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Abstract Presently, waste is regarded as any other fuel in the Swedish district heating (DH) plants where it is treated in combination with energy recovery. Consequently, all carbon dioxide (CO 2) emissions that occur during waste treatment are allocated to DH producers even though two simultaneous services are provided – waste treatment and energy recovery. As the focus today is on phasing out fossil fuels from Swedish DH sector, energy recovery from waste turns out to be less desirable than heat production using biofuel and renewable electricity. This article discusses whether the existing allocation method of CO 2 emissions contributes to sustainable development and if it does not, to recommend a new method that will. To do this type of assessment, we used the principles from Framework for Strategic Sustainable Development. Results showed that the existing allocation method does not consider the problem of waste generation. The method shifts the responsibility from waste producers to DH customers. To prevent this ‘burden shifting’, a broader system perspective and an upstream approach should be applied. In addition, the method should be designed in ways that would give incentives to responsible stakeholders to act properly, which requires identifying the reasons why waste is not being recycled and to find a way to apply the allocation. Considering resource efficiency, waste treatment through combustion should always include energy recovery. To encourage energy recovery, the produced heat should not be burdened with CO 2 emissions. [ABSTRACT FROM AUTHOR]