The recently-concluded UK-EU summit is being widely heralded as a step forward in post-Brexit cooperation, with leaders committing to closer alignment on climate policy. A joint declaration has outlined plans to link the UK and EU Emissions Trading Schemes (ETS), with the aim of coordinating carbon pricing and preventing market distortions across emissions-heavy sectors including power generation, heavy industry, maritime and aviation.
However, the summit did not result in a formal agreement or timeline for convergence. While the political will was evident, the announcement has been criticised for its lack of binding commitments or a schedule for implementation. The earliest expected date for linkage remains 2028.
According to market consultants Redshaw Advisors Ltd, key hurdles persist for businesses, with no immediate price convergence between UK and EU carbon allowances, ongoing administrative complexity, and no liquidity or compliance benefits. UK carbon credits continue to trade at a discount to their EU equivalents, and uncertainty may drive market volatility in the short term.
Though hailed as a positive shift in tone, the outcome leaves UK exporters without an assured pathway to exemption under the EU’s Carbon Border Adjustment Mechanism (CBAM). Stakeholders must prepare for further delays and complexity, warns Redshaw.
