Upgrading municipal environmental services to European Union levels: a case study of household willingness to pay in Lithuania

Lithuania is one of ten countries in Central and Eastern Europe that is aligning its environmental policies with those of the European Union (EU). The costs of harmonizing environmental policies are expected to be extremely high and to fall disproportionately on local governments. One policy option for financing these service upgrades is to use increased tariffs. We evaluate the feasibility of this strategy by estimating household willingness to pay for upgraded landfill, sewerage, and recycling programs. We then compare estimated benefits with costs from the literature. We find that household willingness to pay is substantial for upgraded landfill management and expanded sewerage service, but virtually zero for the two recycling programs considered. Relative to costs, households are willing to pay approximately 80-90 per cent of costs for landfill improvement, but less than 10 per cent for upgraded sewerage service and recycling programs. These results suggest that targeted subsidies will be critical to fund the municipal environmental expenditures required for Lithuania to join the EU.