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Author: Susanna Jackson (MISEP CEnv)
Published: 20-08-2025

Carbon Policy Update: UK ETS Expansion to Waste Incineration

Following Brexit, UK Emissions Trading Scheme (UK ETS) has been the UK’s primary carbon pricing tool. To align the waste and recycling industry with the UK’s net-zero targets and combat rising waste incineration emissions, the UK ETS plans to expand and update its policy to ensure producer responsibility for incineration and Energy from Waste (EfW) emissions.

Accordingly, from 2028, packaging Extended Producer Responsibility (pEPR) payments will include UK ETS carbon costs where packaging waste is incinerated. The inclusion of waste incineration in the UK ETS will mark a shift in carbon policy, set in motion by the UK ETS announcement of a voluntary monitoring, reporting and verification (MRV) period starting in 2026. The 2026 framework will cover combustion and process emissions from energy-waste facilities, as well as clinical waste incineration, but will not impose penalties for non-participation. Alignment of UK ETS and pEPR will ensure local authorities are compensated for the carbon costs of disposing of waste through incineration, therefore ensuring producers bear the carbon costs for fossil-based packaging disposal. 

Potential Challenges: Landfill and Waste Export

The Environmental Services Association (ESA) suggest aligning the UK ETS and pEPR will incentivise behaviour to focus more directly on initial prevention, then re-use and recycling, supporting the waste hierarchy. However, concerns have been raised that expanding the UK ETS waste incineration could undermine the waste hierarchy, as increased incineration costs therefore incentivise landfill and waste exports. Nonetheless, it is essential to acknowledge that landfill expansion under UK ETS has been recognised as unfeasible; therefore, we’re unlikely to see a shift to landfill.  

Scope of Inclusion:

Included

  • Incineration
  • Hazardous waste (except ~1/3 of the UK’s hazardous waste incinerators eligible for Hospital or Small Emitter (HSE) status)
  • Clinical waste (except specialist clinical waste facilities eligible for HSE or Ultra Small Emitter (USE) status)
  • Advanced Thermal Treatment
  • Waste-to-fuel operations
  • Chemical recycling of plastics to create burnable fuel

Excluded

  • Biogenic emissions
  • Chemical recycling of plastics to create raw materials for new products
  • High-temperature hazardous waste incineration 
What this Means for You
  • Rising costs- EfW gate fees are likely to increase as carbon pricing is passed from operators to customers. Consequently, the cost of residual waste disposal is expected to increase. This will particularly affect companies reliant on incineration for waste disposal.
  • Greater accountability for packaging choices and packaging liabilities- Updated UK ETS covers carbon costs for packaging incineration, meaning producers face higher pEPR fees if packaging is fossil-based and hard to recycle.
Suggested Actions
  • Review packaging portfolios to gain a thorough understanding of packaging composition, waste streams, and fossil content. Designing efficiently recyclable packaging with lower fossil carbon content will help reduce future costs.
  • Strengthen waste reporting. Collecting accurate data is essential for ensuring compliance, and data from businesses underpins policy development such as the expansion of the UK ETS and other carbon pricing mechanisms.
  • Potential opportunities. Reducing residual waste and switching to low-carbon packing alternatives position a business well for meeting ESG expectations and managing costs. 

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