From Fragmentation to Framework: UK-EU ETS Coordination
On 19th May 2025, during the UK-EU ‘Reset’ Summit in London, an agreement was reached to link the UK and EU Emissions Trading Schemes (ETS). This move marks a significant development in the regulation of carbon emissions, particularly for the waste management sector.
Avoiding a Disjointed Rollout
With the planned inclusion of Energy from Waste (EfW) facilities under the ETS, the agreement has significant implications for the Refuse-Derived Fuel (RDF) export market. Previously, differences in the timing and pricing of the UK and EU ETS frameworks posed the risk of an uneven playing field. UK EfW plants were set to join the UK ETS in 2028, while some European counterparts would remain temporarily exempt.
Before the agreement, mismatches in ETS timing and carbon pricing risked incentivising ‘waste tourism’ or ‘carbon leakage’, where Refuse-Derived Fuel (RDF) exports would swell to exploit regulatory gaps. In practice, capacity constraints at overseas EfW facilities would have limited this, but UK regulators were already exploring complex ‘balancing fees’ to enforce parity – measures that could have destabilised the RDF export market, increased costs for councils and businesses, and raised the risk of landfilling and illegal dumping within the UK.
The success of ETS linkage hinges on alignment in both carbon pricing and implementation timelines. Waste operators need certainty that they are competing on fair terms across borders. Gaps in rollout schedules or pricing could distort the market and undermine confidence in the system.
The Need for Regulatory Coordination
This development highlights the importance of synchronised tax and legislative regimes between the UK and EU. The chaotic rollout of the UK’s Deposit Return Scheme (DRS) highlights the costs of uncoordinated policy across neighbouring jurisdictions. Fragmented, nationalistic decision-making – driven more by political posturing than environmental outcomes – can lead to inefficiencies, higher costs and environmental harm.
A harmonised regulatory framework is essential to support the transition to a circular economy. Divergent national schemes, such as the Netherlands’ Waste Import Tax or various country-specific carbon levies, increase complexity and cost. These costs eventually filter up the supply chain and hit consumers and businesses alike.
While there are valid criticisms of the ETS, particularly in managing the 2-3 million tonnes of contaminated plastic waste it brings into focus, a cooperative, well-structured approach between trading partners is essential.
Local Authority Concerns and the Need for Upstream Reform
The Local Government Association (LGA) has raised concerns that councils could face billions in additional costs due to EfW’s inclusion in the UK ETS. Addressing this requires more than parity across borders; it needs joined-up policy between carbon pricing and producer responsibility. Reducing packaging waste at the source is far more effective than trying to extract problem plastics from residual waste streams.
Looking Ahead: Dialogue Over Disruption
The RDF export sector has weathered a series of disruptive events in recent years, and a clumsy, disjointed rollout of the UK ETS would have only made matters worse. While the new UK-EU agreement is not a panacea, it represents an important step towards stability and cooperation.
Much remains to be done – especially to shield councils from financial strain – but aligning the UK and EU ETS frameworks may help avoid costly disruption and support a more sustainable, integrated approach to waste management.
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