Finance
EU countries ready to negotiate UK carbon market link
Published by Global Banking and Finance Review
Posted on November 12, 2025
2 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on November 12, 2025
2 min readLast updated: January 21, 2026
EU and UK to negotiate linking carbon markets, aiming to reset relations and avoid tariffs. Talks to start soon, but linkage will take years.
By Kate Abnett
BRUSSELS (Reuters) -European Union countries have agreed to start talks with the UK to link the two sides' carbon markets, a spokesperson for Denmark's EU presidency said on Wednesday, in a move billed as part of a reset in relations following Britain's exit from the bloc.
By linking their carbon markets, the two sides would exempt one another from their respective carbon border tariffs. However the linkage is unlikely to happen in time for British firms to avoid the EU's carbon border levy, which from January 1 will impose fees on the bloc's imports of steel, cement and other goods.
EU countries' ambassadors agreed unanimously in a closed-door meeting that negotiations on the link would go ahead, said a spokesperson for Denmark, which holds the EU's rotating presidency.
The EU mandate needs approval at a meeting of EU countries' ministers on Monday, but that is a formality and they are expected to wave it through with no changes.
The link has been backed by both European and UK industries, with British firms noting that a key upside would be avoiding the EU's carbon border levy - which would not apply if the two sides link their carbon markets.
The UK government has said the EU carbon border tariff would cost UK companies around 800 million pounds a year.
But it will take several years to link the markets, given the technical complexity of the schemes and the required technical changes. British industries could face the EU carbon levy in the meantime.
The UK plans to launch its own carbon border levy, but a year after the EU, in 2027.
(Reporting by Kate AbnettEditing by Ros Russell)
A carbon market is a trading system where countries or companies can buy and sell permits to emit carbon dioxide, aiming to reduce overall greenhouse gas emissions.
A carbon border tariff is a fee imposed on imported goods based on their carbon emissions, aimed at preventing carbon leakage and encouraging sustainable practices.
The EU carbon border levy is a charge applied to imports of certain goods to ensure they meet the EU's carbon emissions standards, effective from January 1.
Linking carbon markets allows countries to mutually recognize each other's emissions trading systems, potentially reducing costs for businesses and enhancing environmental cooperation.
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