We develop a mathematical programming model for the analysis of a nationwide waste-management system based on composting of organic wastes. The model integrates a wide range of engineering, environmental, and economic factors, including estimated production functions based on agronomic experimental data, as well as demand functions for vegetative agricultural products. The model is applied to the case of Israel, comprising 14 groups of municipalities as the source of organic municipal solid waste and wastewater-treatment sludge, 8 composting plants, and 13 agricultural regions; the latter constitute the source of livestock manure and are the consumers of compost to be potentially applied to 42 crops. From a social point of view, 90% of the compost's potential production was found to be warranted. This efficient solution, however, does not emerge under the base-year-observed situation, largely because of the absence of source separation of organic municipal solid waste and the farmers' lack of awareness of compost's advantages as a substitute for conventional fertilizers and as a soil-amending product. Consequently, most of the organic wastes are disposed of by landfilling, resulting in a loss of $102 million per year in terms of net social benefits. While the consumers of agricultural products are expected to benefit from a shift from the base-year situation to the efficient solution, most of their gain is expected to come at the expense of the farming sector. Nevertheless, the appearance of the efficient solution does not depend on administrative compensation payments, but on the removal of bottlenecks. Potential government intervention strategies to promote the change are analyzed. Copyright (c) 2010 International Association of Agricultural Economists.

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