The European Commission intends to amend the EU Emissions Trading System (EU ETS) Directive to align the EU ETS with the EU’s 2040 climate targets. The Commission’s proposal includes the gradual inclusion of municipal waste incineration in the EU ETS from 2031, changes to the conditions for free allocation of allowances and new rules on permanent carbon removals (CDR).
On 17 July 2026, the European Commission presented a proposal to amend the EU ETS Directive (Directive 2003/87/EC, as subsequently amended) and Decision (EU) 2015/1814 on the Market Stability Reserve (COM(2026) 616).
Below, we highlight some of the elements of the proposal that stakeholders in the waste-to-energy sector should pay particular attention to.
Free allocation of allowances is proposed to continue, subject to EU investment requirements
The Commission proposes to continue the free allocation of allowances after 2030. From 2031, free allocation would, as a general rule, be conditional on the operator preparing, publishing and submitting an “Invest in EU decarbonisation plan” for the installation for which free allocation is sought.
Under the proposal, during each relevant five-year period, the operator would be required to invest an amount corresponding to the value of 100% of its free allocation in decarbonisation in the EU. 80% of the free allowances would be allocated annually once the Invest in EU decarbonisation plan has been verified and approved by the competent authority. The remaining 20% would be allocated following confirmation by the competent authority that the investments have been made in the EU, that the investment volume corresponds to the value of the free allocation and that the investments have resulted in substantial emissions reductions.
For district heating, free allocation is proposed to be extended during the 2030s, but gradually phased out towards 2040. At the same time, the Commission states that waste-to-energy used for district heating may be eligible for free allocation under the rules applicable to district heating.
More allowances available on the market for a longer period
The Commission’s proposal would result in more allowances being available on the market for a longer period, giving industry more time and flexibility for the transition. This would be achieved by updating the linear reduction factor (LRF) under the emissions trading system to 3.7% from 2031 to 2035 and 1.7% from 2036 to 2040.
Municipal waste incineration proposed to be gradually brought within the EU ETS
The Commission proposes to extend the EU ETS to waste incineration and co-incineration of waste, with a gradual phase-in from 2031 to 2034. The proposal would add a new, separate activity to Annex I of the EU ETS Directive covering the disposal or recovery of non-hazardous waste in waste incineration and co-incineration plants with a capacity exceeding 3 tonnes per hour. Chemical recycling is excluded from the proposed new activity, while hazardous waste would remain outside the EU ETS.
Waste incineration across the EU would therefore eventually be covered by the EU ETS, rather than only in Member States such as Denmark that have chosen to include it.
The Commission’s proposal does, however, allow for a temporary national opt-out until 2035, provided that certain conditions are met.
Carbon removal (CDR) integrated into the EU ETS
The Commission proposes that the EU ETS should cover permanent carbon removals – carbon removal or carbon dioxide removal (CDR) – through the capture and storage of biogenic CO₂ (BioCCS) and CO₂ captured directly from the atmosphere (DACCS). This would not amount to full, direct integration of CDR into the EU ETS from the outset.
The Commission proposes to integrate carbon removal into the EU ETS by purchasing a number of permanent carbon removal units from BioCCS and DACCS activities certified under the CRCF Regulation.
Specifically, the proposal would introduce a new Article 9c into the EU ETS Directive, under which the overall quantity of allowances would be increased by 250 million allowances. The Commission would auction these allowances from 2031 to 2040 to finance the centralised purchase by the Commission of an equivalent number of permanent carbon removal units. The carbon removal units must originate from BioCCS and DACCS activities certified under the CRCF Regulation.
Article 9c would also establish an additional financing mechanism. Under this mechanism, an additional 10 million allowances from the overall EU allowance quantity could be made available to the Commission for auctioning during the period 2031–2040 if the proceeds from the auctioning of the 250 million allowances are insufficient to finance the purchase of the total quantity of permanent carbon removal units.
The proposal provides that the Commission’s purchase of permanent carbon removal units would be reduced correspondingly if operators, aircraft operators or shipping companies themselves use CRCF-certified domestic BioCCS removals to compensate for their own fossil emissions. At the same time, a corresponding number of allowances would be cancelled from the 250 million allowances allocated to the purchasing programme.
The proposal states that the Commission would be empowered to lay down detailed rules in delegated acts on the purchase of carbon removal units, including selection criteria for purchases.
Non-permanent CCU - opgørelsestidspunktet flyttes i visse tilfælde
Efter de gældende regler medregnes CO₂-emissioner på fangsttidspunktet, hvilket betyder, at anlæg, der fanger CO₂, skal returnere kvoter for den fulde mængde genererede emissioner, undtagen hvor CO₂’en lagres permanent geologisk eller i produkter.
Kommissionen foreslår at ændre opgørelsen for ikke-permanent CCU, så fanget CO₂, der bindes i produkter og forventes genudledt i aktiviteter omfattet af EU ETS, som udgangspunkt først udløser kvotepligt, når CO₂’en frigives i en bilag I-aktivitet (downstream), i stedet for på fangsttidspunktet. For syntetiske brændstoffer foreslås opgørelsen dog placeret ved distribution til forbrug (midstream). Ved direkte anvendelse af CO₂ uden kemisk binding fastholdes opgørelsen på fangsttidspunktet.
EU-finansieringsinstrumenter
Kommissionens forslag angiver, at teknologier, processer og teknikker, der direkte reducerer emissioner fra kommunale affaldsforbrændingsanlæg, herunder carbon capture, vil kunne være berettigede til støtte under Innovation Fund, Modernisation Fund samt et nyt EU-instrument, Industrial Decarbonisation Bank, der foreslås etableret fra 2028.
Proces
Kommissionens forslag til ændring af kvotedirektivet skal behandles efter den almindelige lovgivningsprocedure, før det kan vedtages og gennemføres i medlemsstaterne. Den endelige tekst kan derfor ændre sig.
Der er desuden lagt op til, at de nærmere regler for flere centrale elementer i forslaget, blandt andet carbon removal (CDR), skal fastsættes i efterfølgende delegerede eller gennemførelsesretsakter.
Vi følger arbejdet i EU og holder også øje med det kommende forslag til ”Circular Economy Act”, som Kommissionen i sit arbejdsprogram for 2026 har lagt op til at offentliggøre i tredje kvartal 2026.
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.
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