LGA response to consultation on developing the UK Emissions Trading Scheme (UK ETS)

The first principle of the waste hierarchy is to prevent waste in the first place, and this is where action on net zero must focus.


About the Local Government Association

  • The Local Government Association (LGA) is the national voice of local government. We are a politically-led, cross party membership organisation, representing councils from England and Wales.
  • Our role is to support, promote and improve local government, and raise national awareness of the work of councils. Our ultimate ambition is to support councils to deliver local solutions to national problems.
  • This response is not confidential.

Key messages

  • We support the ambition from Defra and BEIS to decarbonise emissions from waste. The first principle of the waste hierarchy is to prevent waste in the first place, and this is where action on net zero must focus. The LGA has welcomed the reform of the extended producer responsibility (EPR) scheme for packaging and the requirement for producers and retailers to pay councils the full cost of dealing with packaging in household waste. This should reduce the amount of fossil-based material that enters household waste and make it easier to recycle plastic packaging. Producers need to take more responsibility, as councils are left with the problem and cost of disposing of items that are difficult to recycle, such as textiles and nappies.
  • The technology to reduce and capture carbon emissions from waste incineration and energy from waste (EfW) plants is expensive and untested. Councils need support to speed up the delivery of this infrastructure. Applying the Emissions Trading Scheme (ETS) as a cost lever is not guaranteed to drive investment, as this depends on the age of the waste facility and whether the investment can be paid back over the period of the contract. As noted in the consultation document, it will be challenging for some facilities to adopt the new technology because they are located at a distance from carbon capture and storage infrastructure.
  • We need safe routes for disposing of harmful chemicals and other materials that must be kept out of landfill. Incineration and EfW play a necessary role in environmental protection and waste disposal. It is unhelpful that the arguments for extending the ETS to the waste sector are based on comparisons with power stations and energy generation. It is right that we take action to minimise emissions from waste disposal, but classifying incineration and EfW as energy generation overlooks the important role these facilities play in waste disposal. The case for extending the ETS to waste should be considered in its own right. Defra and BEIS may wish to consider the potential for EfW to generate heat for buildings, as this would support wider efforts to decarbonise.

Question 124: Do you agree with the proposed timing for when waste incineration and EfW could be introduced into the UK ETS?

No, we do not agree that the UK ETS scheme should be extended to waste incineration and EfW from the mid 2020s.

The reasons for this are:

  • Long term contractual arrangements of around 25 years underpin the operation of EfW plants. Applying the ETS to waste incineration and EfW in the mid 2020s would hit the majority of facilities at the mid-point of their contracts with local authorities. It is unlikely that mitigation measures would be feasible or affordable over the remaining contract period.
  • The timing must align with other policy changes designed to reduce waste and capture more material for recycling. These must be implemented before the introduction of ETS and be given time to work. This point is expanded in our answer to question 126.
  • The risk of unintended consequences, such as diverting residual waste into landfill or export abroad.

Question 125: For operators of waste incinerators, EfW plants, and local authorities (LAs),

Please outline the steps that you will need to take, and the time required to prepare for the expansion of the UK ETS to waste incineration and EfWP

Operators would be expected to pass the costs onto their customers including local authorities. This would be an additional cost for councils, as explained in the answers to Questions 135 and 139.

The scope for diverting material away from waste disposal and into recycling is linked to the implementation of other reforms, notably the EPR scheme for packaging and the requirement for councils to collect plastic films in household waste collection. EPR is due to be phased in from 2024 and this is expected to bring about change in the format of packaging and make it easier to recycle. The ability of councils to increase recycling before the implementation of EPR is limited.

Defra has set out an ambition for plastic film to be collected by March 2027. This type of plastic cannot be treated through traditional mechanical recycling plants, which is a significant barrier to increased recycling. Pilots are just beginning with a small number of councils, backed by industry and the Flexible Plastic Fund. The speed of implementation will depend on the availability of funding from EPR for packaging materials and new burdens funding from government, as well as the availability of infrastructure that can handle complex material streams.

Question 126: Do you agree that the UK ETS should be expanded to include waste incineration and EfW? (Y/N)

Please outline your reasoning, including alternative options for decarbonisation of the sector outside of the UK ETS

No, not at this time, although we support wider action to reduce carbon emissions from the waste sector. The cost of carbon emissions generated by the disposal of waste must be funded by the producer of the waste following the “polluter pays” principle. It is unfair to place the responsibility for carbon emissions on collectors of waste when change is needed across the whole chain of production and consumption of materials.

The arguments for applying ETS to waste incineration and EfW are based on comparisons of emissions from power stations and energy generation. It is right that we take action to minimise emissions from waste disposal, but we must recognise the important role that waste incineration and EfW play in waste management and disposal of harmful materials.

The sector can be decarbonised by:

  • Extended producer responsibility. The EPR scheme for packaging will be phased in from 2024 and if it is well designed and implemented it should be successful in reducing unnecessary and non-recyclable plastic packaging. The introduction of a deposit return scheme for drinks containers also has the potential to reduce the amount of plastic ending up in household waste. The tax on single use plastic and the ban on certain plastic items such as straws and stirrers should also have a positive impact. Defra may wish to consider other regulatory levers to cut down on single use plastics.
  • A focus on waste prevention and the implementation of measures set out in Defra’s draft waste prevention plan, published in 2021
  • In the medium to long term, councils can look at replacing the vehicle fleet with cleaner alternatives
  • Reducing the cost of carbon capture and storage and speeding up delivery

While this is not the time to extend the ETS scheme to the waste sector it could be an issue to reconsider at a future date. Time must be allowed for the implementation of the Resources and Waste Strategy, and for infrastructure to be developed for carbon capture and storage.

Defra and BEIS may wish to consider the potential for EfW to generate heat for buildings, as would support wider efforts to decarbonise. This potential is largely untapped, as most EfW facilities are set up to covert waste into electricity rather than heat.

Question 127: Do you agree that all types of waste incinerators should be included in the UK ETS? (Y/N)

If you believe certain incineration activities should be exempt, e.g. incineration of hazardous or certain healthcare waste, please provide detail

Hazardous and clinical waste should be exempt.

The chemical compounds identified as persistent organic pollutants (POPs) are harmful to human and animal health, accumulating in tissue and many are linked to serious health issues. Products containing POPs must be disposed of safely through a treatment that destroys the toxic pollutant. Where incineration or energy recovery are designated as safe routes this should be treated in the same way as hazardous waste and be exempt from ETS. POPs occur in household items such as furniture and soft furnishings.

Questions 128 to 134

Questions 128 to 134 relate to the technical detail of how the ETS scheme would work and the LGA does not have the expertise to answer these.

Question 135; How would the application of an ETS to waste incineration and EfW impact stakeholders (including operators of waste incinerators, operators of EfW plants, LAs, consumers, customers)?

The immediate impact on councils is the extra cost and the exposure to the high level of price volatility in the ETS. This would be extremely difficult to manage, and it is likely to have a knock-on effect to council budget setting process.

This could be offset by ensuring that the design of the new EPR scheme for packaging makes the producers responsible for the ETS element of the disposal cost.

Question 136: Could the introduction of a carbon price incentivise waste operators and/or Las to improve their operations or processes to reduce fossil waste being incinerated? (Y/N)

Please outline your reasoning in as much detail as possible and provide evidence to support your views.

No, please see the answer to question 125. Without action on waste prevention, and expansion of the recycling infrastructure, it will always be challenging for councils to divert waste from the residual stream. The cost of landfill and EfW per tonne already act as a financial level and an incentive to divert as much waste as possible into recycling. WRAP estimate a cost of £90-£95 per tonne for energy from waste.

Question 137: Could the introduction of a carbon price incentivise LAs to support households to improve recycling practices? (Y/N)

Please outline your reasoning in as much detail as possible and provide evidence to support your views.

No. Councils are already incentivised to increase recycling:

  • Disposal costs for residual waste are already high and councils will always seek to place materials into recycling streams, where markets exist
  • Councils are committed to reducing carbon emissions and tackling the climate emergency
  • It is a key issue for many residents who can easily find out the recycling rate in their area, and want to see improvements

Councils may look at other ways to increase recycling, such as restricting residual waste collection. It is important that councils can design services locally to meet local needs. In the LGA’s response to Defra consultation on consistency in collections we questioned the need for statutory guidance to local authorities on residual waste collection. We need a national focus on the environmental outcomes, leaving it to councils to design the most effective collection system for the local area.

Question 138: Is there opportunity (in the medium-long term) for the carbon price to incentivise waste operators and/or LAs to invest in carbon capture and storage infrastructure, to reduce fossil carbon emissions? (Y/N)

Please outline your reasoning in as much detail as possible and provide evidence to support your views.

It would depend on the life cycle of the facility, and whether there is enough time remaining on the contract to pay back the investment in carbon capture and storage. As noted above, most contracts are halfway through, and this may not offer a long enough pay back period.

Question 139: In the event of the carbon price being applied to waste operators, will waste operators be able to pass through their costs to customers (including LAs)? (Y/N)

Please explain in as much detail as possible why, how, and to what extent this may or may not occur.

Yes. Bringing EfW within UK ETS could potentially be a qualifying change in law and the costs would pass to the local authority.

Councils will be seeking reassurance from BEIS and Defra that this would be covered by the new burdens doctrine.

Question 140: For LA owned plants, would unitary authorities and waste disposal authorities be the only authorities exposed to the carbon price – in the event of waste operators passing through costs? (Y/N)

Please explain in as much detail as possible and provide evidence to support your views.

This would depend on local arrangements. Councils will be able to provide examples of these.

Question 141: Do you believe that government should consider phasing in ETS obligations to the sector over time? (Y/N)

If yes, please outline why, how, and to what extent phasing options could be provided.

If government extends ETS obligations to the waste sector, then it should consider a phased approach. Time is needed for Defra’s Resources and Waste strategy to be implemented and for carbon capture and storage technology to be piloted, evaluated and mainstreamed.

Question 142: Would operators of incineration/EfW plants be exposed to competitiveness impacts abroad and carbon leakage risk, in the event of being exposed to the carbon price? (Y/N)

Please explain in as much detail as possible and provide evidence to support your views.

This is a question best directed at operators.

Question 143: Have you identified any other distributional impacts (including wider environmental or social impacts) arising from this proposal? (Y/N)

Do you have views on how government could address these concerns?

Yes. Blanket national policies always run the risk of unintended consequences. It is better to let councils take a holistic approach to reducing carbon emissions, and government can help by allowing local flexibility in service delivery and providing strong leadership on waste prevention activities. It should not be assumed that all areas will be able to respond to ETS by increasing recycling rates. In the LGA’s response to Defra’s 2021 consultation on consistency in household and business collections, we highlighted the challenge in increasing recycling rates from flats. The nature of flats means less space to store recycling, and property owners are often resistant to improving communal recycling areas. Areas with high densities of multi-occupancy homes are also likely to record lower recycling rates due to the high turnover of residents and poor provision of recycling bins. The application of ETS will be more expensive for those areas where the type of housing stock is associated with lower recycling rates. It is a concern that these areas may also experience higher rates of deprivation.

An environmental risk is the unintended consequence of driving more waste to landfill or export.

Question 144: What additional policies would be needed to support the UK ETS in decarbonising waste incineration and EfW? How would this change over time?

There is an opportunity for new waste incineration and EfW facility to be future proofed and act as a test bed for carbon capture and storage technologies. It is harder to say what policies could support retrofitting carbon capture and storage to existing facilities, and this may vary depending on the age and location of the facility.

The best environmental gains will come from policies that support waste prevention, and that place the responsibility on the polluter, such as extended producer responsibility.

Contact

Hilary Tanner, Adviser, Local Government Association

Email: hilary.tanner@local.gov.uk