UK delays carbon market entry for waste incinerators

The UK government has abandoned plans to bring waste incineration into its emissions trading scheme by 2028, saying it will set out a new timeline "in due course" as it works to finalize policy details for the sector.

The Department for Energy Security and Net Zero, which oversees the UK Emissions Trading Scheme Authority, said Aug. 26 that a lack of clarity around the expansion had made it difficult for local authorities and industry to plan and budget, prompting the delay to the 2028 target date first proposed in 2023.

"We can confirm that expansion of the UK ETS to waste incineration will not take place in 2028 as originally intended," the Authority said. "A new timeline will be set out in due course, along with full details on final policy design, with sufficient time for the waste sector to implement."

The delay carries implications well beyond the waste sector, with energy and commodity markets watching closely how the policy vacuum affects the pace of decarbonization investment tied to carbon pricing, offset markets and emerging carbon capture infrastructure across the UK.

This comes as the European Commission, in its EU ETS review published in July, proposed that municipal waste incineration be gradually integrated into its carbon market from 2031 to 2034, with installations required to surrender allowances for 25% of verified emissions in 2031, rising to 100% by 2034.

MRV phase to go ahead

The government had originally set out its intention to expand the UK ETS to cover waste incineration and energy-from-waste facilities from 2028, preceded by a two-year period focused on monitoring, reporting and verification (MRV). That transitional MRV-only period still commenced from Jan. 1, 2026, though participation will remain voluntary at this stage, the Authority said.

The delay follows a 2024 consultation on technical aspects of the expansion, including how to handle hazardous and clinical waste, the risk of waste diversion to landfill or export markets, and how costs might be passed through to customers. More than 250 responses were received from waste operators, trade bodies, local authorities and NGOs.

Clinical waste incinerators and clinical waste treated at non-specialist facilities will be included in the voluntary phase, the Authority said, adding that this would allow regulators "to better understand the impacts of including clinical waste" before a final decision is made ahead of full scheme inclusion.

CCS impact

Carbon capture and storage developers were eyeing the anticipated forthcoming legislation to give potential additional revenue streams to energy-from-waste decarbonization projects.

Project developers were looking at both cost savings from avoided emissions under the expanded ETS, and the scope to sell voluntary carbon market credits.

Projects processing biogenic waste could log negative emissions, removing CO2 from the natural carbon cycle.

The absence of a firm inclusion date, however, leaves such projects without clarity on the value of future compliance-linked savings, potentially complicating financing decisions for CCS-equipped energy-from-waste plants that had been counting on ETS-linked revenues to underpin investment cases.

UKAs stable

UK carbon prices have remained largely stable in recent weeks and have closely tracked the price of EU Allowances.

The EU-UK allowance spread has remained near the €12-13/mtCO2e range so far in August as market participants await updates on plans to link the EU and UK schemes.

Platts, part of S&P Global Energy, assessed UK Allowances for December 2026 at £59.34/mtCO2e on Aug. 26. Platts assessed the UKA spread to EUAs for the December 2026 contract at €13.03/mtCO2e Aug. 26.

The annual summit between the two jurisdictions was postponed following the resignation of the UK's previous prime minister, Keir Starmer, who has now been replaced by Andy Burnham.

Market expectations are that the summit will take place this autumn. Linkage discussions remain on the agenda, but there have been no updates since Burnham took over as PM.