Uneven tax burden will reduce sustainable energy recovery

The import- and incineration taxes currently introduced across Europe is meant to promote material recycling and reduce CO2 emissions. However, uneven taxation creates an imbalance in the waste market, and leads to a reduction of the most sustainable energy recovery, argues CEO at Geminor, Kjetil Vikingstad.

Text by CEO at Geminor, Kjetil Vikingstad.

Several countries already have, or are about to introduce incineration tax on energy recovery. First out was the Netherlands, which on 1. January 2020 introduced an import tax of € 32 per tonne. As Europe’s largest importer of English waste for energy recovery, the new tax quickly had an effect: Exports of Refuse-derived Fuel (RDF) from England to the Netherlands – the largest RDF stream in Europe – fell by 48 percent last year, to 602,000 tonnes (according to Footprint Services).

The tax imposed on energy recovery plants has led to higher gate fees in the Netherlands, which in turn has made exports unattractive for waste producers across the UK. As a consequence, landfilling in the UK is becoming a more tempting, but also far less sustainable alternative.

Rising taxes in Scandinavia

Like the Netherlands, Sweden introduced a similar incineration tax of approx. € 7 per tonne in 2020, which this year will increase to € 9,50 before leveling out to € 11 per tonne in 2022. The main argument for this is to help increase material recycling of waste.

The Swedes are also subject to CO2 trading, which the rest of the industry in Europe does not have to deal with. In the Nordics, the cost of emissions has increased by more than 350 percent since 2017.

Norway is also following up and will introduce an incineration tax in 2021. The tax is approx. € 14 per tonne CO2, which corresponds to approx. € 7,5 per tonne of waste. The tax is now being processed by ESA, but it is unclear when it will be implemented. The tax will probably again make Swedish incineration plants more attractive to Norwegian waste producers.

The purpose of the newly introduced tax burden is to increase the proportion of waste for material recycling, as well as to reduce CO2 emissions. This will probably promote more biogenic waste fractions for energy recovery in the time to come.

The intention is good, but someone has to take the cost. Primarily, the off-takers are given the bill, but the cost will consequently be spread to their distant heating and electricity customers. The waste producers will in turn also have to cover the taxes through increased gate fees.

Taxes limit efficient energy recovery

Is tax a political tool that can contribute to more material recycling and an efficient circular economy in Europe?

Yes, probably in the long run. But today taxes hit unevenly, and risk destroying the competitiveness of the most efficient incineration plants in the Nordic region. The fact that incineration is becoming more expensive in the Nordic countries leads to an imbalance that can send the waste to far less efficient incineration plants in Europe. After all, waste producers need a profit like other businesses and will go for the cheaper off-taker option if possible.

In this respect, it does not matter that energy recovery plants in Scandinavia deliver close to 100 percent efficiency – better than any other European plants can deliver at present. If the gate fees are higher, then they will lose volumes, which in a sustainability perspective is quite unfortunate.

We all want more material recycling. But in order not to limit the well-functioning market forces and the most efficient energy recovery available, we must discuss the possibilities of creating other and stronger incentives for material recycling.

It must be profitable to use waste for the production of new goods, but without reducing the possibilities for sustainable energy recovery. A fair and evenly distributed tax burden is important in this context, as well as strict regulations and high taxation on landfill.

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