"Specific Change in Law means a Change in Law that relates specifically to the business of the Authority and which would not affect a Comparable Supply."1
That sentence is from a contract template. Not a policy paper, not a consultation document, not a press release. A contract template — HM Treasury's Standardisation of PFI Contracts, Version 4, published in March 2007.2 It defines a category of regulatory change. And it determines, with quiet precision, who pays when a new regulation arrives at the door of a public-private partnership.
The "Authority" is the council. A "Specific Change in Law" is a regulation targeting a particular sector — one that would not affect, in the contract's careful phrase, a "comparable supply" of services. And the cost allocation rule, set out in the same template, is this: "Any costs incurred (or to be incurred) by the Operator arising from a Discriminatory Change of Law shall be borne by the Authority."3
Borne by the Authority. The council.
Let me translate. When a new regulation arrives that targets a specific sector — not the whole economy, but a particular industry — the cost of complying with that regulation falls not on the private operator running the facility, but on the public body that contracted the service. The operator incurs the cost. The council bears it. The template was published in 2007. It was inherited by every PFI waste disposal contract signed thereafter.4
In the first article in this series, I showed you what voluntary carbon monitoring costs: £377 million per year in un-priced emissions, and a system designed to reward silence.5 That article ended with a question: when measurement becomes mandatory, someone has to open the envelope. This article traces the envelope. Who addressed it, when, and to whom.
The answer is in the clause you just read. It was written before the carbon price existed. And it names the recipient.
£49.41
The UK Emissions Trading Scheme prices carbon at £49.41 per tonne of CO2 — that is the 2026 civil penalty rate, the regulatory reference price set by the UK ETS Authority.6 The scheme has operated since January 2021, raising £17.8 billion from power generators, industrial manufacturers, and airlines.7 Waste incineration has been exempt for the entire period.
That exemption is ending. The government has confirmed that waste incineration will be brought into the UK ETS, preceded by a voluntary monitoring period that began on 1 January 2026.8 The government's July 2025 interim response stopped short of confirming the 2028 date for full compliance obligations, stating instead that a second Authority Response would follow "as soon as reasonably practicable."9 But the date is a detail. The mechanism is already built.
Here is what the mechanism delivers.
The UK's 63 waste incineration facilities emit approximately 7.63 million tonnes of fossil CO2 per year — carbon from plastic and other petroleum-derived materials in the waste stream.10 At £49.41 per tonne, the annual carbon cost is approximately £377 million.11 A report commissioned by SUEZ and prepared by Ceres Waste projects that when compliance costs, verification, and administration are included, the gate fee increase — the additional cost per tonne of waste that operators will charge councils — will reach approximately £48 per tonne. That represents a roughly 50% increase on current energy-from-waste gate fees of £110-121 per tonne.12
Stay with me. This is where it matters.
Current EfW gate fees are cheaper than landfill. That is why 50.2% of local authority collected waste now goes to incineration rather than to landfill, where the total cost — including landfill tax at £126.15 per tonne — runs to approximately £152 per tonne.13 The price advantage of incineration over landfill is the economic logic that built the system.
When UK ETS adds £48 per tonne, the new EfW gate fee reaches approximately £158-169 per tonne.12 It exceeds the cost of landfill. The cheapest waste disposal route becomes the most expensive. And the clause at the top of this article determines who receives the invoice.
THE INVOICE CHAIN
| Carbon price (2026) | £49.41 per tonne CO26 |
| Fossil CO2 per tonne of waste incinerated | ~0.50 tonnes10 |
| Carbon cost per tonne of waste (simple) | ~£25 |
| Full gate fee impact (incl. compliance costs) | ~£48 per tonne12 |
| Current EfW gate fee | £110-121 per tonne12 |
| Projected new EfW gate fee | £158-169 per tonne |
| Current landfill total cost | ~£152 per tonne13 |
| Who the regulation targets | The operator |
| Who the clause bills | The council |
The carbon price nominally targets the operator. The operator runs the facility. The operator holds the emissions permit. Under the UK ETS, the operator will buy the allowances.
But the contract says: the Authority shall bear the costs.
£6.5 Billion
The County Councils Network, the Local Government Association, and the District Councils Network commissioned a joint analysis, published in September 2024, of what UK ETS inclusion would cost councils.14 The numbers are these.
In the first year of mandatory compliance: up to £747 million in additional costs to councils. By 2036: up to £1.1 billion per year. Cumulative cost over the period 2028-2036: as much as £6.5 billion.14
Extended Producer Responsibility — the mechanism that is supposed to make producers pay for the packaging waste that ends up in the residual waste stream — covers only 19% of incineration costs. The remaining 81% has no producer responsibility mechanism attached to it.14 The cost lands on the council.
The LGA surveyed councils in early 2025. Of 64 responding councils, 93% said they would not be able to meet additional UK ETS costs within existing waste and recycling budgets — either to a small extent or not at all.15 Seventy-nine percent expect negative impacts on waste services. And two-thirds expect to cut net-zero and green projects — the very investments that carbon pricing was designed to incentivise.15
I want to read that last figure again. Two-thirds of surveyed councils expect to cut green projects to pay for a carbon price. The mechanism designed to fund the transition to lower-carbon waste management will, according to the councils themselves, defund it.
YouGov polling commissioned by the LGA found that the public is twelve times more likely to believe companies should pay for packaging waste reduction costs (48%) than councils (4%).14 But the contract does not consult the public.
Consider what this means. A carbon pricing mechanism — designed to make the polluter pay — arrives at a sector where the operator holds a contract that re-addresses the bill to the council, where the council has no mechanism to recover the cost from producers for 81% of the waste stream, where 93% of surveyed councils say they cannot absorb it, and where the available response is to raise council tax or cut services.
The polluter-pays principle met a change-in-law clause. The clause won.
The Floor
The reader's natural response at this point is: well, if carbon pricing makes incineration more expensive, councils should reduce waste going to incineration. Divert more to recycling. Bring down the tonnage. Cut the bill by cutting the activity.
The same PFI contracts that route the carbon cost to councils also forbid that response.
PFI waste disposal contracts typically include minimum tonnage guarantees — also called put-or-pay clauses. The council commits to delivering a contractual floor volume of waste to the facility. If actual waste volumes fall below the floor, the council pays a penalty for the shortfall.16 The facility was built on the assumption that the waste would come. The contract enforces the assumption.
Gloucestershire County Council operates under a 25-year PFI waste contract for the Javelin Park energy-from-waste facility. The contract was awarded in September 2012 and runs to approximately 2044. The facility's permitted capacity is 190,000 tonnes per year; the council sends approximately 132,000 tonnes of local authority waste annually.17 The operator — originally UBB, a joint venture of Urbaser and Balfour Beatty, now FCC Environment UK following a chain of acquisitions17 — holds the contract regardless of who owns it. The PFI outlives the companies that signed it.
Community R4C, a Gloucestershire campaign group, analysed the contract's costs. Their findings: the current underlying cost is £194 per tonne — already 50% higher than the landfill alternative. The contract value — originally approximately £450 million — has risen to £613 million. In its first five years, the incinerator cost £42 million more than landfill would have.18 Community R4C also references "contractual minimum waste obligations" — confirming that tonnage guarantees exist, though the specific floor volume has not been publicly disclosed.18
Now apply the if/then chain.
If the council reduces waste below the contractual minimum, the operator claims the shortfall penalty. The council pays for waste it did not burn. If the council maintains waste volumes to avoid the penalty, the operator incinerates the waste, the carbon cost triggers the change-in-law clause, and the council pays for the waste it did burn. Burn it, and pay the carbon price. Do not burn it, and pay the contractual penalty. Both costs land on the same budget line.
The carbon price says: burn less. The PFI contract says: deliver this much, or pay us anyway. The two instruments pull in opposite directions — or rather, both pull in the same direction. Toward the operator.
This is not unique to Gloucestershire. The C40 Knowledge Hub, analysing incineration infrastructure internationally, found that long-term incineration contracts "strongly discourage waste reduction."19 Copenhagen's Amager Bakke facility was designed for 560,000 tonnes per year. When the municipalities' waste forecast — originally 480,000 tonnes — fell to 350,000 tonnes, the facility had to import waste — including from the UK — to stay viable.20 The infrastructure demands the waste. The contract enforces the demand.
3
The reader's second natural response: these contracts need to be renegotiated. The terms were written for a world without carbon pricing. The world has changed. Renegotiate.
Over half of the respondents to the government's consultation on UK ETS waste inclusion said precisely this — that waste disposal contracts require renegotiation to accommodate carbon costs.21 It is the obvious answer.
It is also structurally impossible. And the reason it is impossible has a number: three. As of 2019, three major operators — Viridor, Veolia, and SUEZ — plus FCC, controlled approximately 70% of UK energy-from-waste capacity.22 An oligopoly.
PFI contract renegotiation requires bilateral consent. Both parties must agree to any change in terms. The operator must consent. And the operator has no incentive to consent, because the existing terms protect its revenue. The change-in-law clause routes regulatory costs to the council. The tonnage guarantee ensures a floor volume of waste. The contract duration locks in both provisions for 25-30 years. Every clause the council wants to change is a clause the operator benefits from keeping.
The market structure reinforces the lock. Incinerators are physical infrastructure tied to specific locations. A council cannot credibly threaten to switch providers when the provider is a building — a building the council paid to construct through the PFI arrangement, and which it cannot replicate, move, or replace. Terminating a PFI contract is not like ending a service agreement. The National Audit Office found that for the largest 75 PFI deals, termination would cost 23% more than outstanding debt alone — before accounting for interest rate swap breakage costs, equity valuation disputes, redundancies, and sub-contractor termination.23
When Greater Manchester Waste Disposal Authority decided its PFI waste contract with Viridor Laing was no longer tenable — costs exceeding market rates, waste volumes lower than the projections used when the contract was signed in 2009 — it borrowed £500 million to exit a £3.8 billion contract.24 Half a billion pounds to leave. Most councils cannot borrow that much. Most councils, given the arithmetic, will stay.
And the arithmetic of staying is this: KKR, the private equity firm, acquired Viridor from Pennon Group for £4.2 billion in March 2020, at an enterprise value to EBITDA multiple of 18.5 times.25 By December 2025, KKR was seeking to sell Viridor at a valuation of approximately £7 billion — with Equitix acquiring a substantial minority stake as a first step, advised by BofA Securities and Linklaters.26 The value of the asset nearly doubled in five years. And the asset is, substantially, the contracts. Long-term waste disposal agreements with councils, backed by change-in-law provisions, tonnage guarantees, and termination penalties. Every renegotiation that softens a pass-through clause or lowers a tonnage floor erodes the asset value. Private equity investors will resist.
The exit from the contract requires the consent of the party the contract protects. The price of leaving without consent is half a billion pounds. The party holding the key has seen its asset value rise from £4.2 billion to £7 billion under the existing terms. Of course it will not renegotiate. Given those incentives, I would not renegotiate either.
One paragraph of fairness. The PFI defence is not unreasonable. These contracts delivered waste infrastructure that councils could not afford to build themselves. The risk allocation was set out in a published government template. Councils signed with legal advice. Change-in-law provisions are standard commercial terms, present in every long-term infrastructure contract — they are not hidden, not unusual, not conspiratorial.3 But this defence works for the world in which the contracts were signed — a world without carbon pricing for waste incineration. The contracts were drafted from a Treasury model template, standardised across the sector, signed by councils because PFI was the government's designated procurement route for infrastructure investment.2 Councils did not negotiate clause by clause. They signed page 87. The risk allocation assumed regulatory costs would be absorbed by general taxation or phased in with government support — not concentrated on council tax payers in specific boroughs. The terms were transparent. The bargaining power was not.
2007 to 2044
Now the temporal dimension.
The SoPC4 template was published in 2007.2 The Gloucestershire Javelin Park contract was awarded in 2012 and runs to approximately 2044.17 PFI waste contracts signed from the late 1990s onwards — the majority of which remain active — operate on 25-30 year terms.27
In October 2018, Chancellor Philip Hammond announced the abolition of PFI for future projects. The policy that created these contracts was declared dead.28 But existing contracts were honoured. All 700-plus PFI and PF2 deals, representing approximately £199 billion in remaining charges, continue on their original terms until the 2040s.28
The policy is dead. The clauses are alive.
And the professional ecosystem that built them is still operating. Norton Rose Fulbright, a law firm advising waste sector clients, published a briefing in August 2023 confirming: "Many contracts concerning EfW projects will have also been drafted with change in law provisions that anticipated the inclusion of EfW facilities within the UK ETS."21
Read that sentence carefully. "Anticipated." The lawyers who drafted the contracts foresaw that carbon pricing would eventually reach waste incineration. They wrote the cost allocation before the regulation existed. The provisions were not reactive. They were anticipatory. The invoice was pre-addressed.
The same briefing notes that "although operators will be expected to shoulder the cost in the first instance, many respondents in the Consultation stated that they expect gate fees to increase and for costs to be either passed through to consumers and local authorities."21 Norton Rose is publishing, for its operator clients, a briefing that confirms the clauses the industry's lawyers drafted will work exactly as designed.
The government, to its credit, has acknowledged the problem. The July 2025 interim authority response states the government is "committed to developing policies ensuring Local Authorities are protected from bearing the full costs."9 But a commitment to develop policies is not a policy. The structural problem the article identifies — that PFI change-in-law provisions pre-route costs to councils regardless of government intent — cannot be fixed by aspiration. Fixing it requires one of four things: reclassifying the UK ETS expansion as a General Change in Law (which the government does not control — it is a matter of contract interpretation); renegotiating PFI contracts (which requires operator consent); compensating councils directly (which means taxpayers pay through general taxation instead of council tax — the cost does not disappear, it moves); or providing free carbon allowances to operators (which undermines the carbon price). Each remedy runs into the same contractual architecture. The commitment is real. The mechanism to deliver it does not yet exist.
The Receipt
Let me bring this to where you live.
Gloucestershire County Council sends approximately 132,000 tonnes of waste per year to Javelin Park.17 The facility's measured fossil CO2 fraction is 50.29%.10 At the 2026 UK ETS civil penalty price of £49.41 per tonne of CO2: 132,000 tonnes of waste, producing roughly 66,000 tonnes of fossil CO2, at £49.41 per tonne. That is approximately £3.3 million per year in carbon costs.29
Across approximately 250,000 Band D equivalent dwellings in Gloucestershire: approximately £13 per household per year.29
At the higher Ceres/SUEZ estimate of £48 per tonne gate fee increase — which includes compliance, verification, and administration beyond the raw carbon price — the cost rises to approximately £6.3 million per year for the council. Approximately £25 per household.29
I can hear the objection forming. £13 to £25 per household. On a Band D council tax bill averaging £2,171,30 that is 0.6% to 1.2%. Is this the structural crisis the article has been building toward?
It is the beginning of one. The £13-25 figure is calculated at the 2026 carbon price, for a county council with below-average incineration dependence. London boroughs, which are heavily dependent on incineration for residual waste disposal, will face significantly higher per-household costs. The carbon price is projected to rise — Veolia's own analysis projects ETS allowance prices could double by 2030 — at the current civil penalty rate of £49.41, that points toward approximately £100 per tonne.31 And the £6.5 billion cumulative figure across all councils is not a single household's burden. It is the sum of tens of thousands of households in hundreds of boroughs, each absorbing a cost that their council has no mechanism to avoid, no contractual power to renegotiate, and no escape to pursue without triggering a penalty.
The CCN notes that two-thirds of surveyed councils expect to cut net-zero and green projects to pay for UK ETS costs.15 That is the structural crisis. Not the £13 per household. The £13 per household paid by cutting the green investments that the carbon price was designed to fund. The mechanism eats its own purpose.
THE RECEIPT: ONE PFI WASTE CONTRACT
| Contract | Gloucestershire County Council / Javelin Park EfW |
| Awarded | September 201217 |
| Duration | ~25 years (to ~2044) |
| Operator | FCC Environment UK (originally UBB)17 |
| Contract template | HM Treasury SoPC4 (2007)2 |
| Change-in-law provision | Specific changes in law: costs borne by the Authority1 |
| Minimum tonnage guarantee | Present (exact floor undisclosed)18 |
| Current gate fee | £194 per tonne18 |
| Projected carbon cost addition | ~£25-48 per tonne12 |
| Annual carbon cost to council | ~£3.3-6.3 million29 |
| Per household per year | ~£13-2529 |
| Renegotiation | Bilateral consent required |
| Operator incentive to consent | None |
| Contract value (original) | ~£450 million18 |
| Contract value (current) | ~£613 million18 |
| Policy that created PFI | Abolished, October 201828 |
| Contract expiry | ~2044 |
The structural villain is not FCC Environment, nor Viridor, nor Veolia, nor SUEZ, nor KKR. Each operator exercises clauses that protect its revenue. That is what contracts are for. The structural villain is not the government, which designed a carbon price that nominally targets the polluter. The structural villain is the contract itself — the PFI model, derived from Treasury's SoPC4 template, deployed across the sector, standardising the allocation of regulatory risk onto the public sector regardless of which actor the regulation targets.
Each actor was rational. The lawyers drafted the standard clause. The Treasury templated it. The councils signed because PFI was the available procurement route. The operators accepted because the terms were favourable. Nobody was acting in bad faith. Everybody was obedient to the logic. And the logic was written into the contract in 2007.
I have a term for what the change-in-law clause does. I call it Contractual Pre-Routing — the use of contract provisions to allocate a future regulatory cost to a specified payer before the regulation is enacted. The PFI change-in-law provision is the mechanism. The UK ETS expansion is one example: a carbon cost, pre-routed to the council before the carbon price existed. But the clause is not limited to carbon pricing. It covers any future Specific Change in Law — any regulation targeting the waste sector specifically. Costs that do not yet exist have already been addressed. The invoice drawer is full of envelopes with the council's name on them, waiting for regulations that have not yet been written.
One acknowledgment. Pre-routing creates certainty, and certainty has value in long-term contracts. An operator taking on a 25-year infrastructure commitment needs to know who bears the cost of future regulation. That is a legitimate commercial need.
But certainty for whom? The operator gains certainty that it will not bear the cost. The council gains certainty that it will. The certainty is asymmetric. And the template that created it was written by the same professional ecosystem — the same small number of City law firms — whose expertise spans government advisory work and operator-side transactions.21 The clause was not negotiated. It was templated, standardised, and deployed.
The Levers
The SoPC4 model contract template is a public document, published by HM Treasury in 2007. Its change-in-law provisions — the definitions of Specific, Discriminatory, and General Changes in Law, and the cost allocation rules that follow from them — can be read directly.2 The APMG PPP Certification Guide explains how these provisions operate in practice.3
Your council's waste disposal contract will determine who bears the carbon costs when mandatory compliance begins. Whether that contract is a PFI arrangement with change-in-law provisions, or a shorter-term commercial agreement with its own gate fee escalation clauses, the mechanism of cost transmission is in the contract text. Those texts can be requested under the Freedom of Information Act. Gloucestershire County Council's contract terms have been partially disclosed through scrutiny processes and FOI requests — Community R4C's analysis draws on these disclosures.18
The government's consultation responses, the interim authority response, and the voluntary MRV guidance are all available on GOV.UK.89 The CCN/LGA/DCN cost analysis — including the £6.5 billion cumulative projection — is published on the County Councils Network's website.14
The mandatory compliance date has not been set. The government has committed to protecting councils from the full costs. No mechanism for that protection has been announced. The change-in-law clauses, meanwhile, are written, signed, and waiting.
The carbon price arrives whenever the government decides. The bill was addressed in 2007. The contract was drafted first, will expire last, and cannot be changed without the consent of the party it protects.
Now you have seen the clause. Now you know what it costs.