Ref. Ares(2021)4018116 - 21/06/2021
Ursula Von der Leyen
President of the European Commission
European Commission
CC: Mauro Petriccione, Director General, DG CLIMA, European Commission
Maros Sefcovic, Vice-President for Interinstitutional Relations & Foresight, European
Commission, Co-Chair of the EU-UK Joint Committee
, Chair of the EU Environment Council and Minister of Environment
& Energy Transition, Portugal
MEP, Chair, ENVI Committee, European Parliament
MEP, Chair, EU-UK Coordination Group, European Parliament
Richard Czostak, Principal Adviser, Service for the EU-UK Agreements, European Commission
14th April 2021
THE IMPORTANCE OF LINKING THE EU ETS WITH THE UK ETS AHEAD OF COP26
Dear President Von der Leyen,
On behalf of over 40 leading industries bodies, we urge the EU to start the process of linking the EU
Emissions Trading System (EU ETS) with the new UK Emissions Trading System (UK ETS) as soon as
practicable. We welcome the commitment to ‘
serious consideration’ which the UK and EU have given
to linking their respective carbon pricing systems in the Trade and Cooperation Agreement (TCA), and
believe that linkage negotiations should begin as soon as possible.1
We believe that an EU ETS linked with the UK strengthens the integrity of, and confidence in, Europe’s
carbon market. Central to this belief is the principle that all allowances are treated equally, and that
they remain fungible between installations and preferably across borders. Linkage will benefit both
parties, and allow the EU to reach Net Zero faster and more cost effectively. 2 The advantages of linkage
are clear in terms of liquidity, price discovery, and the ability to attract abatement from across a larger
area. It would also create a level playing field in terms of carbon pricing, avoiding competitive
distortions, and leading to aligned cost implications for industry across the UK and European Economic
Area (EEA). This would be beneficial for international commerce, minimise the risk of carbon leakage,
and lower the costs of achieving Net Zero.
Linking the UK and EU ETS ahead of COP 26 would reaffirm the UK and EU as climate leaders, and
demonstrate strong advocacy for international carbon markets. A linking agreement between the UK
and EU would show commitment to Article 6 of the Paris Agreement during a year in which the EU
hopes to help finalise the Article 6 framework as a key outcome of COP 26, thus ensuring that the EU
can lead by example in respect to the international climate agenda.
Linkage requires two crucial elements; political will, and alignment on environmental ambition. Given
the similarities between the UK and EU’s carbon trading regimes, there should be no two Emissions
Trading Systems that are easier to link. The European Commission has gained valuable experience
through linking the EU ETS and Swiss ETS, and this linkage agreement will be instrumental in providing
a broad framework for similar negotiations with the UK.
1 UK & EU: “
Trade and Cooperation Agreement” (2020), Article 7.3
2 IETA & Carbon Pricing Leadership Coalition: “
The Economic Potential of Article 6 of the Paris Agreement and
Implementation Challenges” (2019)
A linkage between the UK and EU ETS would once again align decarbonisation pathways, create a stable
environment for investment into low-carbon alternatives, and show continued European leadership in
tackling climate change.
We would be delighted to discuss our views on this issue at more length. We very much look forward
to hearing from you.
Confederation of British Industry
British-Irish Chamber of Commerce
British Chamber of
Commerce: EU & Belgium
Energy UK
Eurelectric
Renewable UK
Renewable Energy Association
Wind Europe
Nuclear Industry Association
Oil & Gas UK
UK Petroleum Industry
Eurogas
Association
The Association for Decentralised
Carbon Capture & Storage
Electricity Association of
Energy
Association
Ireland
Irish Business & Employers
British Glass
Chemical Industries
Confederation
Association
British Ceramic Confederation
Cerame Unie – The European
Confederation of Paper
Ceramic Industry Association
Industries
Confederation of European Paper
Eurometaux: The European
Confederation of British
Industries
Association of Metals
Metalforming
techUK
European Lime Association
Mineral Products Association
The Food & Drink Federation
Foodchain & Biomass Renewables
Catapult Energy Systems
Association
Futures Industry Association
International Swaps &
The Institutional Investors Group on
Derivatives Association
Climate Change
Association of European Energy
European Federation of Energy
International Emissions
Exchanges
Traders
Trading Association
London Energy Brokers’ Association
Global Infrastructure Investor
Climate Markets &
Association
Investment Association
Aldersgate Group
The Princes of Wales Corporate
Corporate Leaders Group
Leaders Group
Europe