Compliance carbon markets
12 November 2026 · By Fran Benedito, CEO of ClimateTrade
In short
The EU and the UK are expected to announce at their summit in Brussels on 20 November 2026 that they have concluded negotiations to link the EU Emissions Trading System (EU ETS) and the UK Emissions Trading Scheme (UK ETS). According to a draft summit text reported by Euronews, the link would allow mutual recognition of EU and UK allowances and would exempt EU and UK goods from each other’s Carbon Border Adjustment Mechanism (CBAM), subject to each side’s laws and procedures. The EU CBAM has applied in its definitive regime since 1 January 2026; the UK CBAM starts on 1 January 2027. The deal still needs ratification, and the date on which the link becomes operational has not been published.
Since 1 January 2021, the EU and the UK have run separate carbon markets, with one exception: in Northern Ireland the EU ETS still applies to electricity generation under the Windsor Framework. Linking the two systems is the most important change to European compliance carbon markets since Brexit. This article explains what is expected to be announced, what is already confirmed in official documents, what is still open, and what companies with ETS or CBAM exposure should do now.
What is expected to be announced on 20 November 2026?
The Council of the EU has confirmed that European Council President António Costa and European Commission President Ursula von der Leyen will host UK Prime Minister Andy Burnham in Brussels on 20 November 2026 for the second EU–UK summit, and that leaders are expected to issue a joint declaration. On 6 November 2026, Euronews reported a draft of that text: “We welcome the conclusion of the negotiations on linking the EU’s and the UK’s ETS agreement. This would allow mutual recognition of EU and UK allowances and exempt EU and UK goods from respective CBAM subject to respective laws and procedures that we plan to launch without delays.” The draft could still change before publication.
Linking means that allowances issued in one system are recognised for compliance in the other. Under Article 25 of the EU ETS Directive (2003/87/EC), the EU can conclude agreements with third countries for the mutual recognition of allowances, provided the other system is mandatory and has an absolute emissions cap. The Council of the EU has stated that the UK ETS currently meets those criteria. The EU ETS is already linked with Switzerland’s system, which has applied since 2020.
How did the EU and the UK get here?
- 1 January 2021: the EU and the UK start operating separate emissions trading systems, except for electricity in Northern Ireland.
- Trade and Cooperation Agreement, Article 392(6): both sides commit to give serious consideration to linking their carbon pricing systems.
- 19 May 2025: at the first EU–UK summit, the European Commission and the UK agree a Common Understanding to work towards an agreement linking the UK ETS and the EU ETS.
- 13 November 2025: the Council adopts Decision (EU) 2025/2468, authorising the Commission to open negotiations on the ETS link (together with an agri-food, or SPS, agreement).
- 1 January 2026: the EU CBAM enters its definitive regime.
- 20 November 2026: second EU–UK summit in Brussels, where the conclusion of the ETS negotiations is expected to be announced.
- 1 January 2027: the UK CBAM starts to apply.
What would the EU–UK ETS link change?
Mutual recognition of allowances
Once the link is operational, companies covered by either system would be able to use EU allowances (EUAs) or UK allowances (UKAs) to meet their obligations. That creates one larger, more liquid market for operators with installations or aircraft on both sides of the Channel. When UKAs can be surrendered in the EU ETS, and EUAs in the UK ETS, depends on the start date in the final agreement, which has not been published.
Sector scope and alignment
The 2025 Common Understanding sets the framework. The link should cover at least electricity generation, industrial heat generation (excluding individual heating of houses), industry, domestic and international maritime transport, and domestic and international aviation, with a procedure to add sectors later. Within that scope, the UK would dynamically align with the relevant EU rules, and the UK cap and reduction pathway should be at least as ambitious as the EU’s. Disputes would go to an independent arbitration panel, with the Court of Justice of the EU as the final authority on EU law.
A path to mutual CBAM exemptions
The Common Understanding says the link should create the conditions for EU and UK goods to benefit from mutual exemptions from each side’s CBAM, subject to each side’s legislation. On the EU side, Article 2(4) and (6) of the CBAM Regulation (EU) 2023/956 provides that CBAM does not apply to goods from a third country whose ETS is fully linked to the EU ETS and that meets all the relevant conditions. Reporting by Bloomberg indicates that the exemption will not be automatic: the EU would add the UK to the list of exempted countries by a delegated act once the conditions are met.
EU CBAM and UK CBAM at a glance
| EU CBAM | UK CBAM | |
|---|---|---|
| Start | Definitive regime since 1 January 2026 (transitional reporting 2023–2025) | 1 January 2027 |
| Sectors | Cement, iron and steel, aluminium, fertilisers, electricity, hydrogen | Aluminium, cement, fertiliser, hydrogen, iron and steel |
| Who is affected | Importers of CBAM goods into the EU, who need authorisation, report and surrender CBAM certificates | Businesses importing £50,000 or more of CBAM goods over 12 months; HMRC registration opens on 1 January 2028 |
| Price reference | Linked to EU ETS allowance auction prices | Linked to the UK ETS carbon price, adjusted for free allowances |
Without a link, a UK steel or aluminium producer exporting to the EU, and an EU producer exporting to the UK from 2027, could face border carbon charges on top of the carbon price they already pay at home. Mutual exemptions would remove that double layer for goods originating in each jurisdiction.
What is still to be confirmed?
- The final text. Until the joint declaration and the agreement are published, all details come from drafts and press reports.
- Ratification. Once negotiations are finalised, the agreement must be endorsed by the Council of the EU before it can enter into force. Press reports indicate that the European Parliament and EU member states will be involved, and that parts could be applied provisionally.
- The operational start date. No date has been published for when the registries will recognise each other’s allowances.
- The package. Politico and Bloomberg report that the ETS deal is linked to the agri-food (SPS) agreement and a youth mobility scheme, and would enter into force only once those are also in place.
- Reported parameters. Bloomberg reports, citing people familiar with the talks, that the EU would recognise UK caps for 2028–2030, that UK annual issuance from 2031 would be capped at 7.1% of the EU ETS allowance supply, and that the UK would create its own Market Stability Reserve starting with at least 29.5 million allowances. These figures have not been officially confirmed.
What should companies do now?
- EU ETS operators: keep planning purchases against your 30 September surrender deadline in the Union Registry. Linking does not change your current obligations; it may widen the pool of eligible allowances once operational.
- UK ETS operators and groups active in both markets: review hedging and procurement in both systems, since the two markets are expected to converge once linked.
- Importers and exporters of steel, aluminium, cement, fertilisers and hydrogen: keep your CBAM processes running. Exemptions are expected to require legal steps on both sides and will not apply automatically on 20 November.
- Companies with voluntary climate targets: ETS allowances are compliance instruments. Your voluntary carbon credit strategy continues alongside them, and certified projects remain available on our marketplace.
How ClimateTrade can help
ClimateTrade is a US company headquartered in Miami, with its European office in Valencia. If you have obligations under the EU ETS, we buy EUAs at the best price for you and deliver them to your Union Registry account. Tell us the volume and timing you need and we will send you a quote. For voluntary climate goals, you can explore certified carbon projects on the ClimateTrade marketplace.
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Frequently asked questions
Are the EU and UK carbon markets being linked?
The EU and the UK are expected to announce the conclusion of negotiations to link the EU ETS and the UK ETS at their summit in Brussels on 20 November 2026. The agreement must then be ratified before it enters into force.
Will UK allowances (UKAs) be valid in the EU ETS?
That is the purpose of the link: mutual recognition of EU and UK allowances for compliance. It will only apply once the agreement is in force and operational; the start date has not been published.
Will UK goods be exempt from the EU CBAM?
The link is designed to make that possible. Under the EU CBAM Regulation, goods from a country whose ETS is fully linked to the EU ETS can be exempted once all conditions are met. Reports indicate that this requires a separate EU legal act and is not automatic.
When does the UK CBAM start?
On 1 January 2027, for imports of aluminium, cement, fertiliser, hydrogen, and iron and steel goods. HMRC says registration opens on 1 January 2028, and businesses importing £50,000 or more of CBAM goods over 12 months are directly affected.
Does the EU–UK link change my EU ETS obligations this year?
No. Current EU ETS rules continue to apply: verified emissions reports by 31 March and surrender of allowances in the Union Registry by 30 September.
Is the EU ETS already linked to any other system?
Yes. The EU ETS has been linked with Switzerland’s emissions trading system since 2020.
How can I buy EUAs with ClimateTrade?
Contact us with the volume and timing you need. We buy EUAs at the best price for you and deliver them to your Union Registry account.
Sources: Council of the EU, EU-UK summit to take place in Brussels on 20 November (12 October 2026); Euronews, EU and UK set to link carbon markets in major post-Brexit deal (6 November 2026); UK Government, UK-EU Summit Common Understanding (19 May 2025); Council Decision (EU) 2025/2468 of 13 November 2025; Council of the EU press release (13 November 2025); European Commission, Carbon Border Adjustment Mechanism; HM Revenue & Customs, Carbon Border Adjustment Mechanism; GOV.UK, Prepare for the Carbon Border Adjustment Mechanism; Council of the EU, EU–Switzerland ETS link in force from 1 January 2020; Politico Europe; Bloomberg via Energy Connects.