UK ETS to include waste incineration: Government outlines its interim response

The UK Emissions Trading Scheme (“UK ETS”) Authority has published its interim response outlining the Monitoring, Reporting and Verification (“MRV”) plans ahead of the inclusion of waste incineration and energy-from-waste (“EfW”) facilities in the scheme (the response is available here). 

This follows the government’s 2024 consultation on expanding the UK ETS to cover the waste sector, with full inclusion expected from 2028. Despite this, EfW installations in Northern Ireland will remain under the EU Emissions Trading System due to the Windsor Framework (formerly the Northern Ireland Protocol).

At that point, EfW and incineration operators will be required to purchase and surrender UK ETS allowances, aligning them with other sectors already regulated under the scheme. 

The beginning of the MRV-only period 

The MRV-only period will begin on 1 January 2026 and will be voluntary. It will apply to combustion and process emissions from incineration and EfW activities, including non-mechanical or chemical recycling processes. Facilities above the Small Waste Incineration Plant capacity threshold will fall also within scope. Although, high temperature incinerators that primarily process non-clinical hazardous waste will be exempt during this period.

While participation is not mandatory, the government strongly encourages operators to take part. This will help them understand their potential obligations under the full ETS and prepare accordingly. However, the ETS Authority acknowledges that a voluntary approach could result in incomplete data and an unreliable picture of the sector’s emissions exposure.

To address this, the MRV-only period will mirror standard UK ETS regulatory requirements as closely as possible. This is intended to give participants a realistic understanding of their future obligations and build familiarity with ETS processes.

Integrated monitoring approach

To ensure accurate emissions data, the government will adopt an integrated monitoring approach combining three methods:

• Continuous Emissions Monitoring Systems (“CEMS”) for real-time CO₂ measurement,
• Carbon-14 analysis to distinguish between fossil and biogenic CO₂,
• Emissions factors based on waste type and composition.

Larger facilities, those emitting more than 50,000 tonnes of CO2 emissions annually, will be expected to use both CEMS and carbon-14 equipment unless they can demonstrate that doing so is technically or financially unfeasible. 

Smaller operators are encouraged to similarly use CEMS and carbon-14 monitoring but an application may be made to opt for emissions factors if they can demonstrate that continuous CO2 monitoring would be disproportionate to their facilities. 

Further timescales 

The interim response focuses solely on the MRV phase and does not confirm the final timeline for full ETS inclusion. The government will assess data gathered during the MRV period, which is expected to run until at least 2028, before finalising the policy.

Additionally, the EU and the UK have agreed to work towards an agreement linking the UK and EU ETS’. A research briefing released this week following the May 2025 summit suggests that this would mean UK involvement in EU decision shaping. 

Alternatively, if the EU decides to include the EfW sector in its own ETS, it’s currently considering a 2030 start date. However, this would come with an opt-out clause, meaning individual member states could choose not to apply the rules to their EfW facilities.

Potential areas of concern

The consultation response notes that councils and local authorities, as the largest customers for incineration would be exposed to a “large share” of the ETS costs in the incinerator sector. The importance of managing costs is exacerbated by the local authorities’ limited means. 

The ETS Authority predicts the required monitoring practices could cost £8.5m during MRV period – which will be borne by operators and for which there is no immediate or direct return other than contributing to the development of a system that works.

The ESA and the Local Authority Recycling Advisory Committee (LARAC) have stressed their concern over the voluntary nature of the MRV period and draw attention to the need for “robust and comprehensive data” for designing the details of the ETS regime. Whilst the LARAC chair considers the strategy “disappointingly voluntary”, it is at least considered useful for advising those disproportionately impacted whilst achieving the aims set by the ETS. 

Concluding remarks

Large questions remain unanswered as final policy decisions, including how the ETS costs will work and the impact of the scheme’s expansion on local authorities will be published in a second government response, due to be published “as soon as reasonably practicable”.  

This latest announcement sets a clear framework for the integration of the waste sector into the UK ETS. Whilst challenges are inevitable, an open and early discussion between the government and stakeholders is key for a successful transition. 

Further guidance on MRV requirements is expected from the ETS Authority later this year, with a second government response to follow “as soon as reasonably practicable.”

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