Setting the right paradigm for financing zero waste

Waste management generates significant public value beyond simple collection and disposal, encompassing improved public health, reduced greenhouse gas emissions, resource recovery, and enhanced urban resilience. However, conventional government budgets often fail to capture these wider benefits, leading to persistent underfunding. The report argues that the absence of direct financial returns does not equate to a lack of economic value. Financing decisions must therefore look beyond narrow profitability tests, which often favour large-scale, capital-intensive infrastructure while overlooking the operational requirements of upstream systems like prevention and reuse. A balanced approach combines public finance for essential services with private finance for viable revenue opportunities, ensuring that fiscal tools reinforce the transition to zero waste rather than undermining it.

Shared diagnosis: why waste underfunding persists

The report identifies that 94% of countries have a national agency mandated to oversee the waste sector, yet implementation remains a local responsibility. This creates systemic challenges across ten dimensions. For instance, in three-quarters of low- and middle-income countries, less than 0.15% of GDP is spent on waste, far below the estimated 0.3–0.8% required for universal collection. Consequently, collection rates in low-income countries average only 28%. Other barriers include structural financing gaps where capital is provided without securing operational expenditure (OPEX), misaligned fiscal incentives that favour disposal over diversion, and a disconnect from international climate finance. Furthermore, national infrastructure programmes often favour centralised projects, creating a bias against organic waste management and recycling systems.

The strategic case: zero waste as opportunity, not cost

Shifting towards zero waste generates measurable fiscal savings and efficiency. Evidence shows that prevention and recycling can reduce transport and disposal costs while extending the life of existing infrastructure. For example, Durban achieved an estimated US$1 million in savings over ten years, while Buenos Aires’ RUO model saves approximately US$17,864 annually. In Accra, the GAYO model generates US$1,152–2,880 in annual savings. Beyond direct savings, zero waste systems support inclusive economic development. In Bandung, Indonesia, municipal funds employ over 1,500 workers in decentralised waste operations. Integrating informal waste pickers and cooperatives into formal systems strengthens both livelihoods and service provision. Additionally, building circular economy markets through public procurement and fiscal incentives can improve the viability of recovered materials. In Bali, Banjar Tegeh Sari prices organic waste 60% lower than residual waste to incentivise source separation.

Complementary financing approaches: a two-tier system

An effective transition requires a two-tier system where local and national governments play mutually reinforcing roles. Local governments act as frontline implementers, using accessible mechanisms like in-kind contributions, public land, and cost-savings models to redirect expenditure towards recovery. National governments serve as systemic enablers by establishing dedicated budget lines, anchoring Extended Producer Responsibility (EPR) frameworks, and reforming intergovernmental fiscal transfers. The report stresses that national policies must translate into resources that reach municipalities and waste pickers directly. Without this connection, regulatory frameworks may generate resources that never reach the operators responsible for implementation.

Matching financing approaches to readiness: city archetypes

The report categorises cities into three archetypes to match financing to local capacity. ‘Start-Up Cities’ should prioritise establishing basic foundations like source separation using accessible public finance and grants. ‘Transitioning Cities’ focus on sustaining services and developing local markets through cost-savings reinvestment and procurement reform. ‘Advanced Cities’ are better positioned for sophisticated instruments like performance-based financing and green bonds to support mature circular economy markets. Institutional readiness should be viewed as a progressive pathway rather than a prerequisite for accessing finance, ensuring that no municipality is excluded due to starting conditions.

Common pitfalls across both levels

Recurring pitfalls include neglecting ongoing OPEX in favour of visible capital investments and applying ‘one-size-fits-all’ designs that ignore local waste profiles. Fragmented coordination across departments often treats waste solely as a sanitation issue, ignoring its links to health, climate, and agriculture. There is also a risk of equating finance mobilisation with progress, measuring success by the volume of capital rather than achieved outcomes. Furthermore, reliance on external grants without domestic institutionalisation creates unsustainable pilots. Finally, committing to large-scale technologies like Waste-to-Energy (WTE) incineration can lead to structural ‘lock-in’, entrenching disposal-based systems for decades and crowding out investment in the waste hierarchy.

Cross-level recommendations

To overcome these barriers, the report recommends establishing national regulatory frameworks that prioritise the waste hierarchy and reforming fiscal transfers to allow local governments to retain savings from reduced disposal. National EPR and Pay-As-You-Throw (PAYT) frameworks must include mechanisms for waste picker cooperatives and SMEs to access funding. Governments should align policies across sectors like agriculture and finance to recognise cross-sectoral benefits. It is crucial to avoid large-scale infrastructure commitments before basic collection and recovery systems are functioning. As systems mature, authorities should introduce blended and commercial financing to support higher levels of prevention and recycling while progressively strengthening municipal financial management and data monitoring.