Impacts of policy and market incentives for solid waste recycling in Dhaka, Bangladesh

Solid waste mismanagement in Dhaka, Bangladesh, illustrates a well-known market failure which can be summarized as: waste is a resource in the wrong place. Inorganic materials such as plastic or paper can be used to feed the demand for recycled materials in the industrial sector. Organic materials can be converted and used in the nutrient-starved agricultural sector which is currently heavily depending on chemical fertilizers. They are also a feedstock to generate renewable energy in the form of biogas for this energy-starved country relying on diminishing natural gas reserves and increasing import of coal. Reality however does not capitalize on this potential; instead the waste is a burden for municipal authorities who spend large portions of their budgets attempting to transport it out of the city for discharge into landfills. The major part of these materials still remains uncollected in the residential areas and is discarded indiscriminately in open spaces, polluting the residents' living environment including water, soil and air resources, in the city and beyond. Bangladeshi authorities have, to some extent, recognized this market failure and have developed policies to encourage the development of waste recycling activities. It is also important to note that this market failure is only partial: a large, mostly informal recycling sector has developed in Bangladesh, focusing on inorganic recyclables of market value. The fact that this sector remains largely informal means that these actors perceive significant barriers to formalization. Comparatively, the organic waste recycling sector is less driven by market mechanisms. Competition from chemical fertilizers and fossil fuels is fierce and hinders the development of market opportunities for compost and renewable energy. Nevertheless commercial production of compost and biogas from organic municipal waste is formalized and benefiting from policy incentives.