ETS for EfW Webinar Q&A: We Answer your Questions on Energy from Waste’s Inclusion in the UK ETS
We recently hosted a webinar with Materials Recycling World magazine to investigate the impact of including energy-from-waste (EfW) in the UK Emissions Trading Scheme (ETS) on independent waste operators.
There are just four years until EfW will be included within the UK ETS, and the Environmental Services Association has described the industry change as “the most significant regulatory intervention to the UK waste industry in a generation”.
There were three main takeaways from the webinar – points that were echoed by all of the speakers.
- Beware of the financial ramifications of failing to comply with new regulations
Regulators have far-reaching powers to issue information notices if they require data from an operator or enforcement notice to enter a premises and conduct inspections. Refusal to provide information or providing misleading information can result in a civil penalty of up to £50,000, and operating without a permit can result in a fine of up to £20,000. - Know your waste
Operators must understand their waste—exactly what they’re bringing in and what they’re taking out. If they don’t have a clear understanding of this, they’ll be at a massive disadvantage when regulatory changes take place. As we know, there are potentially hefty fines for those who fail to record data accurately, so it pays to be clued up. - Act now
While 2028 may feel a long way off, the reality is that it doesn’t leave much time to innovate to navigate the sector’s major changes. It’s likely that in 2026, fees will rise to subsidise necessary technological changes, so the sooner operators can begin to evolve, the better chance they have of transitioning without any issues.
The session drew a large audience from within the sector and generated several questions. Over the coming weeks, we’ll answer these burning questions in a series of blogs to arm operators with the knowledge to navigate another regulatory change confidently.
In this blog, the first in the series, we’ll be answering the question: Where does the revenue raised by ETS carbon allowances go? And should it be reinvested to drive behaviour change to reduce fossil fuel content in residual waste?
Quite simply, revenues raised by ETS will go to the HM Treasury.
Since the launch of the UK ETS in 2021, the UK ETS Authority – made up of the UK Government, Scottish Government, Welsh Government and the Department of Agriculture, Environment and Rural Affairs for Northern Ireland – has committed to reviewing and improving the scheme, including policy development, technical and operational improvements, as well as beginning monitoring and evaluation.
The first published review was in 2023 and explored the scheme’s success so far, including evaluating the availability and distribution of allowances – and how revenue is spent.
Allowances are primarily allocated through auctioning, with a portion freely allocated to safeguard the competitiveness of emissions-intensive trade-exposed (EITE) sectors, such as cement production and transport, and minimise the risk of carbon leakage. The system has both a cost containment mechanism (CCM) and auction reserve price to support market stability.
In the review, the Authority reported that carbon pricing via the UK ETS is an “effective, market-based way of allowing businesses to make economically rational decarbonisation investment decisions. The scheme provides a long-term price signal that, when supported by complementary mechanisms and policies, can deliver a stable investment case for decarbonisation.”
The Authority believes the scheme plays a vital role in delivering the UK’s decarbonisation commitments, with revenue providing crucial funds to public services and supporting the transition to net zero.
According to financial modelling by the New Economics Foundation (NEF) in its report Making Polluters Pay, government revenues from the UK ETS will remain above £5bn annually until at least 2030. The Foundation also reveals a significant gap between revenue raised and current spending on “mitigating climate damage”. It suggests that the UK should follow European examples such as Greece and Germany by ensuring revenue raised through the ETS is matched with commensurate spend on climate action at a rate of 1:1.
Driving behavioural change
One effective way to use ETS-generated revenues would be to drive the widespread behavioural change required to reduce our collective reliance on fossil fuels and, crucially, to educate consumers about the improved waste behaviours we need to see. However, this decision is in the hands of the HM Treasury, which will most likely reinvest some of those revenues into the administration and enforcement of ETS.