-Based on reporting by the Council of the European Union
The Council of the European Union has formally authorised the European Commission to open negotiations with the United Kingdom for linking the EU and UK Emissions Trading Systems (ETS). These discussions build on commitments made at the EU-UK Summit of May 2025, where both parties agreed to deepen cooperation across trade and climate policy. A unified carbon market would enable emissions allowances to be traded seamlessly across both systems, supporting shared decarbonisation goals and reducing the risk of carbon leakage. The agreement is expected to define how the linked system will operate, which sectors will be included and how additional sectors may be added over time.
A major implication of this linkage is its connection to the Carbon Border Adjustment Mechanism (CBAM): once the systems are aligned, goods moving between the EU and UK could qualify for mutual CBAM exemptions, offering greater certainty for producers and exporters of steel, aluminium, cement, fertilizers, and other covered goods. With the Council decision now adopted, the European Commission is authorised to begin formal negotiations with the UK, and any resulting agreements will require final endorsement by the Council before entering into force.
FACS Perspective
A potential linkage between the EU and UK ETS represents one of the most significant market developments since the UK’s withdrawal from the EU. A connected system would expand market liquidity, enhance price stability, and streamline compliance for operators active across both jurisdictions. It may also reduce CBAM exposure for cross-border supply chains, particularly in energy-intensive and trade-exposed sectors.
You can read more here: https://www.consilium.europa.eu/en/press/press-releases/2025/11/13/eu-uk-relations-council-greenlights-negotiations-on-agri-food-deal-and-linking-emissions-trading-systems/