Economic regulation of waste management utilities: Taking stock of the Italian reform

Abstract

Since 2018, the economic regulation of Italian municipal waste utilities is attributed to an inde-pendent authority, ARERA. This original model is supposed to facilitate the transition towards the circular economy paradigm, that associates demanding public service obligations to recy-cling and valorization of waste, in the context of a vertically-integrated industry with a wide differentiation of conditions and maturity throughout the country. This paper analyzes the ex-perience of the first two years and discusses the outcomes reached. We start from a discussion of the fundamental economic characteristics of the waste management industry and of how the circular economy paradigm has radically changed it, raising rather new regulatory issues. We next analyze the structure of the Italian municipal waste management industry and its trajecto-ries of evolution face to the challenge to achieve the demanding targets imposed by the EU Circular Economy Package. We present then the regulatory approach adopted by ARERA in the first regulatory period (2020-2021) and discuss its advantages and drawbacks, based on the experience made in the early phase of its implementation.