EU Emissions Trading System reform set to put a “historic” price on waste

20 Dec 2022 --- Members of the European Parliament and EU governments have agreed to reform the Emissions Trading System (ETS) to reduce industrial emissions and invest in climate-friendly technologies. It has been agreed that waste will be included in the reforms, which will have a “historic” impact on incineration practices, according to campaigners.

ETS – based on the “polluter pay” principle and part of the “Fit for 55 in 2030 package” – is central to the EU’s goal of slashing 55% of greenhouse gas emissions by 2030.

“The ETS will reduce emissions in the EU by 1500 metric tons of CO2 until 2030. This means the contribution to the 2030 target of the European Union is 25 times higher than the disputed legislation on CO2 emission standards for cars and vans,” says Peter Liese, EPP, Germany and rapporteur of the Parliament ETS bill.

“EU countries must measure, report and verify emissions from municipal waste incineration installations from 2024. By January 31 2026, the European Commission (EC) shall present a report to include such installations in the EU ETS from 2028 with a possible opt-out until 2030 at the latest,” the Parliament informs.

The office of Liese shares with PackagingInsights that there is no focus on particular materials for the input, only on the output, that is, the emissions.

“Pricing waste incineration will give incentives to generate less waste and to increase recycling and the circular use of materials. In addition, in some industry sectors, waste is already priced when used for production heat (cement, for example). The more sectors the ETS covers, the more efficiently it reduces emissions across sectors and the fairer the system gets between sectors,” they detail.The European Parliament, Commission and Council agreed on a compromise for the "biggest climate law ever" shares Liese (Image Credit: Peter Liese).

Waste inclusion “historical”
While the EC is yet to hatch out technical details of what information is required of the municipal waste incinerators, as per communication received from Liese, they assume that the basic information required would be similar to the Measurement, Reporting and Verification (MRV) system for shipping monitors, where companies have to report the emissions and quantities emitted by ships.

According to Janek Vahk, climate, energy, and air pollution program coordinator at Zero Waste Europe (ZWE), including waste incinerators is a “historic decision.”

“It’s historical in the sense that it changes the prevalent narrative ‘waste incineration helps to mitigate climate change’ to another saying ‘waste incineration is a climate problem’ and we need to address those emissions as well,” Vahk shares with PackagingInsights.

“CO2 emissions from incinerators have been doubling over a short time and already represent more emissions than, for example, those from Portugal.”

“The low-hanging fruit would be to sort the mixed waste sent for incineration as a large fraction of this is recyclable. We can easily sort out plastics, steel, aluminum and glass for recycling. Having the ETS price on incinerators would put in place the right incentive to do that,” Vahk continues.

Carbon footprint of waste incinerators
ZWE spotlights that the actual climate impact of municipal incinerators is currently unknown, and it is estimated that those facilities emit “much more than reported.”

Liese confirms ZWE’s concern as “partly true,” saying, “the EC does not have concrete data on each waste incinerating installation in the EU and thus insisted on having an MRV system to collect data before including the sector into the ETS.”

A ZWE report on waste incineration under the EU ETS found that including waste incinerators would encourage waste prevention and recycling, yielding both climate and employment benefits.

“CO2 emissions are estimated to decrease by 2.8 to 5.4 metric tons per year in 2022 and 4.3 to 8.8 metric tons per year in 2030. The benefits gradually increase up to 2030 because carbon prices are expected to rise, making recycling relatively more competitive,” it elaborates.

Furthermore, the report states that additional jobs amounting to 6,800 to 13,000 in 2022 and 11,200 to 21,200 in 2030 will be created since recycling activities are more labor-intensive than waste incineration.

Liese adds: “For the EPP group, it was imperative to get breathing space for citizens and companies in the difficult times of high energy prices. The ETS is the minor part of the electricity price, but moderation of the price in the short-term is a welcome contribution for those who suffer.”CO2 emissions from incinerators have been doubling over a short time, shares ZWE.

ETS reform agreements
After detailed negotiations, the institutions agreed on the following changes:

• The target to reduce emissions will be increased from 40% in the current legislation to 62% by 2030.

• Waste will be included in the ETS if an impact assessment of the EC concludes that this is possible. The institutions aim at inclusion in 2028.

• The Carbon Border Adjustment Mechanism is introduced for steel, aluminum, fertilizers, cement, electricity and hydrogen to prevent carbon leakage and will be phased in at the same speed that the free allowances in the ETS will be phased out.

• More money will be made available to modernize the energy system: The Innovation Fund will increase from 450 million allowances to 575 million. Additionally, the Modernisation Fund will be increased by auctioning an additional 2.5% of allowances to support EU countries with GDP per capita below 75% of the EU average.

“All this means we have breathing space and time for investments until 2026. But from 2027, it’s crunch time. Everybody needs to reduce emissions by then or will have to pay a lot. I hope this will boost the markets for renewables and energy efficiency strongly,” Liese concludes.

By Radhika Sikaria