EU and UK prepare to link their carbon markets

A deal that removes double carbon charges

The European Union and the United Kingdom are preparing to announce the completion of negotiations on linking their emissions trading systems (ETS). According to a draft document reviewed by Euronews, the announcement is planned for the EU–UK summit in Brussels on 20 November; the document may still change before publication. Linking means mutual recognition of European and British carbon allowances, as well as exemption of goods from the EU and the UK from the respective border carbon adjustment mechanisms (CBAM) — with the caveat of complying with domestic laws and procedures, which the parties plan to launch 'without delay'.

What changes for industry

The practical meaning of the deal is the removal of the double carbon burden. The EU's border mechanism came into force in January 2026, while the UK plans to introduce its own in January 2027. Without a formal link between the two markets, manufacturers could face additional carbon costs when exporting across the Channel, even while already operating under domestic emissions pricing systems. In the view of some EU and UK officials, energy-intensive sectors — steel, aluminium, cement and fertilisers — will be able to avoid additional charges, which would protect their competitiveness and reduce the administrative burden on trade between the two markets.

Criticism: carbon prices could rise in Britain

The proposal has opponents. British MP David Tafnell told Euronews that the country's industry is at a 'critical stage' and that linking 'threatens to push British carbon prices even higher, towards EU levels'. According to him, the UK issues fewer free allowances to industry than the EU, which means British manufacturers could face higher costs than their European competitors. 'If carbon costs in the UK rise faster than in a competing jurisdiction, production, investment and jobs move abroad, while global emissions remain unchanged,' Euronews quotes him as saying. Analysts note, however, that a unified allowance market could improve their availability and simplify trading, but closer integration would also bring regulatory obligations — a politically sensitive issue in a country where Brexit was partly driven by the desire to escape EU rules.

A condition for London: alignment with EU requirements

The two markets differ in rules and sectoral coverage, including the approach to transport and buildings. If the linking goes ahead, the UK will have to keep its carbon pricing sufficiently close to EU requirements. A separate issue is the second iteration of the European ETS (ETS2), which from 2029 will require oil and gas operators to pay for emissions associated with building heating and road transport fuels; according to Euronews, this measure was previously postponed to 2028 and drew public criticism because the new carbon tax is likely to fall on consumers' bills. For Brussels, linking is a way to extend carbon pricing beyond the bloc and protect the market from emissions leakage; for London, it is a way to reduce trade costs and maintain access to the European market without formally rejoining EU regulatory structures. According to an October Messina Group Megapoll survey, 49% of Britons would support rejoining the EU, while 28.5% would oppose it.