Tolvik: “ETS scheme could cost up to £1.5b annually”

At yesterday’s (06 June 2024) Letsrecycle.com National Conference, Tolvik’s Chris Jonas delivered a look into the UK Emission Trading Scheme (ETS) and its impact on the waste sector.  

Mr Jonas provided a brief history of the ETS, noting its establishment in 2005 as a European-wide initiative aimed at reducing greenhouse gas emissions. Following Brexit, the UK launched its own ETS in 2021, which currently includes approximately 700 sites and trades about 90 million allowances annually. Each allowance represents one tonne of carbon dioxide, requiring these sites to purchase and surrender allowances equivalent to their emissions.

He highlighted that the UK government, as part of its ongoing efforts to reduce carbon emissions, is considering including municipal energy-for-waste plants and hazardous chemical plants in the ETS.  

He added that this move aligns with similar initiatives in other European countries, such as Norway, Sweden and Germany.  

Costs 

Discussing the financial implications, Mr Jonas estimated that the sector “could face costs ranging from £500 million to £1.5 billion annually”, depending on the price of carbon allowances. He noted that energy-from-waste plants, which emit a tonne of CO2 per tonne of waste combusted, will be “particularly impacted”. Half of these emissions are biogenic and zero-rated, while the other half stem from fossil-based materials like plastics.  

Mr Jonas also addressed the complexity of managing these costs within the waste sector, which is already navigating financial difficulties through extended producer responsibility (EPR) schemes. He pointed out that the ETS could add “billion pounds of costs”, equivalent to 5% of the industry’s annual turnover. This potential financial burden raises concerns about stranded assets and the need for significant restructuring within the sector. 

Consultation  

While he appreciated the progress made in the Department of energy security and net zero’s consultation, he criticised the document for “lacking development in key areas”, particularly around landfill restrictions and the integration of mixed waste sorting. 

Mr Jonas noted that it indicated landfill tax would align with carbon prices in the future, incorporating a ratchet mechanism to ensure consistency. He highlighted that in the document, the government had decided against imposing a ban or tax on waste exports, which Mr Jonas supported as the right call.  

Despite these clarifications, Mr Jonas identified several areas needing further development. The document made only a passing suggestion that landfill should be considered within the ETS, lacking concrete proposals. There was an overreliance on changing law clauses in contracts, which Mr Jonas believed would necessitate extensive bilateral discussions between large users of waste facilities. The government proposed a fixed emission factor approach for smaller facilities, but Mr Jonas argued for a more “sophisticated system post-2030”. 

Mr Jonas emphasised the urgency of addressing these issues, as the ETS is set to begin in January 2026, with monitoring and reporting requirements starting then and the purchase of allowances commencing in 2028. He underscored the need for “comprehensive monitoring plans, transparency, and accurate apportionment to enable waste producers to plan effectively”.