Throwing taxpayers’ money into the trash

Local politicians in Sweden are wasting huge amounts of money – and breaking the law – by giving waste management contracts to companies owned by municipal councils, says Nima Sanandaji of think-tank Captus.

Garbage might not be the sexiest political question, but how we handle our waste is an important issue for any community. Not least, waste management is interesting from an environmental viewpoint. Although the Swedish society prides itself on conducting good environmental policy there is a clear problem in many municipalities when it comes to waste management.

Swedish laws on public procurement require municipalities to consider bids from both private and public companies when deciding which companies can be given contracts for functions such as waste management. But the problem is that many municipalities are themselves owners or co-owners of waste management companies.

As a report recently published by the consulting company Rhetikfabriken shows, all 98 Swedish municipalities that are are owners/co-owners of waste management companies break the law by giving their own waste management companies an unfair advantage.

In eleven of the fifteen companies owned by the Swedish municipalities the companies themselves have the right to decide the cost of waste management. That is, the municipalities have forfeited the right to negotiate the price.

When Borås Municipality decided to individually negotiate a price from the west-coast waste management company Renova AB, they got a price that was fully 27 percent lower that the price paid by the municipalities that owned Renova AB.

To any businessman it would be clear that the pricing situation gets out of hand when the producers get to decide the price. It would be equally clear for a businessman that the municipalities should go after the most competitive prices and look at both private and public bids. These thoughts do however not seem as clear to the decision makers in 98 of Sweden’s municipalities.

Given the monopoly situation that exists, it is perhaps not surprising to find that the price of waste management has increased by 30 percent during the past ten years compared to the consumer price index, which has risen by only 9 percent during the same period.

It is simply not acceptable for the cost of environmental care to rise due to local politicians hindering competition.

The money spent on the environment should go to taking care of our trash, not be wasted by inefficient public companies. Given that waste management is a multi-billion kronor industry in Sweden, the issue of unfair competition deserves much more attention than it currently gets.

Nima Sanandaji

Nima Sanandaji is chief executive of think-tank Captus