EU and UK ETS DOCUMENTS UPDATE: Linking the EU and UK Emissions Trading Systems

A Strategic Step Toward Integrated Climate Action

Background: Strengthening Market-Based Climate Solutions

Since the launch of the EU Emissions Trading System (EU ETS), the European Union has led the global push for carbon pricing as a key tool to combat greenhouse gas emissions. The UK, after establishing its own ETS post-Brexit, has maintained a similar approach. The recent political momentum to link both systems reflects a shared ambition to enhance international cooperation on climate policy.

Why Link the EU and UK ETS?

Shared Architecture and Ambitions

Both ETSs are built on a cap-and-trade model, covering major sectors such as energy, heavy industry, and aviation. This common design makes linkage technically feasible and strategically beneficial.

Potential Benefits

Linking the two systems could offer multiple advantages:

  • Enhanced market liquidity and stability
  • Cost-effective emissions reductions
  • Minimised carbon leakage
  • Greater investment in low-carbon technologies

Challenges and Differences

Despite their similarities, the systems differ in scope and design. For instance, the EU plans to include emissions from road transport and building heating (ETS2), while the UK does not currently mirror this expansion. Variations also exist in market instruments and carbon price levels, which must be aligned for a successful linkage.

A Symbol of Climate Diplomacy

Linking the EU and UK ETSs would send a strong political message in favour of unified, market-driven climate action. It reinforces the idea that collaboration across borders is essential for driving global decarbonisation and achieving climate resilience.

Download Document File Here: Linking the EU and UK emissions
trading systems (BRIEFING)