New levies on the horizon?

Legislative proposals are currently being discussed at the national and EU level which could result in the introduction of new levies associated with the recovery of energy from municipal waste.

At the national level, the Circular Economy Bill has just made its way through the Oireachtas, having been examined and amended by members of the Dáil and the Seanad.  Under section 29 of the proposed legislation, the Minister for the Environment would have the power to make regulations to introduce a recovery levy.

Applicable to waste recovery activities, including the export of waste for recovery, in 2020 the Waste Action Plan for a Circular Economy said the recovery levy would be €5 per tonne to begin with. The amount is still to be confirmed. It will include recovery operations at MSW landfills, Waste to Energy (WtE) facilities, co-incineration plants such as cement and the export of MSW. This levy will be paid into the Circular Economy Fund and will be collected by the relevant local authority, or by Dublin City Council in respect of waste exported for recovery.

The legislation provides for a maximum levy of €120 per tonne of waste, but as noted above is believed to be €5 per tonne to begin with. The Minister cannot increase it by more than €50 at any one time, and this amount can only be amended once a year. Care must be taken to ensure the difference between the landfill levy and the recovery levy always remains constant. This is to ensure proper implementation of the waste hierarchy (see more below).

Having made its way through Oireachtas, and following its enactment into law, the Department of Environment, Climate and Communications (DECC) is expected to consult on its implementation before the end of 2022. While the exact timeframe is yet to be confirmed, its introduction is expected in the next couple of years.

Inclusion of Waste to Energy in the EU Emissions Trading System?

Recent proposals at the EU level have increased the likelihood of expanding the scope of the EU Emissions Trading System (EU ETS) to cover emissions from waste. This review of EU ETS is part the EU’s wider ambitions to reduce emissions at an accelerated rate, the so called Fit for 55 proposals. Emissions from waste incineration are currently not included in the scheme. Some have questioned the appropriateness of including WtE in the ETS, given that (unlike other processes and technologies), WtE cannot replace or substitute their feedstock as they are designed to recover energy through the treatment of waste.

However, while EU legislators are still to agree upon the precise timeframe for its introduction, the inclusion of incineration of MSW sometime between 2028-2030 is plausible. It is important to note that the treatment of hazardous waste would remain out of the EU ETS.

What does this mean?

Under proposals, this would introduce an obligation for WtE facilities to purchase a carbon allowance for each tonne of carbon derived from the fossil-based waste. Waste treated at WtE facilities typically has a 50/50 mix of fossil and biogenic material. EU allowances (EUAs) are subject to market dynamics, and at the time of writing, the price of an EUA per tonne of carbon emitted was trading at €85 on the market. This price is expected to increase in the coming years.

Legislators are currently negotiating as to whether WtE should come under the scope of the EU ETS before or after an impact assessment is conducted to understand if its inclusion could result in increased landfilling or increased levels of export abroad for treatment. Those who favour waiting for the results of impact assessment have said it is important to understand any unintended consequences of including the incineration of MSW in the EU ETS. These include negative impacts on the waste hierarchy. An agreement on the terms of its inclusion in the EU ETS is expected in the coming months.

Against the backdrop of a tax on CO2 emissions, several WtE facilities in the EU have commenced studies to examine the potential of carbon capture use (CCU) in the treatment of MSW. CCU technologies involve the capture of CO2 from industrial processes such as WtE, for use in a range of sectors such as food production. These studies will help us understand their possible role in the Irish context in the medium term.  Capturing carbon for re-use elsewhere, such as the horticultural sector for heating greenhouses, would have the added benefit of avoiding the use of fossil fuels. As communities and businesses in Ireland work towards a GHG emissions reduction target of 51 per cent by 2030, Indaver has the potential to play a role in assisting sectors which may be unsuitable for electrification replace their fossil fuel consumption.

Importance of protecting the waste hierarchy

Care must be taken to maintain the waste hierarchy. The waste hierarchy in enshrined in EU law and ranks waste management options, prioritising the prevention of waste in the first instance. When waste is created, it gives priority to preparing it for re-use, then recycling, then recovery, and finally landfill. There is concern that the introduction of new levies on recovery could undermine the waste hierarchy.