The EU plans to bring waste incineration into the EU ETS from 2031, raising questions over decarbonisation, carbon costs and the circular economy.
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The European Commission's proposal to bring waste incineration into the EU Emissions Trading System from 2031 has sparked debate over the future of Waste-to-Energy. While environmental organisations question the proposed exemptions, the industry is calling for a framework that encourages decarbonisation without undermining the treatment of non-recyclable waste.
Waste-to-Energy (WtE) faces a significant regulatory shift in Europe. On 17 July 2026, the European Commission presented a proposal to progressively extend the EU Emissions Trading System (EU ETS) to the incineration and co-incineration of non-hazardous waste, including municipal waste treatment facilities. The measure aims to put a price on CO₂ emissions from waste combustion, particularly plastics and other fossil-based materials, and strengthen incentives to reduce their climate impact.
Under the legislative proposal, facilities with a capacity exceeding three tonnes per hour would begin surrendering emission allowances in 2031, with a gradual phase-in reaching 100% of verified emissions by 2034. The proposal, which is still awaiting approval, includes temporary exemptions for certain Member States and retains free allowances linked to district heating.
These exemptions are at the heart of the controversy. An analysis published in September by Zero Waste Europe (ZWE) warns that free allowances could undermine the effectiveness of the new carbon price.
According to Zero Waste Europe's modelling, assuming a carbon price of €80 per tonne of CO₂, an electricity-only incinerator would face a carbon cost of approximately €40 per tonne of waste in 2034, compared with around €33 for a combined heat and power (CHP) plant supplying district heating. This difference would reflect the availability of free allowances, which are due to be phased out by 2040.
The difference is significant because, according to Zero Waste Europe, around 60% of European Waste-to-Energy plants operate in CHP mode and supply district heating, potentially making them eligible for such allowances.
The organisation argues that an insufficient carbon price could discourage the recovery of recyclable materials from residual waste. It also warns of potential excess incineration capacity in Europe, estimated at 60 million tonnes per year, which could exceed 70 million tonnes if planned projects go ahead.
ZWE therefore calls for free allowances to be phased out by 2034, the carbon price to be introduced more rapidly, and the resulting revenues to be directed towards waste prevention, reuse and recycling.
The Confederation of European Waste-to-Energy Plants (CEWEP) takes a different perspective. While supporting emissions reductions, it stresses that the design of the EU ETS must recognise the role of these facilities in treating waste that cannot be prevented or recycled.
According to CEWEP, approximately 500 plants treat 100 million tonnes of residual waste across Europe each year, recovering energy and certain materials. The industry association calls for unintended environmental consequences to be avoided and for the framework to remain consistent with the European waste hierarchy.
Meanwhile, the sector is shifting its investment priorities. The first market report published by the European Suppliers of Waste-to-Energy Technology (ESWET) in July 2026 identifies a shift towards upgrading existing facilities, carbon capture and storage, improved flue gas cleaning and material recovery from bottom ash.
This trend reflects a strategic shift: in mature European markets, competitiveness increasingly depends on reducing emissions from existing plants rather than simply expanding treatment capacity.
The European Commission acknowledges this transformation and its proposal includes provisions to support emissions reduction technologies, particularly carbon capture, through European decarbonisation funding mechanisms. It also proposes using EU ETS revenues to support measures further up the waste hierarchy.
The main challenge will be to balance three objectives: putting a price on fossil-based emissions, preventing waste from being diverted to landfill, and ensuring viable alternatives for non-recyclable waste streams.
The fundamental question is what type of waste management model Europe will encourage over the next decade. The outcome of the legislative negotiations will shape both technological investment in the sector and the competitiveness of waste prevention and recycling compared with Waste-to-Energy.
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