UK ETS delay Update

UK ETS expansion to waste will not proceed in 2028

• The UK ETS Authority has confirmed that the expansion of the UK Emissions Trading Scheme to waste incineration will not take place from 1 January 2028 as originally intended.
• A replacement timetable has not yet been announced. The Authority says a new timeline and final policy design will be set out in due course, with sufficient implementation time for the waste sector.
• Previous Government policy confirmed that applicable UK ETS costs associated with the incineration of household packaging are intended to be reflected in packaging Extended Producer Responsibility (pEPR) payments.

The UK ETS Authority has confirmed that the planned expansion of the UK Emissions Trading Scheme (UK ETS) to waste incineration will no longer go ahead from 1 January 2028. The Authority has not yet announced a new implementation date and says the revised timeline and final policy design will be published in due course.

For food and drink manufacturers, the announcement provides additional time before the indirect cost exposure through pEPR that had previously been anticipated from 2028. However, it does not remove the longer-term issue for packaging producers. Government has already confirmed that the UK ETS is intended to align with pEPR so that applicable additional carbon costs incurred by local authorities from the incineration of household packaging are reflected in the calculation of pEPR payments.

How UK ETS is intended to interact with packaging EPR

In its July 2025 interim response, the UK ETS Authority said that additional carbon costs incurred by local authorities for disposing of household packaging through incineration would be considered as part of the calculation of pEPR payments for the efficient management of household packaging.

The Authority estimated that around 20–30% by weight of fossil waste handled by local authorities and sent to incineration was within scope of pEPR. Despite this relatively small share by weight, it estimated that the in-scope material accounted for around 60% of emissions from the incineration of household waste, largely because much of the material contained plastics.

The same response stressed that ETS costs would need to be accurately apportioned so that packaging producers pay only the carbon price associated with the incineration of fossil-containing packaging, rather than the cost of fossil emissions from waste streams outside pEPR. The pEPR scheme design at that point factored in an adjustment from 2028 to account for ETS costs associated with household packaging.

With the 2028 ETS start date now withdrawn, there is now a question over how and when that planned pEPR adjustment will be applied.

Interaction with the delay to flexible plastics collections

The Government's 2025 ETS analysis assumed that mandatory household collections of flexible plastics would begin from 31 March 2027. It expected this to reduce the proportion of fossil material entering residual waste and incineration and, as a result, expected the share of household incineration emissions attributable to material within pEPR to fall below 60% by 2028.

In July 2026, the Government announced its intention to defer mandatory collections of plastic films and flexible packaging from households and workplaces in England from 31 March 2027 to 1 April 2030, subject to amendment of the relevant regulations.

This means that an important assumption underpinning the earlier ETS/pEPR modelling has changed. FDF therefore considers that any revised assessment of potential producer exposure should reflect the updated collections timetable, alongside the availability of sorting and reprocessing infrastructure.

The potential cost remains significant

Industry modelling has broadly estimated that the inclusion of waste within the UK ETS could add around £740 million of additional costs for producers, on top of existing packaging EPR costs, under the previous timetable.

This should be treated as an industry estimate rather than a Government forecast, but it illustrates why the eventual cost pass-through methodology will be important for producers.

The size of the eventual cost will also be affected by factors outside producers' direct control, including household disposal behaviour, local authority collection systems and the destination of residual waste. This raises an important issue for producers: the final approach will need to maintain incentives for packaging redesign while ensuring that costs are accurately attributed to the fossil-containing packaging responsible for the relevant emissions.

What happens next?

The UK ETS Authority has said only that a new timeline will be set out in due course. There is currently no confirmed replacement date.

Industry has identified a possible alignment scenario under which the UK could move closer to the revised EU timetable. The European Commission's July 2026 proposal would bring non-hazardous waste incineration into the EU ETS progressively from 2031, with surrender obligations phased at 25% in 2031, 50% in 2032, 75% in 2033 and 100% from 2034.

The EU proposal is still going through the legislative process, and the UK Government has not said that it will adopt the same timetable.

For Northern Ireland, the UK ETS Authority has reiterated that the EU ETS will apply to energy-from-waste installations under Article 9 and Annex 4 of the Windsor Framework. This creates a further need for clarity on how any divergence in timing or policy design between Great Britain and Northern Ireland will interact with the UK-wide pEPR scheme.

FDF next steps

FDF will continue to engage with Defra, the UK ETS Authority and PackUK as the revised timetable and cost pass-through arrangements are developed.

In particular, we will aim to seek clarity on:

• the new implementation timetable and the lead time that producers will receive;
• how the pEPR mechanism for passing through packaging-related ETS costs will be revised following the removal of the 2028 start date;
• a refreshed assessment of potential producer costs that reflects the delay to flexible plastics collections to 2030;
• how costs will be accurately apportioned so producers pay only for fossil emissions attributable to packaging within scope of pEPR; and
• how any difference between the GB and Northern Ireland regimes will be managed.