Janek Vahk / Feb 2026
Photo: Shutterstock
Europe has no shortage of waste laws. Yet millions of tonnes of material still end up in landfills and incinerators each year. Too often, policy has simply shifted waste from one disposal route to another -most notably from landfill to incineration-without tackling the core problem: the sheer volume of residual waste that remains after prevention, reuse and recycling.
A new study for Reloop and Zero Waste Europe proposes a different approach: an EU-wide cap-and-trade scheme for residual municipal waste. Instead of targeting landfill or incineration in isolation, the proposal would place a binding, declining cap on the total quantity of residual waste generated per person across the EU.
The logic is simple. If we are serious about a circular economy, we must limit what falls out of it.
Why current policies fall short
Existing instruments-landfill bans, landfill taxes, incineration levies, recycling targets-have delivered uneven results across Member States. In many cases, they have incentivised diversion from landfill to incineration, rather than driving meaningful reductions in residual waste itself.
The data show that once major mineral wastes and combustion wastes are excluded, residual waste in the EU is dominated by a relatively small number of streams: household and similar waste, sorting residues, mixed and undifferentiated materials, and certain wood wastes. In other words, the bulk of the problem lies squarely in municipal-type waste linked to consumption patterns and system design.
Crucially, the report argues that including major mineral wastes (such as construction soils and dredging spoil) in a cap would distort outcomes. These materials are cheap to divert, unevenly distributed across Member States, and often managed through inert landfills or backfilling. Their inclusion could produce large “paper” reductions in residual waste while leaving everyday municipal waste largely untouched.
For that reason, the study concludes that residual municipal waste -measured on a per capita basis -offers the most robust and equitable foundation for an EU-wide scheme.
How a residual waste cap would work
Under the proposal, the European Commission would set an EU-wide cap on residual municipal waste per inhabitant. Each Member State would receive a notional allocation based on population, with possible adjustments (for example, to reflect tourism pressures).
A share of allowances would be distributed free of charge, with Member States deciding- under the principle of subsidiarity-how to allocate them nationally. The remaining allowances would be auctioned at EU level.
Operators of landfill and incineration facilities would be required to surrender allowances for every tonne of in-scope residual municipal waste they manage. Allowances could be traded, ensuring that reductions take place where they can be achieved at lowest cost, while the overall EU cap remains binding.
This is not a tax on all residual waste. It is a constraint at the margin. The economic signal applies to the additional tonne-the one that can still be prevented, reused or recycled.
The system would build on existing EU monitoring and reporting under the Waste Framework Directive, using established List of Waste codes and strengthened digital tracking. In time, it would improve data quality and consistency across Member States.
Why this matters
The strategic benefits are substantial.
First, a residual waste cap aligns incentives with circular economy goals. By limiting what can be landfilled or incinerated, it rewards prevention, reuse, refill and high-quality recycling-not just shifts between disposal routes.
Second, it delivers greater climate and resource benefits. Evidence suggests that moving waste from landfill to incineration often produces limited- and sometimes negative-net environmental gains. Reducing residual waste altogether delivers higher benefits per tonne.
Third, it improves policy coherence. Today, Europe faces an imbalance between Member States with excess incineration capacity and those still heavily reliant on landfill. A residual waste cap reduces the risk of lock-in to expensive disposal infrastructure that offers little long-term value.
Fourth, it enhances cost-effectiveness and fairness. Allowance trading ensures reductions occur where they are cheapest, lowering the overall cost of meeting EU objectives. This mirrors the logic underpinning the EU Emissions Trading System-while focusing squarely on material flows.
Finally, it sharpens priorities. Too often, recycling statistics are inflated by measures that do little to reduce residual waste, such as mobilising additional garden waste without addressing food waste. A residual waste target would instead direct attention to the streams that matter most, including food waste prevention and effective separate collection.
A cornerstone for the next phase of EU waste policy
The EU already requires Member States to recycle 65% of municipal waste and to limit landfill to 10%. But implementation gaps remain, and reliance on incineration risks undermining long-term circularity.
A cap-and-trade scheme for residual municipal waste would complement existing legislation, strengthen compliance, and provide a flexible yet robust mechanism to drive reductions across all Member States.
If carefully designed and phased in, it could become a cornerstone instrument for delivering Europe’s zero waste and climate objectives.
