Import and incineration taxes have been introduced across Europe to promote material recycling and reduce CO2 emissions. However, uneven taxation creates an imbalance in the waste market and leads to a reduction in sustainable energy recovery, argues Norewegian-owned waste fuel specialist Geminor’s CEO, Kjetil Vikingstad.
OPINION: Several countries already have or are about to introduce an incineration tax on energy recovery. First out was the Netherlands, which on 1 January 2020 introduced an import tax of €32 per tonne.
As Europe’s largest importer of English waste for energy recovery, the new tax quickly had an effect: exports of refuse derived fuel (RDF) from England to the Netherlands, the largest RDF stream in Europe, fell by 48% last year, to 602,000 tonnes, according to environmental consultancy Footprint Services.
The tax imposed on energy recovery plants has led to higher gate fees in the Netherlands, which in turn has made exports unattractive for waste producers across the UK.
As a consequence, landfilling in the UK is becoming a more economical, but also far less sustainable alternative to export.
Rising taxes in Scandinavia
Like the Netherlands, Sweden introduced a similar incineration tax of approximately €7 per tonne in 2020, which this year will increase to €9.50 before levelling out to €11 per tonne in 2022. The main argument for this is to help increase material recycling of waste.
The Swedes are also subject to CO2 trading, which the rest of the industry in Europe does not have to deal with. In the Nordics, the cost of emissions has increased by more than 350% since 2017.
“The intention is good, but someone has to take the cost”
Norway is also following up and will introduce an incineration tax in 2021. The tax is approximately €14 per tonne of CO2, which corresponds to approximately €7.50 per tonne of waste. The tax is now being processed, and it is unclear when it will be implemented.
The purpose of the newly introduced tax burden is to increase the proportion of waste for material recycling, as well as to reduce CO2 emissions. This will probably promote more biogenic waste fractions for energy recovery in time. The intention is good, but someone has to take the cost. Primarily, the offtakers are given the bill, but the cost will consequently be spread to their district heating and electricity customers. The waste producers will in turn also have to cover the taxes through increased prices to their customers.
Taxes limit efficient energy recovery
Is tax a political tool that can contribute to more material recycling and an efficient circular economy in Europe? Yes, probably in the long run. But today taxes hit unevenly, and risk destroying the competitiveness of the most efficient recovery plants in the Nordic region. The fact that energy from waste is becoming more expensive in the Nordic countries leads to an imbalance that can send the waste to far less efficient recovery plants in Europe. After all, waste producers need a profit like other businesses, and will go for the cheaper offtaker option if possible.
In this respect, it does not matter that energy recovery plants in Scandinavia deliver close to 100% efficiency – better than any other European plants can deliver at present. If the gate fees are higher, then they will lose volumes, which in a sustainability perspective is quite unfortunate.
We all want more material recycling. But in order not to limit the well-functioning market forces and the most efficient energy recovery available, we must discuss the possibilities of creating other and stronger incentives for material recycling. It must be profitable to use waste for the production of new goods, but without reducing the possibilities for sustainable energy recovery. A fair and evenly distributed tax burden is important in this context, as well as strict regulations and high taxation on landfill.