FIA recently released two letters urging UK and EU leaders to start the process of linking the new UK Emissions Trading System (UK ETS) with the EU’s Emissions Trading System (EU ETS) as soon as practicable.
We believe that an EU ETS linked with the UK strengthens the integrity of, and confidence in, Europe’s and the UK’s carbon markets. 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 and the UK to reach net zero faster and more cost-effectively. 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.
