“Taxes and levies imposed on the energy recovery industry are seen as the quickest way to reduce emissions in Europe. It is equally important to secure energy recovery’s rightful place in a circular economy”, says Kjetil Vikingstad, CEO of Geminor.
The EU’s increasing focus on taxation on CO2 emissions, a central part of the Green Deal and the “Fit for 55” package, means that new levies are being implemented at different pace around Europe. The increase in taxes is primarily a monetary mechanism proposed for reducing CO2 emissions from the waste industry.
In response to this, Germany is from early 2024 increasing the tax burden on the incineration of fossil content in waste, by implementing the BEHG-tax on CO2 emissions. Simultaneously, the Norwegian government is proposing an increase of the existing CO2 tax of 85 percent on waste incineration on both ETS and non-ETS waste.
Using taxes and levies as tools in which to reduce the fossil content of secondary fuels, could have a positive, local effect on emissions. The question now is how efficient these tools can be in the future, given the complexity of the market mechanisms and the industries involved.
The EfW-operators, which are financially affected by an increased tax burden, are not entirely positive to this development. The increasing energy prices can partly cover the increasing expenses, but some are still contemplating reduced operations due to increasing costs. This means less energy and heating for European businesses and households.
An argument against increasing the taxation of the energy recovery sector is that this reduces investments in sustainable technology such as carbon capture.
Taxation brings market imbalance
Unequal terms for competition are also affecting the situation. As long as there is no equal tax burden in all the EU countries, the solutions representing the lowest cost are normally preferred, which makes those operators affected by tax less competitive. The market will never be balanced until EU and non-EU members establish common tax and regulatory burdens for the industry.
Being an international waste and recycling management company, we are always among the first to sense changing streams or other market developments. These can be consequences of national taxation, local regulations, regional lack of waste volumes, varying energy prices, or even a short-term shutdown at a major EfW plant. Secondary fuels for energy recovery are part of an international market where changes, event smaller ones, can make a big difference. There are, in other words, many factors that are affecting the market situation for EfW operators. Taxation, being just one of them, is a political tool that will be used to its full extent in the years to come, and as such be a factor the EfW operators must get used to sooner rather than later.
Tax or no tax: To make our emissions goals in Europe a reality, the national and EU authorities must better understand the importance of energy recovery in a circular perspective, and facilitate this. As long as we produce waste, there will always be residual waste that we cannot recycle. And as long as we need more energy, we will have to rely on fossil emissions for the foreseeable future. Energy recovery is and will therefore for a long time be an effective energy solution. This is also the reason why we need a balanced and well-functioning market for secondary fuels, which will also ensure the most efficient and sustainable incineration. At the same time, better sorting will ensure that we get more recyclable materials from the residual waste and into new products in Europe.