German CO2 tax will change European waste streams

Emissions from facilities like waste incineration will be subject to a CO2 tax of €40/t in the coming year (image credit: aeshnaton, CC BY-NC 2.0 license).

Commentary from recycling company Geminor

The national BEHG tax on CO2 emissions, which is likely to be introduced from the new year, will be imposed on the local energy recovery industry. “The tax will have consequences for the handling, processing, and direction of the flows of German waste resources,” explains Account and Development Manager at Geminor in Germany, Manfred Rissmann.

A new, national CO2 tax will be introduced in the German market from January 1. 2024, making Germany a pioneer country for this type of tax in Europe. Emissions from waste incineration will thus be subject to a CO2 tax of €40/t in the coming year, rising to €50/t in 2025. The CO2 tax will be charged to the incineration plants and paid in addition to the existing incineration tax.

The new tax will vary depending on certain factors. The most important of these are the calorific value and the percentage of biogenic content in the waste, which will be defined using waste codes.

The challenge of missing codes
In the case of biogenic content, the CO2 tax will vary significantly depending on how the fossil content is taxed. The final cost is calculated from a fixed amount of biogenic content in fractions such as sorted residual waste, commercial waste and waste wood. As an example, commercial waste has a fixed biogenic content of 48.9 percent, while the fossil content is 51.1 percent. Sorting residues are taxed as 50/50 percent biogenic and fossil content, while waste wood is taxed as 95 percent biogenic content and 5 percent fossil content.

The part of the regulations that has created challenges is that biogenic fractions without a waste code are taxed as 100 percent fossil content. Several associations in the German waste industry see this as unfair. To avoid this taxation, they are now demanding that relevant waste codes be established for all waste covered by the BEHG regulations in the future.

Leads to increased exports
‍It is still unclear how the new taxation will affect the industry. However, it is reasonable to assume that the new tax will create challenges for the energy recovery industry in Germany. The most obvious reason is the significant price increase, which will have to be passed on to waste companies, and ultimately to consumers. However, the increased cost of incineration is also expected to affect the waste market to some extent. We cannot rule out increased exports of waste for energy recovery from Germany in the coming year, mainly towards Scandinavia. This will apply to both RDF/SRF and volumes of waste wood for both energy recovery and material recycling.

Another factor is the increased cost of incinerating fossil fractions such as plastics, resulting in increased demand for sorting and treatment facilities in Germany. The new market situation will require a high level of flexibility to find the most economical and sustainable solutions for waste management across Europe.

Good intentions – problematic market
The purpose of the CO2 tax is to promote sorting of waste, thereby increasing the recycling rate in the German market. Such long-term effects are of course welcome. However, any national taxes that are not in line with other EU countries will affect the market and change existing waste streams. The recycling and waste industry needs a predictable and stable market, which is best ensured through a common European regulatory framework where possible. And since Germany is a pioneer in the implementation of the CO2 tax, the international market is best served by the EU now pushing for the same tax in other European countries. In terms of regulations, it would also be useful to prevent all landfill of residual waste in Europe once and for all.

Source: Federal Law Gazette: Ordinance on emissions reporting according to the Fuel Emissions Trading Act for the years 2023 to 2030 (Emissions Reporting Ordinance 2030 – EBeV 2030, Part 5 Standard values for calculating fuel emissions in the cases of Section 2 Paragraph 2a BEHG.