The UK Emissions Trading Scheme (ETS) will expand to include the waste sector from 2028. The government is currently consulting on how this could work. What are the implications for local authorities and businesses in the waste management sector?
Timescales
The UK ETS is a system whereby businesses in specific energy-intensive sectors have to keep their emissions below a certain level, but can trade in carbon allowances below that level. (For more background on what the ETS is and how it works, take a look at our ETS FAQs.) It currently only applies to three sectors, not including waste, but the plan is to include the waste sector by 2028. The consultation proposes a draft schedule for this:
1 January 2026- 31 December 2027: a proposed transitional period where emissions from the waste sector are monitored, reported and verified (MRV) but not traded.
1 January 2028 onwards: the waste sector to become a full part of the UK ETS, which means keeping emissions below a designated cap and participating in the trading of carbon allowances.
31 March every year will be the reporting deadline (as it currently is for other businesses).
31 April will be the deadline for surrendering enough allowances to cover reportable emissions (again, as it currently is).
Who will be affected?
According to the proposals in the consultation, the UK ETS will expand to cover businesses dealing in waste incineration and energy from waste (EfW). The MRV obligations will fall on the businesses who operate waste incineration facilities and/or waste-powered energy generation facilities.
This obviously affects the customers of such facilities, mainly local authorities but also other businesses. It is likely that the costs of participation in the ETS will be passed on to these customers. The consultation explains some of the ways in which the UK government and devolved administrations are working to reduce local authorities’ exposure to future carbon pricing.
Types of operations and waste to be included
The document sets out a plan for which categories of waste and types of activity will be included in the UK ETS – again, all subject to the outcome of the consultation.
INCLUDED
- Incineration
- Advanced Thermal Treatment (ATT) such as pyrolysis of solid waste
- Waste-to-fuel operations (such as making sustainable aviation fuel from waste oil)
- Chemical recycling of plastics to create burnable fuel
- Hazardous waste
- Clinical waste
EXEMPT
- Biogenic emissions (such as generating biogas from food waste)
- Chemical recycling of plastics to create raw materials for new products
The role of landfill tax
Expanding the UK ETS to include waste incineration will obviously raise the price of burning waste, and businesses in the industry have expressed concern that this will make sending waste to landfill cheaper in comparison. There is also the risk that more waste will be exported abroad.
The UK ETS Authority is asking in this consultation how best to manage this risk. The UK already has landfill taxes, set annually. (In Scotland and Wales this is a devolved matter and for England and Northern Ireland the taxes are set by central government.) The level of these taxes needs to incentivise the keeping of waste out of landfill.
There are a number of other policies in place designed to achieve the same goal. Some have also argued for the inclusion of landfill emissions in the UK ETS. The consultation is asking people to give their views on the best way forward here.
The consultation on including waste in the UK ETS closes on 18 July 2024. (It is one of two consultations currently open about the UK ETS; the other focuses on greenhouse gas removal technology.) If your organisation will be affected by the changes, this is an opportunity to make your voice heard. There is no obligation to answer every question, just those that matter most to your business.
