The EU-Emission trading scheme (ETS) in its current design hardly affects residual waste management directly: methane from landfill-sites is not included although it is one of the “Green-House-Gases” (GHG) of the Kyoto Protocol, CO2-emissions from waste incineration plants are generally exempted from the regulation of the directive and emissions from combustion of landfill-site gas can be regarded as neutral to the climate. In so far only the combustion of waste in mixed-combustion plants is subject to the ETS. Nevertheless all CO2 and methane emissions do charge the national emission budget and limit the production opportunities of other sectors. Consequently alternative measures will need to be introduced to secure climate-friendly policy changes in sectors not included in the ETS.
Setting up an emission trading scheme usually means: creating an artificial scarcity of emissions by a fixed cap, creating a market and thus a price for emissions. All emitters need to hold as many emission permits as they plan to emit. Fossil fuels are charged with an additional cost for the damage to the climate. The cost-increase might lead to fuel switching towards waste as a low emission intensity fuel in some industries where waste combustion is technically and economically feasible. The exemptions of the ETS mentioned above limit the effectiveness of the scheme to a certain degree: Methane is not included what means that the ETS does not provide any incentive to reduce emissions e.g. from landfill-sites. The inclusion would raise liquidity of the permit market and increase disposal cost of non recyclable
As waste incineration plants are not obliged to hold certificates combustion of waste is relatively cheap compared to a similar combustion in a mixed-combustion plant (e.g. in power production). The decision where to use waste as fuel and – related to that issue – what capacities shall be expanded is distorted towards waste incineration plants. Furthermore the operator of the waste incineration plant has no incentive to increase efficiency of the combustion and power generation process. Mixed-fired plants are motivated by the ETS to reduce emission levels and are dependent on high calorific fuels with low emission intensity: a recognition of organic waste fractions as neutral to the climate would raise the demand for high quality waste from waste treatment plants.
There is one other aspect of the ETS that affects waste management: The Kyoto-Protocol allows taking part in emission reduction projects outside the industrialised countries. Emission reductions achieved (from JI or CDMprojects) may be transcribed into emissions allowances of the ETS and can be sold on the market or used for own emissions. There is a great potential for investments in waste treatment, landfill-site management or recycling technology. Investors have the chance to enter new markets and get into contact with local authorities.