This is the second of four Frith Resource Management blogs on the UK ETS. The first introduced and explains the ETS-EfW scheme, this blog reviews the current DESNZ consultation, the third discusses fossil carbon and the fourth identifies ETS-EfW Allowance costs, their avoidance and mitigation, and looks at the future of ETS-EfW under net zero obligations. Emissions Trading Scheme Consultation

The DESNZ (Department for Energy Security and Net Zero) are currently consulting on the UK ETS EfW scheme. Responses have been extended two weeks to 2nd August due to the General Election https://www.gov.uk/government/consultations/uk-emissions-trading-scheme-scope-expansion-waste#:~:text=Consultation%20description&text=The%20purpose%20of%20this%20consultation,full%20surrender%20obligations%20from%202028.

It is noted “Respondents need only reply to the questions that interest them or that they have views on”. There is no requirement or expectation to respond to every question in this consultation.”

ETS EfW Allowances only apply to fossil fuel derived waste (oil based, e.g. plastics), and not biogenic (food / plant based) wastes. Carbon in emissions from EfW facilities should be continuously monitored giving the taxable ETS emissions (carbon dioxide, nitrous oxide and perfluorocarbons (PFCs)) for the EfW facility https://www.gov.uk/guidance/monitoring-stack-emissions-maximum-uncertainty-values-for-periodic-monitoring. The percentage of fossil v biogenic waste combusted can be calculated from composition monitoring of the waste fuel source. However, as municipal solid waste is heterogenous, this is not easy.

The UK ETS EfW tax will be “cap and trade” system and the value/cost of emissions will be market led. It could be further complicated by “carbon offsets” that an operator could apply for – heat recovery (district heating), CCUS (carbon capture utilisation and storage) and other direct/indirect positive carbon emission reduction schemes.

Torvik Ltd has published a response to Call for Evidence on Inclusion of EfW in the UK Emissions Trading Scheme (https://www.tolvik.com/wp-content/uploads/2022/06/Tolvik-Response_Inclusion-of-EfW-in-the-UK-ETS_27052022_web.pdf). Frith Resource Management (FRM) would agree with many of the issues they raise in the ETS-EfW consultation. FRM note the complexities of the current ETS-EfW proposals:

1. Definition of who pays – EfW Asset owner or EfW Operator. The ETS Authority will need to unambiguously specify the activity at an EfW which will give rise to any obligations under the ETS.
2. The consultation does not provide a clear view as to whether heat generation from EfW (either for industrial or district heating) is to be incentivised under the proposed Monitoring, Reporting & Verification (MRV) protocols. Similar opportunities should be provided to EfW for heat exports as they currently are provided to other electricity generators.
3. The “cap and trade” variable cost of carbon and a variable fossil content of residual waste is likely to result in particular complexity in the calculation of ETS carbon costs.
4. Waste is a heterogenous fuel, with significant seasonal and other variability with different waste mixed from different suppliers before it is combusted, making accurate calculation of the ETS carbon cost for each supplier complex. EfW companies / operators will need to decide how the ETS carbon cost for each supplier should be calculated. This complexity may be simplified by using nationally established EfW emission factors linked to the waste composition e.g. European Waste Catalogue used in Netherlands in assessing their EfW tax, however this may not account for mitigation techniques (see blog 4 in this series).
5. “Cap and trade” may lead to variable prices making it difficult for waste producers (Local Authorities and businesses) to manage costs and their budgets. ETS carbon cost are likely to be passed back to Local Authorities through EfW contract “Change in Law” provisions. Whilst FRM has the above overriding concerns with the application of the ETS-EfW consultation, we would agree with some of the consultation details e.g.

• Hazardous and chemical waste should be included

• Operators of EfW facilities should Monitor, Report and Verify (MRV)

• The Ultra-Small Emitters threshold (less than 2,500 tonnes of CO2e) and the Hospital and Small Emitter threshold (less than 25,000 tonnes of CO2e).

• There should be mechanism for distributing costs of the UK ETS fairly, for example through linking to packaging Extended Producer Responsibility (pEPR) and further EPR for other relevant streams (e.g. textiles, waste electricals, furniture etc.) should be implemented, to prevent cost burdens falling unfairly on the local tax payer.

• It should include Advanced Thermal Treatment (ATT), Advanced Conversion Technology (ACT), and other related advanced waste treatment activities. It should also include waste-to-fuel activities, including the production of sustainable aviation fuel (SAF)

• The application of chemical recycling to ETS-EfW should be clearly defined. Chemical recycling is a blanket term used for several different processes which use chemical processes to break materials back down to base polymers. This includes processes such as pyrolysis and gasification. Some of these can be used to produce new plastics, while others may be burnt to produce energy, either directly or following conversion to transport fuel. The UK ETS should only capture chemical recycling that is performing energy recovery activities, or those that produce fuels for burning.

Parts 1, 3 and 4 of this series of blogs provide further insight into the ETS implications for Local Authorities.

Frith Resource Management provides technical support to local authorities and the private sector on collection, treatment and disposal issues, for details see www.frithrm.com, call 01746 552423 or email info@frithrm.com.