Labour will start talks next week to link the UK’s emissions‑pricing system with the EU Emissions Trading Scheme and to roll back extra post‑Brexit food checks. The UK has agreed to make an “appropriate” financial contribution to the EU — a likely sticking point — and accepted some alignment of rules may be needed. Ministers argue linkage could stabilise prices and help avoid the EU’s carbon border tax from January 2026; critics say regulatory alignment risks betraying Brexit. Separate talks aim to let UK defence firms bid for projects funded by billions in EU loans.
Labour to Open Talks on Linking UK Carbon Market to EU — Payment and Rule Alignment Set to Dominate Negotiations
Labour will start talks next week to link the UK’s emissions‑pricing system with the EU Emissions Trading Scheme and to roll back extra post‑Brexit food checks. The UK has agreed to make an “appropriate” financial contribution to the EU — a likely sticking point — and accepted some alignment of rules may be needed. Ministers argue linkage could stabilise prices and help avoid the EU’s carbon border tax from January 2026; critics say regulatory alignment risks betraying Brexit. Separate talks aim to let UK defence firms bid for projects funded by billions in EU loans.
07:57 PM, 11/14/2025Politics
Government to start formal talks with EU next week
The Labour government will begin formal negotiations next week to link the UK’s carbon-pricing system with the EU’s Emissions Trading Scheme (ETS), about six months after both sides agreed to open talks. Ministers say the move could stabilise prices for British firms and help the UK avoid the EU’s planned carbon border tax on high‑emission imports.
What the talks will cover
Officials say the discussions will focus on two main areas: creating a workable linkage between the UK and EU carbon markets, and reducing the additional border checks on food products introduced after Brexit. As part of the negotiations, the UK has accepted it will make an "appropriate" financial contribution to the EU — a point likely to be a central point of contention.
Payments, alignment and political fallout
The decision to open formal negotiations followed three days of closed-door talks by EU ambassadors in Brussels about the payment level the EU should seek. British ministers have indicated they are prepared to pay for any specific EU "agencies, systems and databases" needed to operate the arrangements, while continuing to reject broader contributions into the EU budget.
UK officials also emphasised that EU member states had decided not to demand payments into the EU regional development funds as a condition of the deals, despite press reports that France had pushed for such a demand. The government has accepted it may need to align some UK financial rules with those of the EU to make the linkage work.
Why linkage matters
Introduced in 2005, the EU’s ETS caps the total carbon emissions allowed for power stations and certain industrial sectors and permits trades of emission allowances. Companies covered by the scheme buy allowances if they exceed their caps, which is intended to raise the cost of pollution and encourage investment in low‑carbon technology.
After Brexit the UK left the EU scheme and set up a domestic system that is smaller and has shown greater price volatility. Ministers say linking with the much larger EU market could provide more stable prices for UK firms; Switzerland has maintained a linkage with the EU ETS since 2021.
Linkage is also being promoted as a way to avoid the EU’s planned carbon border adjustment mechanism (CBAM), a border tax on imports with high embedded emissions — such as steel and cement — that the EU will apply from January 2026. The UK has announced its own similar measure, due in 2027.
Political reactions
The plan has divided opinion. Conservative shadow business secretary Andrew Griffith described following "Brussels red tape" as the "last thing the UK economy needs", accusing Labour leader Sir Keir Starmer of lacking the firmness to negotiate for Britain. By contrast, Nick Thomas‑Symonds, Labour’s minister for EU relations, said the deals would "slash red tape" and smooth trade for firms.
The question of how much the UK will pay is likely to be politically sensitive, particularly ahead of the Chancellor’s Budget this month, where tax changes may be proposed to address a recent shortfall against spending rules.
Defence loans and participation in EU projects
The talks come alongside separate negotiations to allow British defence companies to participate in military projects financed by planned EU defence loans. The European Commission expects to make billions of pounds available to help EU countries buy weapons jointly. British ministers want an agreement in place within weeks so UK firms can bid in the first round of funding, with applications due at the end of this month.
Reports suggest the EU may demand an upfront entry fee running into billions of euros for UK participation, and the two sides still need to agree limits on how much British firms could contribute to joint projects.
Bottom line: The negotiations aim to reduce trade frictions and stabilise carbon prices for firms, but they also raise sensitive questions about financial contributions and regulatory alignment that could trigger political opposition.