EU Clears Path for Talks to Link Carbon Markets with UK, But Levy Relief Still Years Away

EU member states have agreed to begin negotiations with the UK on linking their carbon markets, Denmark’s EU presidency said on Wednesday—marking a significant step in rebuilding post-Brexit relations. A linked system would exempt both sides from imposing carbon border tariffs on each other, a key incentive for British industries facing rising compliance costs. Ambassadors unanimously backed the move in a closed-door meeting, and formal approval by EU ministers on Monday is expected without changes. However, the linkage is unlikely to materialize soon enough to shield UK firms from the EU’s incoming carbon border levy, which takes effect on January 1 for imports such as steel and cement. The UK government estimates the levy could cost its companies around £800 million annually. Because aligning the two carbon markets will take several years, British firms will still face the EU levy until the systems are fully linked. The UK is preparing its own carbon border tax, due to start in 2027.