GCPC Workshop No. 7: Expanding carbon pricing to new sectors (Pt. 2)

On 29 April 2025, the GCPC hosted its 7th online workshop, the second in a series dedicated to the expansion of carbon pricing into new sectors. Partners and associated international organizations from the GCPC Network shared their experiences and research on the expanding carbon pricing to cover the waste, aviation and maritime sectors. More than 25 participants from government, international organizations, and research institutions attended the workshop.

Governments often begin implementing carbon pricing in sectors such as energy and heavy industry because emissions are concentrated and easier to regulate in these areas. Over time, however, expanding to sectors such as transportation, waste management, and aviation becomes essential to achieving broader emissions coverage and climate targets. While critical, this expansion presents challenges due to diffuse emissions, complex regulations, and diverse stakeholders. However, it also offers significant opportunities for deeper decarbonization. In this workshop, experts from the UK government and the International Monetary Fund discussed the practicalities of implementing carbon pricing policies in these sectors.

Presentations

1.     Expansion of the UK ETS to the waste sector

Georgina Treacy, Department for Energy Security and Net Zero, UK Government

Georgina Treacy began her presentation by discussing the waste hierarchy and emphasizing the importance of prioritising avoidance over disposal. While the landfill tax has successfully reduced emissions from landfills in the UK, it has led to higher emissions from waste recovery processes. This is why, from 2028, energy-from-waste facilities and incinerators without recovery will be included in the UK ETS, following a two-year monitoring and reporting period starting in 2026. Consultations have determined that hazardous and clinical waste will be exempt, and the scope will cover only fossil emissions. Georgina Treacy highlighted three key lessons from the expansion of the UK ETS to the waste sector: the risk of incentivising undesirable waste treatment methods, the uncertainty surrounding the ability to pass costs on to polluters, and the question of whether existing monitoring technologies are suitable for the waste sector. Upstream solutions, such as changes in product design, are critical to ensuring alignment with waste management objectives while minimising unintended impacts.

2.     Carbon pricing in the aviation and shipping sectors

Nate Vernon-Lin, International Monetary Fund

Nate Vernon-Lin presented insights from an IMF paper entitled “Destination Net Zero: The Urgent Need for a Global Carbon Tax on Aviation and Shipping“. He emphasised the compelling case for implementing carbon pricing in the maritime and aviation sectors, citing their mobile tax bases and distinctive administrative structures. However, he also highlighted tensions surrounding revenue reallocation and equity concerns related to uniform pricing. IMF modelling identified rising demand for aviation and increased energy use in the maritime sector as key drivers of emissions. A net-zero emissions pathway can be promoted through a combination of robust carbon pricing policies, long-term policy certainty, and investment in zero-emission fuels. Nevertheless, carbon pricing will lead to higher costs, with the price of flight tickets and shipped goods projected to increase. The economic impact will be uneven. Small island developing states and low-income countries that rely heavily on trade and tourism are likely to be disproportionately affected, whereas advanced economies will experience minimal impact. These disparities could be mitigated by providing country-level compensation and equitably reallocating revenue, in line with the principle of common but differentiated responsibilities. A long-term price signal is crucial to encouraging investment in decarbonisation, as certainty over costs and future demand is key to generating returns.