Waste incineration and the EU ETS: delayed inclusion gives operators time to prepare.
The European Commission’s review, in July 2026, of the EU Emissions Trading System (EU ETS) proposes bringing waste incineration into the scheme gradually from 2031, with full inclusion from 2034.
Until now, waste incineration has not been fully covered by the EU ETS in the same way as sectors such as power generation, energy-intensive industry, aviation and maritime transport. That means operators have not generally faced a direct EU ETS obligation to surrender allowances for fossil carbon emissions from waste incineration.
The Commission is now proposing to change this through a phased approach. Relevant operators would surrender allowances for 25% of verified emissions in 2031, rising to 50% in 2032, 75% in 2033 and 100% from 2034 onwards. Member States may also be able to opt out until 2035 where certain recycling, landfill or national carbon tax conditions are met.
The proposal also recognises the need to support the sector, through continued support for district heating, funding for cleaner technologies and carbon capture, and priority use of ETS revenues to improve local waste management. It also forms part of a wider package linked to the forthcoming Circular Economy Act, which is expected to promote waste prevention, reuse and recycling while strengthening safeguards against increased landfilling.
What does this mean for operators?
Operators will need to strengthen emissions monitoring, understand which emissions fall within scope, and plan for the future cost of EU ETS allowances.
Although full exposure is not expected until 2034, the commercial impact is likely to arrive earlier; waste contracts, gate fee models, heat supply arrangements and investment decisions made in the coming years may all need to account for future carbon liabilities.
Operators should now consider:
- Improving emissions data and reporting systems.
- Modelling how carbon costs could affect gate fees, heat pricing and long-term waste contracts.
- Reviewing how carbon costs may be allocated or passed through in contracts.
- Assessing decarbonisation options, including heat recovery, carbon capture readiness and cleaner technology investment.
- Monitoring national policy positions on any potential opt-out route.
The delayed phase-in gives the sector time to prepare, but it should not be treated as a reason to wait. Organisations that act early will be better placed to manage reporting requirements and make informed investment decisions.
Swan Energy is following the development of Waste Incineration and the EU ETS closely and will continue to provide updates as it evolves.
If you’d like support navigating what’s to come, our team is here to help so please get in touch.
