A new national CO2 tax will be introduced in the German market from January 1, 2024, making Germany a pioneering country for this type of tax in Europe. Emissions from waste incineration will thus be subject to a CO2 tax of €40/ton in the coming year, which is set to increase to €50/ton in 2025. The CO2 tax is imposed on incineration plants and is paid in addition to the existing incineration tax.
The new tax will vary depending on certain factors, with the most important ones being the calorific value and the percentage of biogenic content in the waste, which will be defined using waste codes.
The challenge lies in the absence of codes
Regarding the biogenic content, the CO2 tax will vary significantly depending on how the fossil content is taxed. The final cost is calculated from a specified quantity of biogenic components in fractions such as residual waste, commercial waste, and waste wood. As an example, commercial waste has been assigned a fixed biogenic content of 48.9 percent, while the fossil portion is 51.1 percent. Residuals are taxed with a 50/50 split between biogenic and fossil content, while waste wood is taxed with 95 percent biogenic content and 5 percent fossil content.
The part of the regulations that has posed challenges is that biogenic fractions without waste codes are taxed as 100 percent fossil content. Several associations in the German waste industry view this as unreasonable. To avoid this taxation, they are now demanding the establishment of relevant waste codes for all waste covered by the BEHG regulations in the future.
Will increase exports
It is still unclear how the new taxation will affect the industry. However, it is reasonable to assume that the new tax will pose challenges for the energy recovery industry in Germany. The most apparent reason is the significant price increase, which will have to be passed on to waste companies and ultimately to consumers. But the increased cost of incineration is also expected to impact the waste market to some extent. We cannot rule out increased waste exports for energy recovery from Germany in the coming year, primarily towards Scandinavia in 2024. This will apply to both RDF/SRF and volumes of waste wood for both energy and material recovery.
Another factor is the increased cost of incinerating fossil fractions such as plastic, which will lead to greater 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 waste management solutions throughout Europe.
Good intentions - problematic market.
The purpose behind the CO2 tax is to promote waste sorting and, in turn, increase recycling rates in the German market. Such long-term effects are, of course, welcome. However, all national taxes that do not align with those in other EU countries contribute to influencing the market and altering existing waste flows. The recycling and waste industry requires a predictable and stable market, which is best ensured through a common European regulatory framework where possible. Since Germany is a pioneer in implementing the CO2 tax, the international market is better served if the EU now pushes for the same tax in other European countries. Regarding regulations, it would also be useful to prevent all landfilling 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.