Industry groups, business call on Britain and the EU to link carbon markets

By Susanna Twidale

LONDON (Reuters) -More than 50 companies and business groups across Europe have called on Britain and the EU to start talks at an upcoming summit on linking their carbon markets which they say will help curb costs for consumers.

Britain is seeking enhanced cooperation on security, law enforcement and on removing trade barriers with the EU, when leaders meet on May 19.

Both the EU and UK Emission Trading Systems (ETS) charge power plants and other industrial entities for each ton of carbon dioxide they emit as part of wider efforts to cut emissions and reach climate targets.

“The EU and UK ETS linkage would create price convergence between the two schemes, whilst avoiding competitive distortions, preventing carbon leakage and reducing costs for both EU and UK consumers,” a letter signed by companies including Equinor, Orsted and RWE seen by Reuters said.

Linking the two schemes would also likely mean Britain would avoid penalties under Europe’s Carbon Border Adjustment Mechanism which will impose an emissions fee on imports to the EU of steel, cement, aluminium, fertilisers, electricity and hydrogen from 2026.

Energy groups have warned the design of the CBAM could see exports of clean, renewable power from Britain to the EU subject to extra costs which would add to already-high EU power prices and even lead to higher emissions.

Currently, prices in the UK scheme trade around 48 pounds ($64.13) per metric ton lower than in the EU, where the equivalent benchmark contract trades around 66 euros ($75.01) a ton.

Analysts have said linking the two systems would likely see UK prices rise to meet those of the EU which could increase direct carbon costs for UK businesses in the short term. In the longer term they say it will save costs because it will remove the proposed import levies.

($1 = 0.7484 pounds)

($1 = 0.8799 euros)

(Reporting By Susanna Twidale;Editing by Elaine Hardcastle)