A Carbon Price on Waste Incineration: Sharp Industry Criticism Meets the EU’s and Germany’s Emissions Trading Plans

On 17 July 2026 the European Commission tabled its revision of the EU Emissions Trading System (EU ETS), which would gradually bring waste-to-energy plants under carbon pricing between 2031 and 2034. While the debate unfolds in Brussels, in Germany waste incineration is already covered by the national emissions trading system (nEHS), and the third amendment of the governing law (BEHG) is currently out for consultation. Three professional associations — the European CEWEP and the German ITAD and BDSAV — spoke up almost simultaneously. Their messages differ in tone but converge in substance: pricing alone does not push waste up the hierarchy, yet it raises treatment costs and legal and planning uncertainty, and ultimately lands on households.

What did the European Commission propose?

The 17 July 2026 proposal is designed for the fifth EU ETS trading period (2031–2040) and aligns the system with the EU’s target of a 90% net greenhouse gas reduction by 2040. The elements most relevant to the waste sector are the following:

• Scope: every non-hazardous waste incineration and co-incineration installation with a capacity exceeding 3 tonnes per hour is brought into the system as a new Annex I activity. In practice this captures all municipal-scale incinerators.
• Phased introduction: the obligation to surrender allowances starts at 25% in 2031, then rises to 50% in 2032, 75% in 2033, and reaches 100% of verified emissions by 2034.
• Opt-out: Member States may delay implementation until the end of 2035 if they apply equivalent measures — typically by meeting at least two of three conditions (national carbon pricing, recycling performance, landfill targets). Outermost regions may qualify for separate exemptions.
• Accompanying instruments: waste-to-energy for district heating is eligible for free allocation; auction revenues may be used to support local authorities in moving up the waste hierarchy; carbon capture (CCS/CCU) is eligible for support from the Innovation Fund, the Modernisation Fund and the Industrial Decarbonisation Bank.
• Landfills: monitoring, reporting and verification (MRV) obligations are extended to non-hazardous waste landfills, with a review clause on methane emissions.

The proposal was deliberately designed alongside the forthcoming Circular Economy Act, which the Commission plans to finalise in the fourth quarter of 2026. The package now moves to negotiations between the Parliament and the Council.

Reactions split into two camps within the first days. Environmental organisations (such as the EEB and Zero Waste Europe) called it a long-overdue but loophole-ridden step: they criticise the opt-outs stretching to 2035 and the free allocation for district heating, arguing these dilute the climate impact. Industry, by contrast, warns about the pitfalls of the system’s design — and this is where the three analysed statements come in.

CEWEP: yes to decarbonisation, but along the waste hierarchy

CEWEP (the Confederation of European Waste-to-Energy Plants), which represents around 500 European plants treating close to 100 million tonnes of residual waste per year across 25 countries, delivered a measured but firm message. According to the association, the European waste-to-energy sector is committed to decarbonisation — as documented in its own Climate Roadmap — but the revision should incentivise high environmental performance in line with the waste hierarchy and avoid unintended collateral effects.

The core of CEWEP’s argument is the sector’s public-service role: incinerators treat the residual waste — including the rejects of recycling processes — that can neither be prevented nor recycled. The association underlines that including waste incineration is part of a wider package linked to the Circular Economy Act, and therefore calls for a framework that delivers real greenhouse gas reductions in the sector without harmful environmental side effects. CEWEP signalled that it will engage actively in the negotiations with the Parliament and the Council.

The German picture: waste incineration is already under the nEHS

The German case matters because it foreshadows what awaits the EU system. In Germany, waste incineration falls under the national emissions trading system (nEHS) not from 2031 but already today, governed by the Fuel Emissions Trading Act (BEHG). The draft third amendment of the BEHG (Referentenentwurf) is currently under consultation and would adjust the legal framework for 2027. The federal government’s coalition committee decided on the amendment on 12 May 2026.

The technical logic is as follows: allowances have a price corridor (55–65 euros in 2026), which the draft would extend to 2027. However, if not every bid can be satisfied at the 65-euro cap at auction, operators must buy surplus volume (Überschussmenge) and repurchase volume (Nachkaufmenge) at higher prices. Under the draft, in 2027 the surplus volume price would rise from 68 to 73 euros and the repurchase volume price from 70 to 75 euros.

The first auctions in the 2027 phase have already exposed the problem: at the auctions held in weeks 27 and 28, the allocation rate at the 65-euro cap was only 7.5% and 6.0% respectively. In other words, the bulk of the required allowances must be bought above the cap — precisely when the government claims the price will remain “stable”.

ITAD: “no discernible steering effect, only higher costs and uncertainty”

ITAD — the association of Germany’s thermal waste treatment plants (TAB), covering more than 90 plants and around 95% of Germany’s treatment capacity, with over 7,000 employees and more than 25 million tonnes of waste per year — sharply criticised the draft in its statement of 20 July 2026.

ITAD’s central objection is a matter of principle: because of their statutory obligation to properly dispose of incoming, heterogeneous waste, incinerators — unlike the “fuel-switch” logic familiar from conventional fuels — cannot influence the volume they emit. As a result, the system has no discernible emission-reducing steering effect (Lenkungswirkung); what remains is higher treatment costs and significant legal and planning uncertainty. According to the association’s managing director, the plants perform a public-service (Daseinsvorsorge) task and can influence the volume and composition of incoming waste only to a very limited extent.

ITAD estimates the cost of the system at around one billion euros (including VAT) already in 2026 — caused solely by the waste treatment carried out by its member plants. Because the auction procedure directly determines allowance prices and thus a key element of disposal fees, unplannable costs run down the entire chain: through disposal contracts, municipal fees, and ultimately to households and businesses.

Its concrete proposals:

• Auction procedure: a larger auction volume, raising the repurchase limit from 10% to 20%, longer purchase periods, and limiting market participation by non-mandated financial intermediaries.
• Price basis from 2028: an early, reliable price basis. Under the draft, from 2028 — after the current auction phase — a price system that does not yet exist (EU ETS 2) would apply, so costs would only become known during 2028, while in 2027 there is no planning basis for the 2028 fee calculation. ITAD therefore proposes coupling to the EU ETS 1, where past reference data already exist, avoiding a complex, bureaucratic switch of price systems.
• Emissions reporting (EBeV 2030): from 2027, base the standard values on the carbon-based rather than energy-based biomass share, since the appropriate reference for determining fossil CO₂ is the fossil carbon content. In addition, differentiate the emission factors for household waste according to local waste management circumstances.

An important detail: ITAD welcomes the extension of the 55–65-euro price corridor to 2027, but increasingly sees constitutional concerns with maintaining the corridor, because too-low allocation quotas and higher surplus/repurchase prices could push the actual average allowance cost well above 65 euros.

BDSAV: rejects the inclusion of hazardous-waste incineration in principle

BDSAV (the Federal Association of German Hazardous Waste Incineration Plants), in its statement of 15 July 2026, went the furthest. The association stresses that it supports the climate targets and does not question emissions trading in general — but that including hazardous-waste incineration in CO₂ allowance trading is not expedient and should be rejected.

Its arguments partly overlap with ITAD’s and partly sharpen them:

• The national “special path” (Sonderweg) is climate-policy-questionable, economically heavily burdensome for hazardous-waste incineration, and regulatorily unconvincing. The association argues that its concerns are shared by the majority of the federal states, and refers to the Bavarian State Parliament’s motion of 9 July 2026 (Doc. 19/12811), which again calls for withdrawing the inclusion.
• The promise of “price stability” is untenable if the surplus and repurchase prices are raised at the same time. BDSAV therefore asks that the increases for the surplus volume (73 euros) and the repurchase volume (75 euros) be deleted in full from the draft.
• The current form of the auction model opens the door to speculation: financial-market actors from outside the sector artificially drive up allowance prices. The association argues this renders the market dysfunctional and that the purchase options of non-mandated intermediaries must be restricted.
• BDSAV firmly rejects the statutory role that turns operators into “collectors” of the CO₂ charge on behalf of waste producers — effectively a debt-collection agency. Under the legislator’s intent, the charge should be borne by the actual originator (the waste producer), but operators can hardly, if at all, credibly demonstrate this within the auction system — which strains the operator–customer relationship and increases legal uncertainty.
• For 2028, BDSAV likewise urges an early, reliable price basis: as one option, it would tie the national allowance price to the volume-weighted average price of the EU ETS 1 in the same quarter of the previous year.
• Finally, a procedural objection: the one-week consultation deadline did not allow for meaningful input from member companies.

The common thread: pricing is most expensive where it steers least

Overlaying the three statements reveals several recurring, mutually reinforcing themes:

1. The absence of a steering effect. Incinerators cannot choose the volume or composition of incoming waste, because they have a disposal obligation. The carbon price would therefore bite not at the incinerator but earlier in the waste hierarchy — at prevention, at design, at producer responsibility. This is exactly the tension the Commission also acknowledges when it would use revenues to help local authorities “move up”.
2. Auction design as the real price driver. All three associations argue that the system prices not at the nominal corridor but above it, because the auction allocation quotas are too narrow. The German experience (7.5% and 6.0% at the cap) is a live warning to the EU legislator.
3. Financial-market speculation. Both ITAD and BDSAV call for squeezing out non-mandated financial intermediaries — the carbon market should not become a “betting shop” at the expense of public services.
4. Cost pass-through and households. The endpoint of the system is the municipal waste fee: unplannable allowance costs reach households through public-service charges.
5. Planning certainty and coupling to EU ETS 1. A shared proposal is to tie the future price basis to the existing EU ETS 1’s historical reference data, avoiding calculations built on systems that do not yet exist.

The other side matters too, however: environmental organisations argue that it is precisely the industry’s requests (opt-outs, free allocation, delayed introduction) that jeopardise the climate impact. The debate is therefore not about whether to price carbon on waste incineration, but how to design it so that it genuinely steers rather than merely raises costs.

The Hungarian angle: what could this mean for the domestic system?

From Hungary’s perspective the story is relevant for several reasons, even though the domestic starting point differs fundamentally from Germany’s.

A low incineration base. In Hungary the vast majority of residual waste still goes to landfill, and thermal recovery is essentially concentrated in the Budapest waste-to-energy plant. This means the EU ETS extension starting in 2031 will directly affect few existing installations in the short term — but for exactly that reason the Hungarian system is most exposed at the bottom of the waste hierarchy (landfilling), since the proposal also extends monitoring to landfills and includes a review clause on methane emissions.

The opt-out question. Member States may delay until 2035 if they meet at least two of the three conditions (national carbon pricing, recycling performance, landfill targets). For Hungary this is uncertain precisely at the weak points: on recycling rate and landfill targets the country has historically lagged the EU average. The delay is therefore not automatic — it is worth thinking now about which condition can realistically be met.

The cost sensitivity of the MOHU concession. Domestic waste management has been organised since 2023 through MOHU’s concession model, in which the household public-service and DRS segments are already under pressure. A future carbon cost falling on incineration — of unpredictable magnitude, as the German experience shows — would add further strain to this structure and ultimately show up in household fees. The German sector’s main message becomes especially instructive here: pricing alone solves nothing without appropriate auction design and a predictable price basis behind it.

The right direction: up the hierarchy. For Hungarian policy the most important conclusion is not the technical detail of pricing incineration, but what the Commission itself is aiming at: a carbon price works when the revenues are channelled into prevention, reuse and the development of separate collection and recycling. In a system with a low recycling rate and heavy reliance on landfill, the greatest return comes not from taxing the incinerator but from investments that move the system up the hierarchy.

FAQ – Frequently Asked Questions

What is the difference between EU ETS 1 and EU ETS 2? EU ETS 1 is the traditional system in place since 2005 for power generation and heavy industry. EU ETS 2 is a new system, starting in 2027, for pricing carbon from heating fuels in buildings and road transport fuels. The German nEHS is the national forerunner of this logic, and waste incineration currently falls under it.

From when will incinerators have to buy allowances in the EU? Under the Commission’s proposal, gradually from 2031: 25% of emissions in 2031, then 50%, 75%, and finally 100% by 2034. Some Member States may delay until 2035 if they meet certain conditions.

Why do the associations say there is no “steering effect”? Because an incinerator cannot choose what or how much it burns: it has a statutory obligation to dispose of the incoming waste. The carbon price therefore does not influence the incineration decision but mainly raises costs — genuine steering could happen earlier in the hierarchy (prevention, design, producer responsibility).

What is wrong with the German auction system? The allocation quotas are too narrow, so a large share of allowances must be bought above the nominal cap (65 euros), at higher surplus and repurchase prices. On top of that, speculation by financial-market actors from outside the sector drives prices up.

Will this affect Hungarian household waste fees? Not directly for now, because domestic incineration capacity is low and the EU extension starts in 2031. Over the longer term, however, the carbon cost — through incineration and the tightening regulation of landfills — may appear in the cost structure of public services.

Sources:

• CEWEP: Press Release – CEWEP calls for an EU ETS design that reduces emissions without undermining waste policy (17 July 2026)
• ITAD e.V.: ITAD kritisiert höhere Behandlungskosten sowie anhaltende Rechts- und Planungsunsicherheiten des BEHG (Düsseldorf, 20 July 2026)
• BDSAV e.V.: Stellungnahme zum Referentenentwurf eines Dritten Gesetzes zur Änderung des BEHG (15 July 2026)
• International Carbon Action Partnership (ICAP): EU Commission publishes EU ETS review proposal (July 2026)
• Reuters / Resource Media / letsrecycle.com: timeline of the EU ETS extension to waste incineration (2031–2034), July 2026
• Zero Waste Europe and EEB statements on the EU ETS proposal (17 July 2026)