On 21 July 2025, the UK ETS Authority (the "Authority") published its interim response to its May 2024 consultation (the "Consultation") on the expansion of the UK Emission Trading Scheme (the "UK ETS") to the waste sector (the "Interim Response"). For more information on the Consultation, please see our previous blog post here.
The Authority has indicated that several elements of the technical Consultation will require further consideration. It has therefore published an interim response which confirms that:
- There will be a voluntary monitoring, reporting and verification ("MRV") only period beginning on 1 January 2026.
- This period will apply to combustion and process emissions from energy from waste ("EfW"), and waste incineration processes.
- The inclusion threshold for waste incineration will be based on the small waste incineration plant throughput threshold (ie installations incinerating non-hazardous waste with a capacity exceeding 3 tonnes an hour, or hazardous waste with a capacity exceeding 10 tonnes a day) (the "Relevant Thresholds").
- It will use an integrated monitoring approach, which will combine Carbon-14 and emissions factors.
The voluntary MRV period will inform ongoing policy in relation to the inclusion of EfW in the UK ETS. The Interim Response provides that final decisions (including the impact on the UK ETS cap) will be provided by the Authority as soon as reasonably practicable.
Scope of the voluntary MRV-only period
Technologies in scope
The Authority committed to ensuring that the expansion of the UK ETS to the waste sector would maintain a level playing field across technologies. In line with the Consultation, the scope of the MRV-only period will include direct emissions from EfW and waste incineration processes including advanced thermal treatments and advanced conversion technologies. The on-site combustion of the outputs of these processes on-site, and where the processes are undertaken for the purposes of producing fuels, are also in scope. Emissions from off-site combustion of these fuels are not.
However, the MRV-only period will also include chemical recycling processes. These have an important role in moving waste up the waste hierarchy, so the Authority is considering how to subtract emissions associated with recycling outputs from the reportable emissions of affected installations upon full inclusion in the UK ETS.
Inclusion threshold
All facilities that exceed a Relevant Threshold will be in scope. Although respondents to the Consultation did not agree with the proposed threshold, they did not favour a particular alternative. The Authority is of the view that a lower limit is required in order to avoid a disproportionate regulatory burden on smaller facilities.
For the purpose of the MRV-only period, the Interim Response provides that the existing Hospital and Small Emitter ("HSE") and Ultra-Small Emitter eligibility criteria of 25,000 / 2,500 tonnes fossil CO2 per year will apply to waste facilities upon the inclusion of the waste sector. Operators above a Relevant Threshold but within the HSE threshold are expected to apply for HSE status, such that this status would be effective from the date the UK ETS is expanded to cover waste.
Exemptions
The MRV-only period will:
- be open to clinical waste incinerators (as the Authority does not currently intend to exempt them from the full ETS), but the Interim Response indicates that this will remain under review;
- include Persistent Organic Pollutants, which shall also be kept under review; and
- exempt high temperature incinerators that primarily process hazardous waste.
Participation in the MRV-only period
The intention is to apply the UK ETS regime for stationary installations to the waste sector once it is included (ie compliance cycle, permit and monitoring plan requirements, as well as penalties). The MRV-only period has therefore been designed on this basis, although the requirements will not be enforced as the period is voluntary.
The Authority is of the view that a voluntary MRV-only period not only enables operators to become familiar with requirements, but it also enables the Authority to review MRV methodologies and test approaches. A number of options are being considered, including integrated approaches which combine CO2 monitoring, Carbon-14 analysis and emissions factors. The Authority has indicated that proportionality, accuracy and fixed requirements for measurement-based reporting are important for ongoing policy development.
Reducing adverse risks of the scheme
The Authority recognised concerns raised by respondents that the expansion of the UK ETS to the waste sector could incentivise the use of landfills and/or the export of waste. In response, the Authority confirmed that:
- it is not feasible to include landfills in scope of the UK ETS, but that appropriate measures will be implemented to reinforce the waste hierarchy; and
- it is developing its policy position to ensure that waste export is not used to avoid UK ETS costs.
The Authority has also indicated that local authorities will not be expected to cover full ETS costs, recognising that the expansion of the UK ETS to include the waste sector poses particular challenges. Proposals are expected to be confirmed before facilities become exposed to the carbon price.
Next steps
The Authority will publish:
- guidance in relation to the MRV-only period before January 2026; and
- a further response setting out the full policy design for the inclusion of the waste sector in the UK ETS.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
