On behalf of over 40 leading industries bodies, we urge the EU to start the process of linking the EU Emissions Trading System (EU ETS) with the new UK Emissions Trading System (UK ETS) as soon as practicable. We welcome the commitment to ‘serious consideration’ which the UK and EU have given to linking their respective carbon pricing systems in the Trade and Cooperation Agreement (TCA), and believe that linkage negotiations should begin as soon as possible. We believe that an EU ETS linked with the UK strengthens the integrity of, and confidence in, Europe’s carbon market. Central to this belief is the principle that all allowances are treated equally, and that they remain fungible between installations and preferably across borders. Linkage will benefit both parties, and allow the EU to reach Net Zero faster and more cost-effectively.
The advantages of linkage are clear in terms of liquidity, price discovery, and the ability to attract abatement from across a larger area. It would also create a level playing field in terms of carbon pricing, avoiding competitive distortions, and leading to aligned cost implications for industry across the UK and European Economic Area (EEA). This would be beneficial for international commerce, minimise the risk of carbon leakage, and lower the costs of achieving Net-Zero.