The EU ETS takes an Important Step Forward for the Circular Economy
As the European Commission has presented its long-awaited proposal to revise the EU Emissions Trading System (EU ETS) Directive, NG Nordic welcomes the inclusion of municipal waste incineration, also known as Waste-to-Energy (WtE), in the EU ETS.
This proposal represents an important step towards strengthening Europe’s circular economy. By gradually introducing carbon pricing on municipal waste incineration between 2031–2034, it can boost recycling rates, reduce external dependencies on critical materials, and contribute to meaningful CO₂ emissions reductions. Although the proposal will not have an immediate effect, as it extends the timeline and leaves open the possibility for Member States to opt out until the end of 2035, it is still a significant step forward.
Crucially, the Commission still recognizes the fundamentally different role of hazardous waste incineration (HWI). By excluding HWI from the EU ETS, the proposal acknowledges that not all waste incineration serves the same purpose. While municipal waste incineration is part of a broader waste management market where pricing signals can drive behavioral change, hazardous waste treatment performs a non-substitutable sanitary function. It is designed to safely destroy pollutants under strict regulatory conditions, operating at higher temperatures, and under tighter controls to ensure compliance with environmental and health standards.
Treating HWI as a standard energy-producing activity in the EU ETS would risk undermining this critical function. Carbon pricing in this segment would not drive meaningful decarbonization but could instead create unintended incentives, such as unsafe handling, illegal exports, or diversion of hazardous waste away from proper treatment.
“Including municipal waste incineration in the EU ETS will establish a clear carbon price for residual waste treatment, creating a strong financial incentive for operators to invest in decarbonization technologies such as carbon capture. Inclusion of WtE in the EU ETS will make recycling more competitive compared to energy recovery, reinforcing the EU waste hierarchy by ensuring that incineration is reserved only for waste streams that cannot be recycled. We call on the co-legislators to take even more ambitious steps by accelerating the timeline proposed by the Commission and removing the possibility for national opt-out,” says Bjørn Arve Ofstad, CEO of NG Nordic.
The EU ETS revision represents a unique opportunity: to use carbon pricing not only as a climate instrument, but as a driver of circularity. By including municipal Waste-to-Energy while safeguarding the role of hazardous waste treatment, the proposal can accelerate emissions reductions, strengthen recycling markets, and ensure that waste is managed in the most sustainable and responsible way.
Contact
Janne Koivisto, Group Director, Public Affairs, janne.koivisto@ngnordic.com, +358 503 213 639