UK ETS to include EfW and incineration from 2028

In a landmark decision that marks a significant shift in the UK's waste and recycling industry, the UK Government has announced that emissions from Energy from Waste (EfW) / waste incineration will be included in the UK Emissions Trading Scheme (ETS) from 2028.

EfW plant Teesside
EfW plant in Teesside
This move is part of a broader package of reforms announced by the UK ETS Authority (3 July), aimed at accelerating the country's transition to a greener and more sustainable economy.

The UK ETS, which replaced the previous EU Emission Trading Scheme 2021, sets a limit on the total amount of greenhouse gases that certain industries can emit. The scheme encourages industries to move away from fossil fuels, reduce their carbon footprint, and invest in cleaner, renewable technologies.

Although EfW has been considered part of the power sector for reporting purposes to The United Nations Framework Convention on Climate Change, until now it has been excluded from the ETS. Including it in the scheme is expected to drive significant investment in decarbonising the UK's waste infrastructure, aligning with the four nations' net zero targets.

The decision to include these sectors in the ETS from 2028 is based on a comprehensive consultation process and reflects the UK Government's commitment to a balanced and fair transition to a low-carbon economy. In taking this step, the Government says it has balanced the potential impact on all stakeholders across the value chain, including local government, waste producers, and the general public, and is committed to exploring these cost impacts in further detail before establishing the exact policy design for how EfW will be included in the UK ETS. This is expected to incentivise the waste and recycling industry to reduce emissions and invest in cleaner alternatives, thereby contributing to the UK's overall decarbonisation efforts.

Need for firmer commitment to provide ‘more certainty to industry’

Following the announcement, industry experts have weighed in on the potential implications and challenges of the decision. Dr Dominic Hogg, Director of consultancy Equanimator, commented on the move, indicating that while the decision is welcome, the process had taken considerable time: "This is long overdue. Incineration – including incinerators generating energy – should have been taxed a long time ago. The consultation response itself has taken about a year to emerge.”

He also expressed concern over the consultation's exclusion of non-fossil CO2 emissions, such as those from paper, card and food waste: "The Consultation never asked about the non-fossil CO2. It just made the assumption that only fossil CO2 emissions [derived from burning plastic] would be accounted for in the scheme," he said, suggesting that non-fossil CO2 emissions should also be considered for inclusion once relevant accounting issues are properly addressed.

Regarding the timeline for the implementation of the scheme, Dr Hogg noted that while an earlier implementation would have been preferable, the 2028 implementation date and two-year phasing period between 2026 and 2028 are likely considered reasonable by the Government to allow the industry sufficient time to adjust.

He also pointed out the somewhat tentative language used in the document, arguing that a firmer commitment would provide more certainty to industry stakeholders. "The language is a little guarded in terms of the certainty with which this will be introduced, saying ‘we intend’ to include EfW in waste incineration from 2028. Why not say ‘we will’?" he questioned, noting that the credibility of government policy announcements is already shaky.

Dr Hogg further noted that other ongoing consultations (on Carbon Leakage and scheme allowances) on the final shape of the emissions trading scheme should have been conducted concurrently. Without considering these in the round, he noted, a coherent view of the future emissions trading scheme cannot be gained.

It is hoped that the new regulation will stimulate interest in sorting waste more effectively and reducing the amount sent to incineration. However, Dr Hogg also highlighted a potential loophole in the system, regarding the threshold for exempting smaller emitters. "In the Government response, there’s a discussion about the threshold for exempting smaller emitters at 25,000 tonnes of fossil CO2, which is about 50,000 tonnes of waste if they are only including CO2 of fossil origin," he noted, suggesting that this was too high, and could give rise to proposals for smaller sites to avoid the financial impact of the scheme.

Including EfW in ETS will change economics of the sector

The Government's decision has been met with a mixed response from industry stakeholders. Chris Huhne, Chairman of the Anaerobic Digestion and Bioresources Association (ADBA) and former Energy and Climate Secretary, welcomed the move, stating: “Bringing biogas and biomethane into the emissions trading scheme would make economic sense, as it would create a level playing field for biogas producers to show what they can do to reduce carbon emissions."

Mike Maudsley, CEO of enfinium, also voiced support for the decision, stating: "We need to decarbonise the UK economy at pace, which is why we support the proposed inclusion of energy from waste in the UK Emissions Trading Scheme in 2028. Combined with banning landfill and minimising waste exports, this change could deliver billions of pounds of investment in decarbonising Britain’s waste infrastructure."

However, the industry also recognises the challenges ahead. Charlotte Rule, ESA Climate and Energy Advisor, responded to the announcement by saying, “The expansion of the UK Emissions Trading Scheme to Energy from Waste represents the most significant regulatory intervention to the UK waste industry in a generation. It will fundamentally change the economics of the sector, and impact all stakeholders across the value chain, including local government, waste producers and the general public."

She further added that the implementation by 2028 must align with supporting policies, including the immediate implementation of key packaging and recycling reforms. The EAS considers the Government's decision to include EfW and waste incineration in the UK ETS from 2028 as a significant milestone in the UK's journey towards a greener and more sustainable future.

As the industry navigates this new landscape, collaboration and innovation will be key to achieving the UK's ambitious net zero targets. Rule concluded, "The ESA is committed to continuing to work closely with Government, and stakeholders across the value chain, to ensure this policy can be implemented effectively and that it successfully minimises waste, increases recycling, and reduces emissions.”

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