Mar 13, 2025
UK carbon prices increased by 7% in a single day due to reports about potential connections with the EU Emissions Trading System.
The prices for carbon allowances in the UK experienced a 7% increase on the afternoon of March 12, following news that the UK was contemplating a connection between its domestic emissions trading system and that of the EU.
During a discussion on the carbon border adjustment mechanism in the House of Lords, Spencer Livermore, the financial secretary to the Treasury, mentioned that both the UK and the EU were giving "serious consideration" to the idea of linking their emissions trading systems.
On March 12, Livermore told lawmakers, "We are continuing to explore all options to enhance trade and investment with the EU, which includes the UK and the EU seriously considering linking our emissions trading schemes."
According to Platts, a part of S&P Global Commodity Insights, the UKA contract for December 2025 delivery was assessed at GBP41.29/mtCO2e ($53.56/mtCO2e), marking an increase of GBP2.68, or 7%, during the session on March 12. This price surge followed a period of stability in trading, with prices starting to rise in the afternoon.
A UK-based carbon broker stated to Platts, "In my opinion, this is a standard stock response from the UK government and merely repeats what is outlined in the trade and cooperation agreement."
The UK-EU Trade and Cooperation Agreement, established after the UK's exit from the EU, commits to "seriously considering linking their respective carbon pricing systems to maintain the integrity of these systems and potentially enhance their effectiveness."
Livermore also highlighted that this alignment is viewed as beneficial for the competitiveness of the UK.
He stated, "We understand that this can lessen administrative burdens, hence we will align where suitable and closely monitor developments regarding the EU CBAM."
On February 28, the European Commission proposed changes to its carbon pricing certificates. According to the new proposal, starting in February 2027, importers will have the option to acquire CBAM certificates to cover the emissions associated with their imports for 2026, instead of beginning from January 1, 2026.
Additionally, companies importing less than the 50 mt threshold would be exempt from the requirement to purchase certificates. Analysts observed that these modifications would alleviate the administrative burden for smaller importers.
The UK’s version of the carbon border mechanism is set to be implemented in 2027. In October 2024, the UK government released a consultation response detailing considerations for small and medium enterprises.
CBAM will apply only to companies importing CBAM goods valued at GBP50,000 or more over a 12-month period, with the government estimating that this will exempt 80% of CBAM-eligible firms while still accounting for over 99% of imported emissions.
UK carbon prices have been on the rise since January amid early reports regarding a potential connection between the two systems.
As of February 10, the nearest December 2025 UKA contract reached a near eight-month high of GBP48.41/mtCO2e after a 20% increase from the beginning of the year.
During a discussion on the carbon border adjustment mechanism in the House of Lords, Spencer Livermore, the financial secretary to the Treasury, mentioned that both the UK and the EU were giving "serious consideration" to the idea of linking their emissions trading systems.
On March 12, Livermore told lawmakers, "We are continuing to explore all options to enhance trade and investment with the EU, which includes the UK and the EU seriously considering linking our emissions trading schemes."
According to Platts, a part of S&P Global Commodity Insights, the UKA contract for December 2025 delivery was assessed at GBP41.29/mtCO2e ($53.56/mtCO2e), marking an increase of GBP2.68, or 7%, during the session on March 12. This price surge followed a period of stability in trading, with prices starting to rise in the afternoon.
A UK-based carbon broker stated to Platts, "In my opinion, this is a standard stock response from the UK government and merely repeats what is outlined in the trade and cooperation agreement."
The UK-EU Trade and Cooperation Agreement, established after the UK's exit from the EU, commits to "seriously considering linking their respective carbon pricing systems to maintain the integrity of these systems and potentially enhance their effectiveness."
Livermore also highlighted that this alignment is viewed as beneficial for the competitiveness of the UK.
He stated, "We understand that this can lessen administrative burdens, hence we will align where suitable and closely monitor developments regarding the EU CBAM."
On February 28, the European Commission proposed changes to its carbon pricing certificates. According to the new proposal, starting in February 2027, importers will have the option to acquire CBAM certificates to cover the emissions associated with their imports for 2026, instead of beginning from January 1, 2026.
Additionally, companies importing less than the 50 mt threshold would be exempt from the requirement to purchase certificates. Analysts observed that these modifications would alleviate the administrative burden for smaller importers.
The UK’s version of the carbon border mechanism is set to be implemented in 2027. In October 2024, the UK government released a consultation response detailing considerations for small and medium enterprises.
CBAM will apply only to companies importing CBAM goods valued at GBP50,000 or more over a 12-month period, with the government estimating that this will exempt 80% of CBAM-eligible firms while still accounting for over 99% of imported emissions.
UK carbon prices have been on the rise since January amid early reports regarding a potential connection between the two systems.
As of February 10, the nearest December 2025 UKA contract reached a near eight-month high of GBP48.41/mtCO2e after a 20% increase from the beginning of the year.