Understanding the side effects of emission trading: implications for waste management

The trading of emission allowances is an important market instrument in climate policy. However, the inclusion of certain branches of industry in the trading system not only provides incentives for emission reduction, it also entails unwanted side effects. Thus, the objective of the present study is to identify such side effects-positive and negative-by examining the potential impact of waste management inclusion in the European Union Emissions Trading Scheme (EU ETS). Desk research was supplemented with qualitative and quantitative empirical analysis (based on expert interviews and a questionnaire) in order to analyse the related perceptions and expectations of actors and stakeholders. The impact of waste management inclusion in the EU ETS is analysed in terms of the following three areas: (i) costs and cost pass-through, (ii), competitiveness and market position, and (iii) carbon leakage. Concerning expectations in the area of costs, both the interviewed experts and the practitioners surveyed thought that costs were likely to increase or that they could be passed on to customers. However, experts and practitioners differed with respect to the possibility of carbon leakage. Clearly, increased knowledge of the possible impact arising from inclusion of the waste sector in the EU ETS would enable managers to become more proactive and to manage waste streams and treatment options more economically.