Industry groups urge UK, EU to agree emissions trading link before COP26

BRUSSELS/LONDON, 15 April – A coalition of more than 40 industry associations from Europe and the UK has written to the President of the European Commission and the UK Prime Minister, urging them to agree to link the UK’s and Europe’s emissions trading systems (ETS) before this year’s COP26 climate summit.

After leaving the European Union last year, the UK has introduced its own domestic emissions trading system, designed along very similar principles to the EU ETS.

“In choosing an ETS over a carbon tax, the UK has shown that carbon markets offer cheaper, more efficient, and legally binding decarbonisation” said Adam Berman, European Policy Director at IETA.

“If the UK wants to reach Net Zero, linkage to the EU ETS is key. It will allow emissions reduction targets to be reached more quickly, easily, and at better value. A larger market means a better market with more liquidity, fewer competitive distortions which damage industry, and more decarbonisation opportunities.”

The coalition pointed out that linking emissions markets requires two key elements: political will and alignment of climate goals.

“Given the similarities between the UK and EU’s carbon trading regimes, there should be no two emissions trading systems that are easier to link,” the groups said in the letter.

“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).”

A linkage would also send a strong political signal ahead of this year’s climate talks, the groups added.

“Linking the UK and EU ETS ahead of COP 26 would reaffirm the UK and EU as climate leaders, and demonstrate strong advocacy for international carbon markets,” the coalition said.

“A linking agreement between the UK and EU would show commitment to Article 6 of the Paris Agreement in a year during which the EU hopes to help finalise the Article 6 framework as a key outcome of COP 26, thus ensuring that the EU can lead by example in respect to the international climate agenda.”

“Linkage will [also] allow the UK to reach Net Zero faster and more cost effectively,” the group said.

A copy of the letter to Prime Minister Johnson can be found here, and to Commission President von der Leyen here.