When Green Turns Costly: The Fiscal Fallout of EU Waste Management Funds in Italian Municipalities

Baraldi, Anna Laura and Cantabene, Claudia and de Iudicibus, Alessandro and Fosco, Giovanni and iacopo, Grassi (2025): When Green Turns Costly: The Fiscal Fallout of EU Waste Management Funds in Italian Municipalities.

Abstract

This paper investigates the fiscal consequences of EU-funded waste management projects on local taxation in Italian municipalities. Using a difference-in-differences approach on panel data from 2007 to 2023, we find that municipalities receiving EU cohesion funds experienced a significant increase in per-capita waste taxes, driven by rising service costs. A decomposition of these costs reveals that while separate waste collection expanded — in line with sustainability goals — the associated logistical and operational expenses increased sharply. Conversely, although the vol- ume of unsorted waste declined, disposal costs rose, likely due to lower quality and more complex treatment requirements. To assess whether cost increases reflected inefficiency or technological progress, we estimate total factor productivity changes via a non-parametric Malmquist index. The results indicate substantial productivity gains in sorted waste management, mostly from technological advancement, but also suggest transitional inefficiencies. Our findings highlight the need for more integrated investment strategies to balance environmental goals with fiscal sustainability.

• Item Type: MPRA Paper
• Language: English
• Keywords: U Cohesion Policy, Waste Management, Local Public Finance, En- vironmental Taxation, Service Costs, Efficiency and Productivity
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H72 - State and Local Budget and Expenditures; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R53 - Public Facility Location Analysis ; Public Investment and Capital Stock

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