The EU runs the world’s largest carbon market. The Emissions Trading System (ETS) has reduced pollution from power plants, steel and heavy industry. Yet one major fossil fuel source remains largely outside its scope: waste incineration, write Anna Larsson and Janek Vahk.

That loophole is no longer defensible. And the political window to close it is now, with a decision on including incineration in the ETS due by July 2026.

Over the past decade, Europe has increased the amount of waste burned by roughly eight million tonnes per year. Driven by persistent marketing of incineration as a preferred disposal method, the EU has created at least 60 million tonnes of annual overcapacity, likely more today given continued investment. Europe has built more incinerators than it needs and now faces structural pressure to keep them fed.

This directly undermines both climate neutrality and the circular economy, which is essential for Europe’s resilience and secure access to materials.

Waste incineration is far from carbon-neutral. Each tonne burned emits around 1.1 tonnes of CO₂. About half of those emissions are fossil-based, largely from plastics made from oil and gas. These are real fossil emissions, and they are growing.

A recent CE Delft study shows that bringing incineration under the EU ETS would reduce emissions within the system by at least 4–7 million tonnes of CO₂ in 2030 and 18–32 million tonnes in 2040. These figures cover direct emissions only.

At projected ETS prices of €108 per tonne in 2030 and €184 in 2040, incineration gate fees would increase by an estimated €74–132 per tonne in 2030 and €125–225 in 2040. That price signal would drive change.

Faced with higher disposal costs, companies would reduce unsorted waste by 15–28 percent by 2030, rising to 22–41 percent by 2040. Recycling one tonne of municipal waste instead of burning it delivers a net climate saving of around 0.75 tonnes of CO₂ across the life cycle. Plastics and textiles offer particularly high savings.

Residual waste sorting facilities can go further, extracting plastics from mixed waste before incineration and cutting fossil emissions even more.

The economic case is equally strong. Recycling and circular activities are far more labour-intensive than incineration. Including waste burning in the ETS could generate between 8,700 and more than 21,000 additional jobs by 2040.

There are also clear public health benefits. Incineration produces millions of tonnes of bottom ash and hazardous residues every year, much of which still ends up in landfill. Reducing waste burning lowers toxic by-products and long-term risks, including heavy metal leakage.

Carbon pricing is a proven instrument. Fee-based mechanisms have long ranked among the most effective environmental policy tools. Sweden has included waste incineration in its ETS since 2013. The experience shows that pricing carbon incentivises the extraction of plastics from mixed waste prior to incineration and reduces fossil emissions from the sector.

Some argue that pricing incineration will simply divert waste to landfill. That risk must be managed, and it can be.

The upcoming Circular Economy Act, due in September, provides the opportunity to directly address landfilling. Stronger pre-treatment requirements, tighter waste acceptance criteria and proper enforcement of the Landfill Directive can ensure recyclable fractions are removed and waste is stabilised before disposal. The answer is not to shield incineration from carbon pricing, but to strengthen safeguards against backsliding.

Including incineration in the ETS should form part of a broader package: mandatory recycled content for plastics, extended producer responsibility schemes that fully cover the cost of extracting recyclables from mixed waste, and widespread pay-as-you-throw systems. Together, these measures reinforce the carbon price signal and accelerate circularity.

Europe cannot claim climate leadership while expanding waste-burning capacity and exempting fossil carbon in waste from carbon pricing.

Waste emissions are not marginal. They amount to tens of millions of tonnes of CO₂ every year, and they are rising.

If the ETS is meant to reflect the true cost of fossil carbon, then fossil carbon in waste must be included.

The decision is imminent. The Circular Economy Act offers the tools. Europe should close the loophole and align waste policy with its climate and circular economy objectives.