On behalf of over 40 leading industry bodies, we urge the UK Government to start the process of linking the new UK Emissions Trading System (UK ETS) with the EU’s Emissions Trading System (EU 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.
Linkage will benefit both parties, and allow the UK 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 Europe rather than just the UK. 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 the 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, thereby facilitating trade and investment between the Parties as per the objective of the Chapter on energy in the TCA.