UK carbon prices rally 5% on pledge to finalize linking negotiations ahead of 2026 EU summit

The UK and the EU have agreed to conclude negotiations on linking emissions trading schemes before a summit scheduled for next spring, with carbon prices in the UK rallying 5% on Dec. 18.

"The United Kingdom and the European Commission underline their commitment to implementing the outcomes of the May 2025 Summit in a timely manner, and aim in particular by the time of the next EU-UK Summit to conclude the negotiations on [...] linking our Emissions Trading Systems," the UK government said in a statement Dec. 17.

The commitment follows a meeting between EU Commissioner for Trade and Economic Security Maros Sefcovic and UK Minister for the Cabinet Office Nick Thomas-Symonds.

UK Allowance prices for the nearest December were trading at GBP63.5/mtCO2e at 1027 GMT Dec. 18, according to Intercontinental Exchange data.

The commitment follows a statement from the EU's climate commissioner, Wopke Hoekstra, that the UK would not receive any exemptions from the bloc's Carbon Border Adjustment Mechanism, which is set to enter its definitive phase in a few weeks' time.

This means British importers will face additional carbon costs and administrative burdens on goods entering the EU. However, a link between the two jurisdictions' cap-and-trade schemes would lead to a waiver of the CBAM.

The UK is set to introduce its own CBAM rules from 2027, with first payments due in 2028. The fee will apply to emission-intensive imports, such as aluminum, cement, fertilizers, hydrogen, iron and steel.

The spread between EU and UK allowance prices narrowed 11.5% on the back of the announcement. Platts, part of S&P Global Energy, assessed the spread at Eur17.38/mtCO2e on Dec. 17.