LONDON (CU)_The European Union and Britain have been urged to link their carbon markets, as the move is expected to help businesses, traders and energy firms in their fight against climate change. In a letter addressed to the European Commission and the British government, 42 businesses urged the two parties to link their Emission Trading Systems “as soon as practicable”.
Signatories to the letter mainly represent industries covered in carbon markets, including the European Federation of Energy Traders, the Confederation of British Industry and the power industry group Eurelectric.
As part of Britain’s withdrawal from the EU, the country also removed itself from the EU emissions trading system 2020. Subsequently, London set up its own carbon market, in which the first auction of permits will take place next month. Although Brussels and London did agree to consider linking the schemes, however, negotiations on this regard are yet to begin.
Meanwhile, Eurogas Secretary General James Watson says that a link between the two emissions trading systems would enable businesses operating in both the EU and Britain to avoid administrative burdens, while it would also create a more liquid market.
If the EU is to link its carbon market with that of Britain, it would require a green light from member states in order to begin negotiations.
In the meantime, the bloc plans to reforms its emissions trading system, by expanding it to several major industries, such as shipping, buildings and transport. However, since the EU and UK schemes are currently similar in design, these reforms may make the linking more complex.
Nevertheless, analysts are of the view that without a link to the EU market, permit prices in the UK ETS could surge once trading begins, since there will be high demand and low supply of UK permits.
