What’s behind China’s waste incineration overcapacity?

Author: Dialogue Earth Asia Pacific ｜ RE Energy ｜ Energy, Transport & Building November 18, 2025

Chinese cities have more waste incinerators than they need, while rural areas go short. Change is needed, writes Xu Nan

A power plant uses domestic waste to generate electricity in Feixi, Heifei province (Image: Imago / Xinhua / Alamy)

Possibly China’s most unexpected hot topic of the summer was the “waste shortage”.

Six years since Shanghai sparked nationwide debate by making it compulsory to sort household waste, the “shortage” suggested to many that Chinese cities no longer risk being surrounded by landfill sites. All waste problems had been resolved, went the thinking. Reality is, of course, less simple.

The shortage is better understood as an oversupply of waste-incineration capacity, created by a mismatch between policy and market demand. The mistaken belief that the waste-disposal issue has been solved makes it harder to actually solve.

What the waste-to-power sector must do is ensure waste supply reaches existing incinerators. It can do this by improving transportation of household waste, by bringing more dumped waste into the system, and by diversifying from household to industrial waste. People also need to pay more attention to what they throw away.

Great work, when you could get it

In the early 2000s, Chinese cities were running out of sites to use as landfills, while concerns over leachate and methane emissions were on the rise. So industrial policy shifted to boost waste-to-power incineration. This approach was higher tech and less land intensive. It could eliminate all waste and, when managed properly, create fewer environmental concerns.

It was profitable too. Though building an incinerator facility costs about four times as much as a landfill site per tonne of processing capacity, incinerators earned higher fees for dealing with waste and could operate for longer. Plus, local governments used public-private partnerships (PPPs) to ease the financial pressures of construction. Most incinerators were funded by bonds, meaning cheaper financing for the companies and guaranteed incomes from subsidies and disposal fees. Cash flowed in.

The PPP model helped drive a rapid expansion of waste incineration. By 2018, China could incinerate 102 million tonnes of waste a year – that is, 45% of urban household waste. By 2024, that had shot up to 206 million tonnes, equivalent to 79% of such waste. In less than a decade, China had shifted from burying to burning most of its waste.

The number of incinerators has jumped from 104 in 2010 to around 1,000 today. China is now home to two-thirds of global waste-to-power generation capacity.

But the sector is facing big challenges, notably sources of income are shrinking and waste is “leaking” from the system into the environment. When the environment and human health are considered, the answer to the issue must not be for China’s urban waste production to continue to grow to the level of certain advanced countries, as some have implied.

Reducing subsidies

Alongside fees for disposing of waste, the incinerators’ three main sources of cash were government subsides, selling generated electricity and carbon trading. All three are facing challenges.

In 2019, the Ministry of Finance made clear that the percentage of new facilities eligible for subsidies would be gradually decreased over time. Incinerators would have to support themselves via the market, for example through waste-disposal fees.

This situation was the result of central-government policy, local-government budget constraints, and regulatory standards.

Waste-to-power is classed in China as a form of biopower, making it eligible for subsidies. Prior to 2020, those were paid by central government. But if a facility was connected to the grid after that year, local governments have to contribute. Rates varied; in eastern China, local governments paid the lion’s share, with central government chipping in only 20%.

A 2021 document on biopower construction made clear that central-government subsidies would be reduced every year. Waste-to-power plants which came online from 2023 no longer get any central-government subsidy, with the financial burden falling squarely on local-government shoulders. Reduction of subsidies is also used as a regulatory sanction. Since 2020, the Ministry of Ecology and Environment has cut subsidies for plants with non-compliant emissions or poor management practices.

With local governments already strapped for cash, filling the gap left by these subsidies has become harder. This year the China Environment Chamber of Commerce gave an example of a company whose three biopower projects were owed a total of more than CNY 400 million (USD 56 million) as of October 2024. Smaller plants, with less than 500 tonnes of daily incineration capacity, tend to be in less affluent areas and are more likely to find payments delayed.

In the first half of 2024, listed firms in the environmental sector – mainly companies in solid waste or sewage treatment – were owed CNY 350 billion (USD 49 billion), or 114% of operational income. In 2025, one big company even organised a conference on the recovering of these debts. The problem is, clearly, systemic.

Meanwhile, income from carbon trading, via China Certified Emission Reductions (CCER) credits, has been reduced to zero since waste incineration became ineligible in 2024. This was both because the new methodology reduced the emissions reductions attributable to incineration, and due to concerns about pollution.

What are CCER credits?

China Certified Emission Reductions are government-certified carbon credits pegged to activities to reduce or avoid emissions, such as renewable-power generation or tree planting. Each credit corresponds to a tonne of CO2 reduction, and can be traded by companies on the national carbon market to help meet their obligations. The CCER scheme relaunched in January 2024 after being suspended in 2017 due to low transaction volumes and data quality. It was originally launched in 2012.

In 2012-2017, waste-to-power incinerators could make CNY 7.60 per tonne of waste burned by selling CCER credits, adding 3-7% to their incomes. That is according to Investment Strategy Research, a product of China Merchants Securities. GEP Research, an environmental consultancy based in Beijing, calculated that in this way, high-performing firms (with relatively high technical and management levels) used to be able to add as much as 8-10%.

Then there’s electricity generation. In the past, incinerators benefited from a benchmark tariff and subsidised prices. The first 280 kilowatt-hours generated from a tonne of waste were sold to the grid at a nationally set tariff of CNY 0.65 each. The remainder went at the price paid locally for coal power – generally CNY 0.25 to CNY 0.40.

Now, the environmental attributes of that power are paid for through the sale of Green Electricity Certificates, which track and verify renewable-power generation. Supply-and-demand issues with those certificates, though, are still being worked out; there was a sudden uptick in supply in 2024 and demand didn’t keep up. The certificates generally sell for only several fen per kilowatt-hour.

All these factors combine to make life much harder for the sector than it was 10 years ago. As of June 2024, China had the capacity to burn 1 million tonnes of waste per day – 34% over the target for the 2021-2025 five-year plan period. More than 40% of that capacity, though, was going unused and the sector’s profits were on the slide.

Missing waste

China has geographical and urban-rural imbalances in waste incineration. The cities have a glut of incinerators, while less densely populated areas have a shortage.

In 1935, geographer Hu Huanyong drew a diagonal line across China, running from the north-east border in Heilongjiang to the south-west border in Yunnan. The Hu line divides the country by population density and also by socioeconomic development. Less than half of China’s land lies to the right of it, but as of 2015 that area was home to 94% of the population and was much more urbanised. The vast majority of China’s incinerators are in that eastern section.

To the left of the line, in the west and parts of the north-east, less than 30% of household waste from towns is properly handled, far below the 2016-2020 five-year plan’s national target of 70%.

Lower population density in towns and villages means waste is more widely distributed and so more expensive to collect. Investors, therefore, prefer to build incinerators in cities. Many remote villages still use uncovered dumps or crude incinerators, giving rise to environmental concerns.

A volunteer introduces garbage sorting to villagers in Gulong village, Guangxi province (Image: Imaginechina / Alamy)

Most lightly populated areas are within ten western provinces, and this is where waste collecting and transportation is more difficult, wrote Xu Haiyun, deputy chair of the urban environment and hygiene committee at the Ministry of Housing and Urban-Rural Development’s technology commission, in 2024. The total population of those ten provinces is 300 million. Waste-to-power plants already built or under construction can cope with the waste from only about 210 million people.

Moreover, the statistics only cover waste that makes it into the system, missing what is quietly dumped. Rural dumping can lead to leachate and bits of plastics flowing into waterways and spreading through the environment.

Levels of microplastics in sediment from the Huai River are lower in Beijing than the average for other tested sections of the river, including rural sections, according to research by Tsinghua University’s School of Environment in 2021. Most of those microplastics stem from household waste and agricultural sources, such as membranes.

In the cities, levels are lower as water-treatment plants filter out some pollutants. A separate study by Sun Yat-sen University, also from 2021, found much higher levels of microplastics in the mouth of the Pearl River in the rainy season – mainly because of rural waste being washed into the river.

An action plan for tackling plastic pollution during the period of the 14th Five-year Plan (2021-2025) identifies the key rural issues as agricultural membranes and the burying and open-air dumping of plastic waste.

Avoiding overproduction of waste

As consumerism reaches China’s villages, the amount of waste ending up outside of collection systems and statistical coverage has increased.

Meanwhile, a mistaken belief that waste disposal is no longer a problem makes reducing waste quantities harder. In 2016, China’s cities collected over 200 million tonnes of household waste. In 2024, that had risen to 262 million – an increase of 30% in seven years. The more people think the country has solved its waste disposal problems, the less attention they pay to what they throw away and the less likely they are to reduce waste. And so the problem grows.

“The idea that China does not have enough waste to burn is back-to-front,” Hubei Daily commentator Zhang Shuangshuang rightly notes in a comment piece. “The problem is not a lack of waste, it is a surplus of incinerators.”

If we set out to increase the amount of waste we produce to the level of some advanced economies, using more disposable products, to fill our incinerators, we will only harm ourselves.

If more kitchen waste is being sent for composting, and if more waste is recycled rather than buried or burned – then waste sorting is a success. Our approach to waste disposal should be first to reduce, then reuse, and only then dispose. What needs to change is the distribution of waste-disposal capacity. We should not produce more waste simply to feed the incinerators.

In short, China cannot burn its way to a solution for waste disposal.

Everbright Environment, one of the leading firms in the sector, said in its 2024 annual report that it must shift its orientation to cope with the mismatch between waste supply and demand. It would look to diversify from household to industrial waste, and broaden its customer base from governments to include other businesses and consumers. This move is quite representative of the industry approach.

The old days have gone. The incineration sector needs to work out where there is demand for waste disposal and the complementary electricity-generation, recycling and heat-provision businesses. It also needs to play a key role in improving the transportation of waste and to help cover the rural gap. Only then can the industry emerge from crisis.

Author: Xu Nan

This article was originally published on Dialogue Earth under the Creative Commons BY NC ND licence. Read the original article.