UK Emissions Trading Scheme Expands Scope to Energy-From-Waste
In July 2025, the UK government (along with the Scottish government, the Welsh government, and the Department of Agriculture, Environment and Rural Affairs for Northern Ireland) (together "the Authority") published an interim response to the consultation on the expansion of the UK Emissions Trading Scheme ("UK ETS"). This has reconfirmed plans to include energy-from-waste ("EfW") operations within the scope of the UK ETS beginning in 2028, signaling a major change to the waste and resource management sector.
The UK ETS, in operation since January 1, 2021, and based upon the EU ETS following Brexit, currently applies to major emitters of carbon emissions, such as power stations, industrial plants, and the aviation sector. It sets a declining cap on greenhouse gas emissions from covered sectors and requires operators to monitor, report, and surrender allowances for their fossil fuel carbon dioxide emissions, pricing pollution in line with the "polluter pays" principle.
The Authority has proposed a voluntary monitoring, reporting, and verification ("MRV") period for in-scope EfW plants beginning on January 1, 2026. This aims to monitor emissions by such plants prior to the proposed changes being formally introduced in 2028. The Authority will use this period to refine emissions factors and policy design. Guidance for the MRV-only period is expected to be published by the end of 2025, with further details on full inclusion and potential cap adjustments to follow. The reduction in the use of landfill facilities in the United Kingdom has heightened waste incineration emissions, and so the policy-hope is that if EfW is incorporated into the UK ETS, operators will invest in technology and operations that minimize emissions. The policy builds upon the UK government's commitment to net zero by 2050 and decarbonizing the waste industry.
During the MRV period, operators of EfW facilities will be responsible for recording their plant's emissions and reporting their data to the Authority. The expanded scope will apply to facilities processing three tonnes or more per hour of non-hazardous waste or 10 tonnes or more per day of hazardous waste, with clinical waste incinerators included and high-temperature hazardous waste incinerators exempted. Operators are encouraged to participate in the voluntary scheme to observe processes to record their emissions. Operators should review their emissions and aim to reduce them where possible and begin budgeting for extra costs, which may commence in 2028 when the scheme is fully integrated.
The primary concern surrounding the proposed extension of the UK ETS is the accompanying rising costs for operators, local authorities, and council taxpayers as well as commercial undertakings. A report commissioned on the UK ETS expansion found that the move will increase costs for all customers of EfW facilities associated with the requirement to purchase and surrender "carbon allowances." This cost is initially born by the operators, but it is expected that they will attempt to pass this cost on to the parties who supply waste. In practice, this means that operators will initially charge local authorities increased "gate fees," the cost of which local authorities are saying they cannot afford to fully absorb. It is expected that local authorities will then be forced to raise council tax rates, ultimately passing the cost to householders. Private waste management companies are also expected to pass the costs to their customers.
The Authority recognizes that increased costs associated with the scheme expansion may lead to the diversion of waste to cheaper but equally carbon-intensive disposal routes, such as being sent to landfill or elsewhere in Europe. A new report by Ceres Waste, Renewables and Environment estimates that expanding the scheme will increase costs by around 50%, with gate fees set to rise by approximately £48 per tonne. That said, the report noted such "significant cost increases are not an inevitability." Investing in waste minimization, reuse, and recycling services will avoid ETS costs, potentially without impacting overall service costs.
