With Landfill Tax due to step up to £126.70 in April 2025 the gate fee trajectory of landfill and EFW going forwards looks ominous – and may lead to some unintended consequences of Landfill tax and UK ETS policy in the future.
The graph below shows the potential trajectory for landfill and EFW gate fees to 2035.
Using industry available figures1, the mid-point gate fees for landfill plus landfill tax (orange) and EFW (blue) in the graph above have been inflated by 3% per year from 2026 (dotted lines). Added to the EFW gate fee is an assumption of the impact of UK ETS from 2028 (taking government carbon trading values2 forward at the same inflationary rates, at an assumed 50% non-biogenic carbon).
By 2028 the EFW gate fees exceed landfill by around £8 per tonne, by 2035 by nearly £20 per tonne. However, the government carbon market ‘starting point’ in 2023 was £59.00 (at about £30 per tonne gate fee impact to EFW in today’s terms at the 50% non-biogenic carbon level) and considerably higher than the current market of around £38.003 (£19 per tonne gate fee impact in today’s terms).
So what could the implications/unintended consequences be:
- Criminal activity around landfill tax will continue and possibly become worse
- Long term contracts to EFW plants will have to acknowledge the uncertainty in carbon pricing and the risk of changing composition impacting carbon liability
- Even if short term lobbying to simplify and/or phase in the UK ETS via some form of standardisation is successful, the inevitable would still be coming, and the danger is that an imbalance may be created in the other direction (i.e. the UK ETS is lower than the EU ETS and this encourages importation of waste)
- The tax position may push waste from EFW to landfill as a cheaper alternative
- The tax position may push waste to export, unless the implementation of the EU ETS is aligned in cost terms and in roll-out timing terms (or unless some form of tax on export is implemented)
- The cost to pre-process residual waste prior to EFW (to remove plastics and reduce fossil carbon content alone) may be more than the tax increase and may not stimulate the change that some desire in this space
- Greater recycling and separation at source (with bulking, simple MRFs and more complex MRFs) is likely to increase with the overall tax take – which may be the only real driver of change in a policy context where Simpler Recycling seems to be ‘No Real Change Recycling’ and DRS seems to stand for ‘Deposits….Really…Sometime-never’
- Alternative fuels and ‘waste to fuels’ may get a commercial benefit where they are displacing fossil fuels and/or have less emissions than ‘traditional EFW’ but they will need the pull of the demand side to get there as this won’t make the difference on its own
For further market insights and support with understanding the implications for your potential gate fees, please contact us at info@monksleigh.com.
