Hello, everyone, Philipp here. We’re hearing a lot about income inequality these days, and I thought it might be interesting to take a look at the economics of landfills, and the companies that operate them. The results might surprise you – or make you angry.
In 1984, about 17% of the landfills in the US were privately owned, according to the Solid Waste Association of North America. Today, it’s about 50%. But that doesn’t tell the whole story. Waste companies today control 85-90% of permitted capacity, which gives the private sector immense leverage.
The obvious question here is why? Why would private companies want to take ownership of landfills? The answer, as you probably suspected, is simple: profit. Most of a landfill’s revenues are generated by what are called tipping fees, or the amount charged for the right to deposit waste. In 1982, the national average tipping fee was just over $8.00/ton, or about $23.00 adjusted for inflation. Today it’s nearly $54/ton, an increase of more than 130%.
There’s one other aspect of this overview that we haven’t mentioned: consolidation within the industry. Approximately half the landfill volume in the US is controlled by two companies, Waste Management and Republic Services. Not only have these two industry giants been acquiring public landfills, but they have been buying out smaller competitors as well. Both are publicly traded companies, and their stocks have consistently outperformed the overall market. Trash is truly a growth industry.
In the next few installments, we’ll take a deeper look at the economics of landfills, how contracts with municipalities are structured, and the levels of oversight from federal and state governments. But for now, here’s what to remember.
- The trend toward privatization and consolidation is continuing.
- This trend is accompanied by an increase in tipping fees at a much higher rate than inflation.
- A small number of publicly traded companies dominate the market – companies that answer primarily to their shareholders.