In a major step toward advancing global ESG frameworks and a unified carbon neutral strategy, the European Commission and the UK government have agreed to pursue linkage between their respective emissions trading systems (ETS). The announcement, made during the first-ever EU–UK summit, underscores shared commitments to climate leadership and economic cooperation post-Brexit. 

The agreement aims to mutually recognize carbon allowances issued by either jurisdiction, allowing them to be counted toward each other’s ETS compliance. This move will enhance carbon market liquidity, create a level playing field, and support decarbonization efforts across sectors such as electricity generation, industry, maritime transport, and aviation. 

The EU ETS, operational since 2005, regulates greenhouse gas emissions from high-emitting sectors and is projected to generate €40 billion in revenues between 2020 and 2030. It is complemented by the Carbon Border Adjustment Mechanism (CBAM), a carbon tax on imports designed to prevent carbon leakage and maintain global climate competitiveness. 

The UK, which established its own ETS in 2021 following Brexit, has announced plans for a national CBAM by 2027. The linkage between the two carbon markets is expected to include mutual CBAM exemptions, easing trade barriers and fostering regulatory alignment. 

Crucially, the UK’s ETS cap and emissions reduction targets must remain at least as ambitious as those of the EU, ensuring continued alignment with net-zero pathways. EU Commission President Ursula von der Leyen highlighted the strategic importance of this collaboration, stating: “A larger integrated system is a big step forward in decarbonisation.” 

The EU–UK carbon market linkage marks a pivotal advancement in cross-border climate cooperation and reflects growing momentum behind ESG-aligned policies and carbon neutral strategy integration on a global scale. 

Source : 

https://www.esgtoday.com/eu-uk-to-work-on-linking-carbon-markets/