The European Council announced today that EU member states have approved the start of negotiations with the UK to link their emissions trading systems (ETS). The move aims to rebuild alignment between the EU and UK in key climate policy areas that have diverged since Brexit.
The EU ETS, launched in 2005, places a carbon price on major greenhouse-gas-intensive sectors such as power generation, steel, cement, chemicals, and aviation. It is expected to generate around €40 billion in revenue between 2020 and 2030. In 2023, the EU introduced the Carbon Border Adjustment Mechanism (CBAM) to prevent carbon leakage by ensuring imported carbon-intensive goods face a carbon cost comparable to EU-produced goods covered by the ETS.
Today’s decision follows the May 2025 EU-UK summit, where both sides agreed to work toward linking their carbon markets so that EU and UK carbon allowances could be mutually recognized under each system.
Under the Council’s mandate, the agreement should clearly define how the linked ETS systems will function, which sectors will be covered, and how additional sectors may be added in the future. The linkage would also allow goods traded between the EU and UK to qualify for mutual CBAM exemptions.
The Council also authorized negotiations with the UK to align sanitary and phytosanitary standards, which would remove the need for most checks and certificates for animals, plants, and related products moving between the two markets.
