Businesses Call for UK–EU Carbon Market Connection
Larger companies, in a letter to leaders, are pressing for talks in line with their demands.
Unanimity on carbon systems avoids unfair competition and reduces costs for consumers, say businesses.
Over 50 companies and business groups from Europe are urging Britain and the EU to discuss connecting their carbon markets, which now operate separately, at an upcoming summit on May 19, 2025.
They say that consensus on carbon pricing systems will bring the costs down for consumers and reinforce climate cooperation.
For the moment, the UK and the EU have separate Emission Trading Systems (ETS), charging companies, including manufacturers and power plants, for each tonne of carbon dioxide they emit. The object is to reduce emissions and reach climate goals. But, since the systems are not linked, this will create differences in carbon pricing, making cross-border trade complex.
Connecting the two systems can bring similarity in carbon prices in the regions, reducing risk for those businesses relocating to places with cheaper carbon costs. This will make trading fairer and more predictable for companies on two sides.
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Bigger companies—Equinor, Ørsted, and RWE—in a letter to policymakers, stated that such a decision would prevent 'competitive distortions' and benefit both economies.
Another ensuing worry is that the EU's new Carbon Border Adjustment Mechanism (CBAM) will impose carbon fees on certain imports, like steel, cement, and electricity, in 2026. Sans a linked carbon market, British exporters have to pay an extra amount under this system. Some believe this will make clean electricity exports from the UK a costly affair and even result in higher emissions.
Now, the carbon price in the UK is around £48 per tonne lower than that of the EU. If the two systems were connected, prices in the UK would likely rise to equal the EU's, meaning higher short-term costs for UK businesses. Experts say that this could be offset by the removal of EU import fees in the long term, making the transition financially worthwhile.
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Source: Reuters
