Janek Vahk is a circular economy and sustainability expert working to accelerate Europe’s transition to a zero-waste society. He is the zero-pollution policy manager at Zero Waste Europe.

By the end of July, the European Commission must decide whether to include municipal waste incineration in the EU Emissions Trading System. It may sound technical, but the decision will test the credibility of Europe’s climate leadership.

At a time when carbon markets are expanding worldwide and governments are under pressure to close loopholes, refuse incineration has become a growing blind spot in European climate policy.

Since 1990, emissions from the sector have roughly doubled. Today, garbage incinerators release tens of millions of metric tons of carbon dioxide each year, much of it from fossil fuel-based plastics. Yet unlike power plants, cement kilns or steel mills, incinerators do not pay for those emissions under the EU’s flagship carbon-pricing system.

If Europe is serious about reaching climate neutrality by 2050, this anomaly must be tackled.

Across several member states, waste-to-energy capacity is still expanding. These plants are built to operate for 30 to 40 years. At the same time, Europe has committed to reducing waste, increasing recycling and building a circular economy. The contradiction is obvious.

Incinerators require a steady stream of residual waste to remain financially viable. That creates structural tension with prevention and recycling targets. When infrastructure depends on waste, waste becomes something to secure rather than to reduce.

Excluding incineration from carbon pricing deepens that distortion. It makes burning comparatively cheaper than recycling, despite the climate cost of combusting fossil-based materials.

Including the sector in the EU Emissions Trading System (EU ETS) would restore a basic principle: the polluter pays.

Policy patchwork

Europe would not be starting from scratch. The Netherlands and Norway already apply national carbon levies to waste incineration. Denmark and Sweden price most waste-to-energy emissions under the EU system, while Germany covers the sector through its national emissions trading scheme.

Britain has announced it will bring municipal waste incineration into its ETS from 2028.

These examples demonstrate that pricing emissions from waste is both feasible and politically workable. But fragmented national approaches risk distorting the single market and encouraging cross-border waste shipments driven by regulatory differences rather than environmental logic.

An EU-wide approach would create consistency and provide long-term certainty for investors.

Regulatory blind spot

Carbon pricing has already reshaped Europe’s power sector. As allowance prices rose, coal declined rapidly and investment shifted toward renewables. Industry is now responding to stronger carbon signals with electrification and efficiency measures.

Applying that logic to waste would change behaviour across the value chain. It would incentivise better sorting, more plastic recycling and upstream waste prevention. It would strengthen the economics of reuse and circular business models that cut emissions before waste even exists.

Without a carbon price, incineration remains a regulatory blind spot. With one, climate and resource policy finally align.

The timing matters beyond Europe. Carbon markets are spreading, from China’s national ETS to emerging schemes in other major economies. If the EU leaves a fast-growing emissions source outside its own system, it weakens its position as a standard setter in global carbon governance.

Roadmap launched to restart deadlocked UN plastics treaty talks

At the same time, landfills are facing stricter methane controls under updated EU rules. Tightening methane standards while leaving incineration outside the carbon price risks shifting emissions rather than reducing them.

This is not simply about waste management. It is about consistency in climate policy.

Europe has expanded its carbon market to maritime transport and introduced a carbon border adjustment mechanism. Leaving municipal waste incineration untouched would sit uneasily with that ambition.

By July, the Commission has a clear choice to make. Close the loophole and confirm that every significant source of fossil carbon must contribute to decarbonisation. Or explain why burning fossil-based waste should remain the exception in Europe’s climate rulebook.

If carbon markets are meant to drive systemic change, they cannot stop at the incinerator gate.

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Will the EU finally make waste pay for its growing carbon footprint?

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Rudecindo Espíndola’s family has been growing corn, figs and other crops for generations in the Soncor Valley in northern Chile, an oasis of green orchards in one of the driest places on Earth – the Atacama desert.

Perched nearly 2,500 metres above sea level, his village, Toconao, means “lost corner” in the Kunza language of the Indigenous people who have lived and farmed the land in this remote spot for millennia.

“Our deep connection to this place is based on what we have inherited from our ancestors: our culture, our language,” said Espíndola, a member of a local research team that found evidence that people have inhabited the desert for more than 12,000 years.

This distant outpost is at the heart of the global rush for lithium, a silvery-white metal used to make batteries for electric vehicles (EV) and renewable energy storage that are vital to the world’s clean energy transition. The Atacama salt flat is home to about 25% of the world’s known lithium reserves, turning Chile into the world’s second-largest lithium producer after Australia.

For decades, the Atacama’s Indigenous Lickanantay people have protested against the expansion of the lithium industry, warning that the large evaporation ponds used to extract lithium from the brine beneath the salt flats are depleting scarce and sacred water supplies and destroying fragile desert ecosystems.

Espíndola joined the protests, fearing that competition for water could pose an existential threat to his community.

But last year, he was among dozens of Indigenous representatives who sat across the table from executives representing two Chilean mining giants to hammer out a governance model that gives Indigenous communities living close to lithium sites a bigger say over operations, and a greater share of the economic benefits.

A pioneering deal

The agreement is part of a landmark deal between state-owned copper miner Codelco and lithium producer the Sociedad Química y Minera de Chile (SQM) to extract lithium from the salt flats until 2060 through a joint venture called NovaAndino Litio.

The governance model that promises people living in Toconao and other villages around the salt flats millions of dollars in benefits and greater environmental oversight is the first of its kind in mineral-rich Chile, and has been hailed by industry experts as the start of a potential model for more responsible mining for energy transition metals.

NovaAndino told Climate Home News the negotiations with local communities represented an “unprecedented process that has allowed us to incorporate the territory’s vision early in the project’s design” and creates “a system of permanent engagement” with local communities.

The company added it will contribute to sustainable development in the area and help “the safeguarding of [the Lickanantay people’s] culture and environmental values”.

For mining companies, such agreements could help reduce social conflicts and protests, which have delayed and stalled extraction in other parts of South America’s lithium-rich region, known as the lithium triangle.

“Argentina and Bolivia could learn a lot from what we’re doing [here],” said Rodrigo Guerrero, a researcher at the Santiago-based Espacio Público think-tank, adding that adopting participatory frameworks early on could prevent them from “going through the entire cycle of disputes” that Chile has experienced.

Justice at last?

As part of the governance deal, NovaAndino has pledged to adopt technologies that will reduce water use and mitigate the environmental impacts of lithium extraction.

It has also committed to hold more than 100 annual meetings with community representatives to build a “good faith” relationship, and an Indigenous Advisory Council will meet twice a year with the company’s sustainability committee to discuss its environmental strategy, company sources said. The meetings are due to begin next month.

To oversee the agreement’s implementation, an assembly – composed of representatives from all 25 signatory communities – will track the project’s progress. In addition, NovaAndino will hold one-on-one meetings with each community to address issues such as the hiring of local people and the protection of Indigenous employees.

Espíndola said the deal, while far from perfect, was an important step forward.

“Previously, Indigenous participation was ambiguous. Now we talk about participation at [every] hierarchical level of this process, a very strong empowerment for Indigenous communities,” said Espíndola, adding that it did not give local communities everything they had asked for. For instance, they will not hold veto power over NovaAndino’s decisions or have a formal shareholder role.

But after years of conflict with mining companies, a form of “participatory justice is being done”, he said.

Not everyone is convinced that the accord, pushed by Chile’s former leftist government, marks progress, however.

“Not in our name”

The negotiations have caused deep divisions among the Lickanantay, some of whom say greater engagement with mining companies will not stop irreparable damage to the salt flats on which their traditional way of life depends. Others fear the promise of more money will further erode community bonds.

In January 2024, Indigenous communities from five villages closest to the mining operations, including Toconao, blocked the main access roads to the lithium extraction sites. They said the Council of Atacameño Peoples, which represents 18 Lickanantay communities and was leading discussions with the company, no longer spoke for them.

Official transcripts of consultations on the extension of the lithium contracts and how to share the promised benefits reveal deep divisions. Tensions peaked when communities around the mining operations clashed over how to distribute the multimillion-dollar windfall, with villages closest to the mining sites demanding the largest share.

Eventually, separate deals establishing a new governance framework over mining activities were reached between Codelco and SQM with 25 local communities, including a specific agreement for the five villages closest to the extraction sites.

The division caused by the separate deal for the five villages “will cause historic damage” to the unity of the Atacama desert’s Indigenous peoples, said Hugo Flores, president of the Council of Atacameño Associations, a separate group representing farmers, herders and local workers who oppose the mining expansion.

Sonia Ramos, 83, a renowned Lickanantay healer and well-known anti-mining activist, lamented the fracturing of social bonds over money, and for the sake of meeting government objectives.

“There is fragmentation among the communities themselves. Everything has transformed into disequilibrium,” said the 83-year-old.

“[NovaAndino] supposedly has economic significance for the country, but for us, it is the opposite,” she said.

The company told Climate Home News it has “acted consistently” to promote “transparent, voluntary, and good-faith dialogue with the communities in the territory, recognising their diversity and autonomy, and always respecting their timelines and forms of participation”.

A one-off deal or a model for others?

The NovaAndino joint venture is a pillar of Chile’s strategy to double lithium production by 2031 and consolidate the copper-producing nation’s role in the clean energy transition as demand for battery minerals accelerates.

Chile’s new far-right president, José Antonio Kast, who was sworn in last week, promised to respect the lithium contracts signed by his predecessor’s administration – including the governance model.

Still, some experts say the splits over the new model highlight the need for legislation that mandates direct engagement and minimum community benefits for all large mining projects.

“In the past, this has lent itself to clientelism, communities who negotiate best or arrive first get the better deal,” said Pedro Zapata, a programme officer in Chile for the Natural Resource Governance Institute.

“This can be to the detriment of other communities with less strength. We cannot have first- and second-class citizens subject to the same industry,” he added.

The government is already negotiating two more public-private partnerships to extract lithium with mining giant Rio Tinto, which it said would include a framework to engage with Indigenous communities and share some of the revenues. The details will need to be negotiated between local people, the government and the company.

Sharing the benefits of mining

Under the deal in the Atacama, NovaAndino will run SQM’s current lithium concessions until they expire in 2030 before seeking new permits to expand mining in the region under a vast project known as “Salar Futuro” – a process which will require further mandatory consultations with communities.

Besides the participatory mechanism, the new agreement promises more money than ever before for salt flat communities.

Depending on the global price of lithium and their proximity to the mining operations, Indigenous communities could collectively receive roughly $30 million annually in funding – about double what SQM currently disburses under existing contracts.

When taking into account the company’s payments to local and regional authorities, contributions could reach $150 million annually, according to the government.

To access these resources, each community will need to submit a pipeline of projects they would like funding for under a complex arrangement that includes five separate financial streams:

• A general investment fund will distribute funding based on each village’s size and proximity to the mining sites
• A development fund will support projects specifically in the five communities closest to the extraction sites
• Contributions to farmers and livestock associations
• Contributions to local governments
• A groundbreaking “intergenerational fund” held in trust for the Lickanantay until 2060

For many isolated communities in the Atacama desert, financial contributions from mining firms have funded essential public services, such as healthcare and facilities like football pitches and swimming pools.

In the past, communities have used some of the benefits they received from mining to build their own environmental monitoring units, hiring teams of hydrogeologists and lawyers to scrutinise miners’ activities.

Espíndola said the new model could pave the way for more ambitious development projects such as water treatment plants and community solar energy projects.

Competition for water

The depletion of water resources is one of local people’s biggest environmental concerns.

To extract lithium from the salt flats, miners pump lithium-rich brine accumulated over millions of years in underground reservoirs into gigantic pools, where the water is left to evaporate under the sun and leaves behind lithium carbonate.

One study has shown that the practice is causing the salt flat to sink by up to two centimetres a year. SQM recently said its current operations consume approximately 11,500 to 12,500 litres of industrial freshwater for every metric ton of lithium produced.

NovaAndino has committed to significantly reduce the company’s water use by returning at least 30% of the water it extracts from the brine and eliminating the use of all freshwater in its operations within five years of obtaining an environmental permit.

Cristina Dorador, a microbiologist at the University of Antofagasta, told Climate Home News that reinjecting the water underground is untested at a large scale and could impact the chemical composition of the salt flats.

Continuing to extract lithium from the flats until 2060 could be the “final blow” for this fragile ecosystem, she said.

Asked to comment on such concerns, NovaAndino said any new technology will be “subject to the highest regulatory standards”, and pledged to ensure transparency through “an updated monitoring system with the participation of Indigenous communities”.

High price for hard-won gains

For the five communities living on the doorstep of the lithium pools, one of the biggest gains is being granted physical access to the mining sites to monitor the lithium extraction and its impact on the salt flats.

That is a first and will strengthen communities’ ability to call out environmental harms, said Sergio Cubillos, the community president of Peine, the village closest to the evaporation ponds. It could also give them the means to seek remediation through the courts if necessary, Espíndola said.

Gaining such rights represents long-overdue progress, Cubillos said, but it has come at a high price for the Lickanantay people.

“Communities receiving money today is what has ultimately led to this division, because we haven’t been able to figure out what we want, how we want it, and how we envision our future as a people,” he said.

Main image: A truck loads concentrated brine at SQM’s lithium mine at the Atacama salt flat in Chile (Photo: REUTERS/Ivan Alvarado)

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Landmark deal to share Chile’s lithium windfall fractures Indigenous communities