UK metal associations welcome EU-UK deal linking emissions trading systems

Associations representing UK steel and aluminum producers have welcomed an agreement between the EU and UK linking their respective emissions trading schemes.

The deal, announced at the conclusion of the UK-EU Summit in London on May 19 represents a significant step in post-Brexit cooperation on climate policy and is expected to be mutually beneficial to European and UK industry, which have come under pressure in recent years.

In a joint statement during the summit, the two parties said that alignment of the two compliance carbon markets will also create mutual exemptions from their respective carbon border taxes.

The UK Steel association welcomed the plan in a statement released shortly after the announcement, noting that the move will enable better access to the UK's largest export market for steel.

According to UK Steel, the UK carbon market is too small and illiquid as a lone initiative. Through the merger of the EU and UK emissions trading schemes, UK steel producers will benefit from a single carbon price across both markets, it said, adding that UK industry will also be exempt from the costs and administrative requirements associated with the EU Carbon Border Adjustment Mechanism.

In addition, UK Steel noted that the UK and the EU have agreed to improve steel quotas, a development that it said would ease export restrictions for steel angles and heavy sections.

"This will be a significant step in reducing trade frictions in steel with the EU, our biggest export market, by ensuring equivalent carbon costs and easier exports," said UK Steel Director General Gareth Stace.

"Crucially, linking the schemes lowers costs for the sector and provides long-term security, particularly if UK ETS prices were to exceed those in the EU in the years ahead, making linkage all the more important for competitiveness," he added.

Platts, part of S&P Global Commodity Insights, assessed UK HRC at GBP530/mt DDP West Midlands on May 15, down GBP5/mt week over week.

UK ALFED seeks clarification on inclusion of aluminum in agreement

Although the UK-EU agreement is yet to be extended to aluminum, the UK Aluminum Federation or ALFED, said that the decision to link the UK and EU ETS markets suggests that UK aluminum producers may also avoid the extra costs and burdens associated with the EU CBAM.

"ALFED continues to press the government to confirm whether aluminum will benefit from this new pathway," it said in a statement released May 20..

It added that the agreement also opens the door for direct UK participation in the EU's shared electricity market, which it described as a "game-changer."

"If successful, this could improve the efficiency of cross-border electricity trading, with long-term implications for grid stability and pricing," ALFED said.

It also noted that the agreement opens up the potential for the UK to access the EU's new Security Action for Europe fund – a Eur150 billion investment instrument designed to support cross-border defense projects through loans and financing.