EU Emissions Trade System : WtE and EU ETS: What the Inclusion means for the Industry

The European Commission sees the EU Emissions Trading System (EU ETS) as a cornerstone of the EU’s policy to combat climate change. It is a tool for reducing greenhouse gas (GHG) emissions cost-effectively. Set up in 2005, it is the world’s first major carbon market and also remains the largest.

The EU ETS operates in all EU countries plus Iceland, Liechtenstein and Norway and covers around 40 per cent of the EU’s greenhouse gas emissions.

The EU ETS operates according to the “cap & trade” principle. A cap determines the total amount of GHG emissions that may be emitted by installations subject to emissions trading. The Member States issue a corresponding amount of emission allowances to the installations – partly free of charge, partly via auctions. One allowance permits the emission of one tonne of carbon dioxide equivalent (CO2-eq). The emission allowances can be freely traded on the market. This creates a price for the emission of GHG. This price provides incentives for the companies involved to reduce their greenhouse gas emissions.

For those sectors that fall outside the scope of the EU ETS, the current legislation foresees binding annual GHG emission targets for 2021-2030. The Effort Sharing Regulation (ESR) provides for a 30 per cent reduction in greenhouse gases by 2030. Sectors falling under the ESR include transport, buildings, agriculture, non-ETS industry and waste. They also account for almost 60 per cent of total domestic EU emissions.

Like what you read? Subscribe to our newsletters!

As part of the European Green Deal, the European Commission also wants to change some aspects of the EU ETS. One such aspect is including waste to energy in the trade system. Last June the European Parliament approved the inclusion of municipal incinerators in the scope of the EU ETS as of 2026. NGOs such as Zero Waste Europe (ZWE) are very much in favour of this. “The inclusion would ensure that recyclables are pulled out of the waste stream intended for incineration and recycled in line with the EU waste hierarchy by applying mixed waste sorting systems,” says Janek Vähk, Climate, Energy and Air Pollution Programme Coordinator at ZWE.

But the European Council is calling for a prior conditional impact assessment. “Such an assessment is also crucial in the absence of a clear EU framework for the monitoring and reporting of emissions that fits the specific features of waste incineration,” says Patrick Clerens, Secretary-General of ESWET (European Suppliers of Waste-to-Energy Technology). “The Council’s proposed transitional period would provide time for such an assessment and for the implementation of carbon capture technologies in residual waste treatment plants,” he adds. (read the full interview here!)

UPDATE: On April 15th, MEPs and EU governments agreed to reform the Emissions Trading System. This now means that EU countries will have to measure, report and verify emissions from municipal waste incinerators from 2024. By 31 January 2026, the Commission shall submit a report with a view to including such installations in the EU ETS from 2028, with a potential opt-out until 2030 at the latest.

According to Clerens, the European waste-to-energy sector is committed to making all the necessary contributions towards a climate-neutral Europe by 2050. “But unlike other industries, WtE plants do not have a choice as to the carbon footprint of the plant’s input. Indeed, they are bound to treat the residual waste they receive after separate collection and sorting,” Clerens says. “That is why ESWET is asking for the proper application of the polluter-pays principle in the waste sector, so that those responsible for waste generation (waste producers or previous waste holders) pay for its environmental and climate impacts.”

Furthermore, waste to energy should not be understood as a panacea to the energy crisis, but as a tool that complements other renewable sources

For Clerens, what is essential in creating a level playing field for the whole waste management sector is that the entire sector should be covered under the same piece of legislation, be it the Effort Sharing Regulation or the ETS. This is a demand that can be heard from the entire industry.

“Increasing the operating costs of WtE plants by including them in the ETS may lead to less desirable disposal routes, such as landfilling (legal and illegal) and export to questionable and poorly monitored ‘recycling’ destinations where no such fees are charged,” Dr Thorsten Becker, Director Sales & Proposals at Doosan Lentjes, warns. And Benoit Englebert, Business Development Manager at Keppel Seghers Belgium, adds: “Landfills have many consequences for the environment, including air pollution, water contamination and high methane emissions from organic waste decomposition.” Both agree that the waste management sector could contribute significantly to reducing GHG emissions if landfilling were reduced in favour of WtE.

CEWEP (Confederation of European Waste-to-Energy Plants) additionally points out the comparison with recycling, which is currently also included in the ESR: “WtE does not compete with recycling; instead it complements recycling, by treating waste left after separate collection as well as the residues from sorting and recycling activities. So, including WtE plants in the ETS will also inevitably make recycling more expensive as a domino effect, which could hamper circular economy targets.”

CEWEP strongly supports the prevention, reuse and efficient source separation of waste to enable quality recycling. The association says that once plastic ends up in the residual waste, it’s already too late: “Producers and consumers also need to take responsibility for their environmental cost. By putting an additional burden via ETS just on WtE plants, which are at the end of this value chain, it’s applied too far. This is another aspect that will have to be carefully evaluated in the impact assessment.”