Waste Incineration and the EU ETS: Who Will Be Covered and When?

Last updated: 6 November 2026

Will your waste incineration plant be covered by the EU Emissions Trading System (EU ETS), and from when? The answer comes in two stages. A monitoring obligation has applied since 2024. The European Commission proposes to add an obligation to surrender allowances from 2031. An allowance is the right to emit one tonne of CO₂: each year, the operator must surrender as many allowances as it emitted tonnes. This second stage is still only a proposal. It was presented on 17 July 2026 and is now being discussed by the European Parliament and the Council. Here is what applies today, what could apply next, and the flexibilities to watch.

What already applies to waste incinerators since 2024

Since 1 January 2024, municipal waste incinerators above 20 MW have had to monitor their emissions, report them and have them verified every year. They do not, however, have to surrender any allowances.

In most Member States, municipal waste incinerators remain outside the carbon market. Other installations that burn waste are already covered: incinerators of non-hazardous commercial and industrial waste, and co-incineration plants, which use waste as fuel without it being their main activity. This is the case of an industrial boiler fired with solid recovered fuel (SRF), which is waste prepared for use as fuel.

The result: two tonnes of burnt plastic release the same CO₂, but one goes through the carbon market and the other does not. According to the explanatory memorandum of the proposal, municipal waste incineration emits around 40 million tonnes of fossil CO₂ a year in the EU.

What the Commission proposes for 2031-2034

This section covers what the Commission's proposal of 17 July 2026, COM(2026) 616, contains on waste incineration. These measures are part of the wider EU ETS reform presented the same day.

Which installations would be covered

The proposal would cover all installations that incinerate or co-incinerate non-hazardous waste, provided their capacity is above 3 tonnes per hour (the threshold of the Industrial Emissions Directive, 2010/75/EU). Two categories would stay outside. The first is installations that mainly treat hazardous waste. The second is chemical recycling (pyrolysis, gasification), as long as the resulting products are not burnt afterwards.

The criterion applies to the installation, not to the status of its operator. A municipal operator, an inter-municipal body, a public-private company or a private operator would therefore be treated the same way once the threshold is exceeded.

A phase-in from 25% to 100% of emissions

The share of emissions to be covered by allowances would rise each year. Mind the time lag: allowances due for one year's emissions must be surrendered by 30 September of the following year.

This schedule is proposed, not adopted. It would only apply to installations entering the system. An installation already covered, such as an SRF-fired boiler, would keep covering 100% of its emissions.

Planned flexibilities: national opt-out, district heating, outermost regions

The temporary national opt-out. A Member State could exempt its installations from surrendering allowances for their emissions up to 2035. To do so, it would have to meet at least two of these three conditions:

• a national carbon tax on these emissions, in force by 31 July 2029, where the amount effectively paid is higher than the average allowance price;
• being on track to meet the EU recycling targets for municipal waste;
• being on track to meet the EU target for reducing landfill.

The request would have to be notified to the Commission by 31 July 2029, and the Commission could object (Article 12b of the proposal).

District heating. An installation that supplies heat to a district heating network could receive free allocation: part of the allowances it needs would be given to it, so it would not have to buy them. There are three limits. Free allocation only covers heat, since electricity has not been eligible since 2013. It would require an "Invest in EU decarbonisation plan". Finally, it would decrease each year after 2030 and disappear in 2040.

Outermost regions. According to the proposal, each Member State could choose to exempt installations in outermost regions, such as the Canary Islands, the Azores, Madeira or Réunion, from surrendering allowances until 31 December 2035. This exemption is optional: it depends on a national decision.

Do you operate an installation that burns non-hazardous waste? Let's talk about what the proposal would change for it.

Only fossil CO₂ would require allowances

Burnt waste contains two kinds of carbon. The fossil fraction comes mainly from plastics, which are made from oil: this CO₂ adds to what is already in the atmosphere. The biogenic fraction comes from food waste, wood, paper or cardboard: plants absorbed this carbon only recently.

In the EU ETS, emissions from biomass count as zero, under conditions. Only the fossil share of your installation's emissions would therefore count towards the allowances to surrender. The more plastics the waste you receive contains, the higher that share.

Our carbon experts' view
In France, for example, most operators do not measure their biogenic share today. They apply a flat-rate value of 53.4%, accepted by the regional authorities (DREAL). The proposal provides for monitoring rules better suited to incineration, in particular to distinguish biomass from fossil carbon. The share applied to your installation could therefore change, and with it the number of allowances to surrender.

How to estimate the cost for your installation

The principle fits in one formula: tonnes of fossil CO₂ × share subject to surrender × allowance price.

Take a fictitious installation emitting 100,000 tonnes of fossil CO₂ a year, and an allowance price of €80 per tonne. This price is a round figure chosen for the calculation, not a forecast. From 2034 emissions onwards, the share subject to surrender would be 100%: 100,000 × 100% × €80 = €8 million, before any free allocation. During the 2031 to 2033 phase-in, only part of these emissions would need to be covered (see the table). The allowance price changes every day on the market: the actual cost will depend on the price at the time of purchase.

If part of the heat goes to a district heating network, free allocation would reduce this amount, but by less each year until 2040.

That leaves the question of who pays. The surrender obligation legally falls on the operator of the installation. The economic cost, however, is shared according to the contracts:

• the price revision clause of a concession or operating contract;
• the treatment fee paid by local authorities;
• the price of steam sold to a neighbouring industrial site.

Many contracts signed today will still be running in 2031.

A text still under negotiation between Parliament and Council

The European Parliament and the Council, which brings together the Member States, must still adopt the text, and each can amend it. In their "One Europe, One Market" roadmap of April 2026, Parliament, Council and Commission set the goal of reaching agreement in the first quarter of 2027, with no guarantee.

The date has already moved. The current Directive provided for an assessment of inclusion from 2028, with a possible opt-out until 2030. The Commission has finally proposed 2031.

Positions remain far apart. In France, for example, the Senate adopted a European resolution on 18 May 2026 calling for waste-to-energy plants to be excluded from the EU ETS. It points to their public-service mission and their place downstream of recycling. On the other side, district heating associations and industry representatives call for full obligations from 2031, with no phase-in and no national opt-out, in a joint letter dated 14 October 2026.

Four common misconceptions about waste incineration and the EU ETS

"Burning waste is carbon neutral." Only the biogenic fraction counts as zero. CO₂ from plastics is fossil CO₂, and that is precisely what the proposal targets.

"An installation that reports nothing today is not concerned." Not necessarily. The current obligation depends on thermal input (above 20 MW), while the proposal relies on treatment capacity (above 3 tonnes per hour). In France, for example, according to the Senate, only 85 of the 116 waste-to-energy units exceed 20 MW and report their emissions today. Some of the others could therefore enter the system.

"An installation covered by an opt-out has nothing left to do." According to the proposal, the opt-out would cover the surrender of allowances, not monitoring and reporting. Your installation would still have to measure, report and verify its emissions.

"Landfills escape all oversight." According to the proposal, non-hazardous waste landfills would have to monitor and report their emissions, mainly methane, from 2031 (or 2034 if the measurement tools are not ready). They would not have to surrender allowances. The Commission would assess by the end of 2034 whether to include them fully.

In summary

If your installation has a capacity above 3 tonnes of non-hazardous waste per hour, the proposal would bring it into the EU ETS for its 2031 emissions. It would cover a quarter of them at first, then all its emissions from 2034. This schedule will depend on the final text, on any temporary national opt-out and on the share of heat delivered to a network. Two elements you can already check will determine your actual cost: the fossil share of your waste and the clauses of your contracts.

To anticipate your allowance needs and organise your first purchases when the time comes, discover Homaio Comply, the solution dedicated to your EU ETS obligations.

FAQ: waste incineration and the EU ETS

Will waste incineration fall under ETS 1 or ETS 2?

ETS 1, the market that already covers power plants and industrial sites. ETS 2, which will be fully operational in 2028, is a separate market: it targets suppliers of fuels for buildings, road transport and small industry, not installations. The proposal does not change it.

Will monitoring rules change for waste incinerators?

Under the proposal, the rules for monitoring and reporting emissions (currently set by Regulation (EU) 2018/2066) would be revised to better fit municipal waste incineration. Until then, the current rules apply.

Could EU ETS revenues help local authorities?

Member States auction part of the allowances. Under the proposal, Article 10(3) of the Directive would allow them to use these revenues to help local authorities prevent, sort and recycle waste. That choice would remain with each Member State.

Can carbon capture reduce the bill?

Under the proposal, carbon capture projects at incineration installations could be supported by the Industrial Decarbonisation Bank, the Innovation Fund and the Modernisation Fund.

What happens if an installation does not surrender enough allowances?

It pays a penalty of €100 per tonne for which no allowance was surrendered, indexed to the European index of consumer prices. Paying the penalty does not release the operator from surrendering the missing allowances.

Where should you start to prepare?

First check whether your installation has a capacity above 3 tonnes of non-hazardous waste per hour, then make your data on tonnages and waste composition reliable. Follow the text as it progresses and open contract discussions early with the local authority or the operator. Every situation is different: the Homaio team can discuss yours with you.