Energy UK is calling on the government to link Britain’s carbon pricing scheme with the EU’s – warning that failure to do so could cost UK exporters up to £800 million a year by 2030.
In a letter to the Prime Minister ahead of his meeting with EU President Ursula von der Leyen on 19 May, the group says aligning the two carbon markets is a no-brainer – cutting red tape, stabilising prices and shielding industries from the incoming Carbon Border Adjustment Mechanism (CBAM).
What’s an ETS?
An Emissions Trading Scheme is a carbon market. It caps how much pollution companies can emit and auctions off a limited number of allowances. The cap shrinks every year pushing up prices and giving firms a clear incentive to go green.
What’s CBAM?
The EU’s CBAM is a carbon tax on imports – due to start properly in 2026 – that makes foreign producers pay the same carbon price as EU firms. It’s designed to stop “carbon leakage” – where green policies at home just push emissions overseas.
If the UK links its ETS with the EU’s, our exporters will be exempt from CBAM. If not they’ll face eye-watering tariffs even when selling into Northern Ireland.
That’s why a broad coalition – from the CBI and TUC to UK Steel, Make UK and sectors like glass, paper and chemicals – is backing Energy UK’s call.
Adam Berman, Energy UK’s Director of Policy and Advocacy said:
While emission trading schemes are a proven way of incentivising investment in clean energy and reducing pollution, having separate ones is causing problems for UK businesses, which will only increase with the introduction of the CBAM.
“A smaller scheme is more prone to volatile pricing, causing uncertainty for UK businesses. Analysis suggests that a linked ETS price would be lower for UK businesses than a standalone scheme over the next few years. UK businesses are very clear that the biggest threat to them comes from continuing with divergent schemes.“
The fix doesn’t require a full-blown EU treaty. Switzerland already has a simple standalone deal linking its ETS with the EU’s.
Energy UK also wants a wider reset in energy ties – including closer cooperation through the North Seas Energy Cooperation group to boost renewables, electricity trading and security of supply.
In short – sync the schemes, slash the risk and spare British industry a massive carbon bill.
