In 2023, the UK ETS Authority confirmed that waste incineration facilities (energy from waste and waste incineration) will join the UK ETS scheme in 2028. For full details, please click here.
The purpose of the consultation now released on 23rd May 2024 is to provide more detail and consult on the implementation of how waste incineration facilities will be included in the scheme.
If you wish to respond to the consultation, you can do so here or email ukets.consultationresponses@energysecurity.gov.uk. The consultation closes on the 18th July 2024.
**Please note that the deadline date has now changed and is the 2nd August 2024. **
The Authority is proposing the following:
1 – Coverage
The regulated activities include, but is not limited to, Advanced Thermal Treatment, Advanced Conversion Technology and waste-to-fuel activities. Chemical recycling (i.e. breakdown of waste into polymers and monomers to be used as raw materials for products) will not be included.
2 – Inclusion Threshold
Inclusion will not be dictated by a thermal input threshold. All waste incineration facilities will be included. Smaller sites, emitting less than 25 000 tonnes of fossil CO2e per year, may apply for Hospital and Small Emitter (HSE) status. As with current HSEs, these sites will receive a target and will incur a penalty should they exceed this target. They are not required to trade allowances. Sites that emit less than 2 500 tonnes of fossil CO2e per year may apply for Ultra-Small Emitter status (USE). All USEs must monitor their emissions to ensure they do not exceed the USE threshold, however no formal reporting is required if this limit is not reached.
3 – Exemptions
All types of waste will be included in the UK ETS, this includes hazardous and clinical waste.
4 – Net Zero-Consistent Cap
To account for the expansion to include waste incineration facilities 21.9 million allowances will be added to the UK ETS Phase I base cap from 2028.
5 – 2026-2028 Transitional Period
One option the Authority is considering is making this transitional period mandatory for all waste incineration facilities. They will all join the UK ETS as full participants however they will not be required purchase or surrender allowances. They will however have to monitor, report and verify their emissions. Towards the end of the transitional period, those sites who meet the HSE or USE criteria will be able to apply for one of those statuses, and that status will be applied from 2028 onwards. The alternative option the Authority is considering is making the transitional period voluntary. Operators may choose to monitor their emissions and again may choose whether to share the data with the authority. However, those sites wishing to apply for HSE or USE status will be impeded as a voluntary period would not allow them to meet the monitoring, reporting and verification requirements needed to apply.
6 – Monitoring and reporting requirements
Waste incineration facilities will only need to purchase and surrender allowances for fossil emissions, not biogenic emissions. In order to calculate the split, the Authority understands that many of the methods, such as feedstock sampling and analysis, flue gas sampling and analysis, and predictive (balance) methods, are inaccessible to smaller installations. The Authority is considering if default calculation factors could be used for determining fossil CO2e emissions at smaller installations. To align the sector with existing UK ETS tiers, the Authority is proposing two options; (1) Measurement-based method tiers, (2) Determination of biomass fraction tiers. More information on the specific tiers can be found here (page 20).
7 – Guidance
The Authority is intending to provide sector-specific guidance on the requirements of UK ETS. They are interested to know what should be covered in the guidance and when the guidance should be produced.
8 – Diversion to Landfill and Waste Export
The Authority fears the inclusion of waste incineration facilities may course installations to send more waste to landfill as a cheaper option. To mitigate this, the Authority is monitoring the potential role of landfill taxes, the potential inclusion of landfill emissions in the UK ETS, the tightening of waste policies, and developing a refuse derived fuel and solid recovered fuel export tax or implementing an outright ban.
9 – Decarbonisation Pathways
UK ETS costs may be passed from waste incineration facility operators to their customers. Local authorities are the largest customers of such installations. The Authority will ensure that any expansion of the UK ETS to waste incineration facilities will complement existing and upcoming waste and environmental policies that impact both local authorities and waste incineration operators. The Authority also wishes to support decarbonisation technologies such as Carbon Capture & Storage (CCS) and recognises Non-Pipeline Transportation projects as UK ETS compliance pathways. The Authority estimates that at present 20-30% of fossil waste incinerated is within scope of Extended Producer Responsibility (pEPR), therefore the Authority proposes to align the UK ETS with pEPR so that the carbon price is considered as part of the pEPR cost recovery process.
10 – Accurate Apportioning of Cost Pass Through
As stated above, cost pass through will likely occur between operators and their customers. It is therefore important for operators to accurately apportion fossil content and UK ETS costs between different customers. The Authority proposes three methods to do so; (1) Sampling, (2) Default calculation factor approach, (3) Combined, phased approach. More information on the specific methods can be found here (page 33).
11 – Equality Considerations
The UK ETS Authority is conducting analysis to ensure that the application of the UK ETS to waste incineration facilities will not lead to any impacts for any groups with protected characteristics under the Equality Act 2010.
12 – Incentivising heat network
The Authority recognises that the UK ETS could incentivise new and existing participants, including waste incineration facilities, to export heat via heat networks. They are looking to incentivise clean heat sources and are considering options to incentivise heat offtake through the UK ETS.
The full consultation document is available here.
If you have any questions on the information provided within this update or would like to speak to the Swan Energy team, please contact us.
