The UK Emissions Trading Scheme (UK-ETS) is entering a new phase, and the Energy from Waste (EfW) sector is firmly in scope. 

Following its latest consultation, the UK-ETS Authority has confirmed that EfW and waste incineration facilities will join the scheme from 2028, marking one of the most significant regulatory changes for the waste and resource management industry in recent years.

This change brings both challenges and opportunities. Indeed for operators, investors, and developers, the coming years will be defined by preparation; ensuring facilities are ready to meet new carbon-cost obligations while maintaining operational efficiency and compliance.

UK ETS Expansion: Full Inclusion from 2028

From 1st January 2028, EfW operators will be required to purchase and surrender allowances covering the fossil-derived portion of their carbon emissions, primarily those generated by plastics and other fossil-based materials within residual waste.

While biogenic CO₂ (i.e. that derived from organic and renewable material) is expected to remain outside the surrender obligation, the UK-ETS Authority is still finalising the technical methodology for accurately separating fossil and biogenic emissions. 

During this process, several measurement approaches - including C-14 sampling, feedstock analysis, and balance-based estimation - are being trialled across the sector.

Voluntary MRV Phase: 2026 – 2027

Before inclusion becomes mandatory, the Authority will run a two-year voluntary Monitoring, Reporting and Verification (MRV) phase, beginning January 2026.

This phase is designed to collect reliable data, refine reporting methods, and help operators familiarise themselves with compliance expectations without financial penalties. 

Participation will also allow EfW operators to benchmark emissions early, identify reduction opportunities, and test systems for continuous measurement ahead of the 2028 deadline.

Scope and Thresholds

The inclusion applies to plants meeting the Small Waste Incineration Plant (SWIP) thresholds: those processing ≥ 3 tonnes per hour of non-hazardous waste, or > 10 tonnes per day of hazardous waste.

This captures most large EfW facilities, as well as clinical-waste incinerators, where  high-temperature hazardous incinerators will remain excluded at this stage, though future reviews could revisit their status.

What About Costs?

The UK-ETS does not create a separate allowance pool for EfW; instead, it operates within the existing national cap, which has been tightened to 936 million allowances for the current trading phase (2021–2030). This cap will continue to decline annually in line with the UK’s net-zero trajectory.

Carbon prices fluctuate, but as of mid-2025, allowances were trading at around £50 per tonne, with government penalty guidance set at £41.84/t for 2025. Forecasts for 2028 vary, with analysts suggesting a range of £60 – £80/t depending on market conditions and any potential linkage with the EU-ETS.

To illustrate the potential impact:

A typical 50,000-tonne fossil-CO₂ emitter could face an annual carbon-allowance cost of around £3.5 million, assuming a price of £70/t.*

*This is a simplified example for modelling purposes only; actual exposure will depend on each site’s verified fossil fraction, efficiency measures, and carbon-procurement strategy.

Why This Matters

The inclusion of EfW under the UK-ETS is more than a compliance milestone, it’s a turning point for the sector. As carbon costs become a new operational reality, proactive operators will gain a competitive edge by:

• Participating in the MRV phase to benchmark and refine emissions data;
• Exploring carbon-reduction technologies, such as carbon-capture integration or feedstock optimisation; and
• Engaging in cost-pass-through and Extended Producer Responsibility (EPR) strategies to protect financial performance.

For developers and investors, the change also strengthens the case for designing EfW plants with carbon capture [technology] readiness and embedding emissions data into feasibility and permitting from the outset.

Next Steps for Operators

1. Prepare for MRV (2026 – 2027): Establish reliable monitoring systems, train teams, and gather baseline data to support accurate reporting.
   
   
2. Model Financial Exposure: Assess how various carbon-price scenarios could affect operational margins and gate fees.
   
   
3. Plan for 2028 Compliance: Review procurement and offset strategies, and engage early with advisers to build robust, forward-looking carbon-management plans.

The Bottom Line

The UK’s move to bring EfW into the emissions trading framework signals a clear policy direction: accountability for fossil emissions is now a key part of waste-management strategy.

For operators who prepare early, the next two years present an opportunity to strengthen systems, future-proof facilities, and lead the sector toward lower-carbon performance.

Early action today will define who leads the EfW market of tomorrow.

References and Sources

• UK ETS Authority: “Developing the UK ETS: Including Waste Incineration and EfW” (Interim Response, 2025)
• National Audit Office (June 2025): Review of the UK Emissions Trading Scheme
• UK Government: Carbon Price Determination 2025
• UK ETS Consultation on MRV for EfW and Waste Incineration (Gov.uk, 2025)