London Daily

Focus on the big picture.
Tuesday, Sep 16, 2025

Brexit decision left UK firms paying 10% more than EU rivals for emissions

Brexit decision left UK firms paying 10% more than EU rivals for emissions

Government refusal to link carbon market to EU’s has led to higher cost for British businesses
British businesses are paying substantially more to produce carbon dioxide than their EU rivals because of the government’s refusal to link the UK carbon market to the bigger European market after Brexit.

The difference is putting UK industry at a significant competitive disadvantage to European rivals, at a time of soaring energy prices, but does not result in any additional benefit to the environment.

UK companies are paying more than £75 (€90) a tonne for the carbon they emit, while similar industries in the EU are paying up to about €85 a tonne. The difference has narrowed slightly in recent days, but was reaching about €8-9 a tonne of carbon in the past month, equating to a premium of about 10% being paid by UK companies.

Britain’s carbon price is higher because the UK carbon market, set up last year with the first permit auctions taking place last May, is much smaller and lacks the liquidity of the larger EU emissions trading scheme (EU ETS) that has been operating since 2005 and covers all of the EU’s heavy industries.

Under both schemes, companies buy tradeable permits to cover the carbon dioxide they produce, with cleaner companies able to sell spares to laggards. The price acts as an incentive to companies to clean up their operations, and is seen as an economically efficient way to help meet the net zero emissions target.

Ministers have a short window in which to reduce UK carbon prices before 18 January, the deadline for the government to release extra permits on to the market, which could reduce some of the price pressure. But experts said linking to the EU market would provide a better long-term answer, and make economic and environmental sense.

Tom Lord, the head of trading at Redshaw Advisors, said: “UK companies are paying substantially more than they are in the EU. The big problem for the UK market is liquidity, and the fact that it is new. The EU has a historic surplus [of permits] to fall back on, but the UK has pent-up demand and only a drip-feed of supply.”

Lawson Steele, joint head of carbon and utilities research at Berenberg bank, said: “This is a disadvantage [to UK companies]. The reality is that the UK carbon market is dwarfed by the EU ETS. Given that the UK wants to trade with the EU, and the EU wants to trade with the UK, it would make sense for companies to be on the same carbon footing.”

British companies already paid higher prices for energy than their EU counterparts, amounting to about £35 a megawatt hour more, added Joe Morris, of UK Steel, which represents the steel industry. “This is a long-running bugbear for the steel sector, and something that continues to hamper our international competitiveness,” he said.

The effect of both higher carbon prices and higher energy prices than the EU, as well as the lack of a post-Brexit deal with the US, which recently dropped its tariffs on EU steel, was to deter investment, he said. “This affects the competitiveness of steel companies, which links to investment in these companies. It affects our members’ confidence, and does not help people who work in the sector.”

Steel companies were firmly behind the net zero strategy, Morris added, seeing the push for decarbonisation as offering a competitive advantage. “There’s an opportunity to be world-leading in green steel and net zero steel,” he said.

Politicians tempted by high energy prices to dismantle net zero policies were mistaken, added Berenberg’s Steele. “Blaming the carbon price is baloney. Increasing energy prices in the last year have been 85% due to the gas price. Carbon is not the problem,” he said.

The government has not explained why it has so far rejected a link with the EU system, but many suspect it is part of the desire for a “clean break” hard Brexit, maintaining as few regulatory links as possible.

The Liberal Democrats and the Green party called on the government to link the UK ETS to the EU system. If the EU agreed, linking could probably be achieved fairly easily, as the UK system is modelled on the EU market, which the UK was a core part of and took a leading role in designing and updating while an EU member.

The Liberal Democrat leader, Ed Davey, said: “The UK needs ambitious climate policies, but they will always be better if we work together with international partners. The Conservatives’ failure to do this is now hitting British business at the worst possible time, as energy-intensive firms are struggling with sky-high gas prices.”

Molly Scott Cato, of the Green party, said: “It’s clearly irrational, inefficient and the result of the destructive Brexit ideology to try to run an independent UK carbon trading system with all its additional costs, inevitable inconsistencies and opportunities for gaming the market.”

For years, after the 2008 financial crisis, the EU’s carbon market suffered a glut of permits and was largely ineffective, as the carbon price crashed. In recent years, however, reforms and the renewed need to slash emissions have pushed up prices and it is now working as intended, spurring investment in low-carbon technologies.

Ministers have no plans to seek a link with the EU ETS, but are understood not to have ruled out the possibility entirely. A spokesperson for the Department for Business, Energy and Industrial Strategy said: “The UK ETS Authority is considering whether to take any appropriate action under the cost containment mechanism [to release more permits on the market] and will announce its decision no later than 18 January to provide certainty to the market.”
Newsletter

Related Articles

0:00
0:00
Close
U.S. and Britain Poised to Finalize Over $10 Billion in High-Tech, Nuclear and Defense Deals During Trump State Visit
China Finds Nvidia Violated Antitrust Laws in Mellanox Deal, Deepens Trade Tensions with US
US Air Force Begins Modifications on Qatar-Donated Jet Amid Plans to Use It as Air Force One
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
Elon Musk Retakes Lead as World’s Richest After Brief Ellison Surge
U.S. and China Agree on Framework to Shift TikTok to American Ownership
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
Anesthesiologist Left Operation Mid-Surgery to Have Sex with Nurse
Tens of Thousands of Young Chinese Get Up Every Morning and Go to Work Where They Do Nothing
The New Life of Novak Djokovic
The German Owner of Politico Mathias Döpfner Eyes Further U.S. Media Expansion After Axel Springer Restructuring
Suspect Arrested: Utah Man in Custody for Charlie Kirk’s Fatal Shooting
In a politically motivated trial: Bolsonaro Sentenced to 27 Years for Plotting Coup After 2022 Defeat
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Turkish authorities seize leading broadcaster amid fraud and tax investigation
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Brazilian police say ex-President Bolsonaro had planned to flee to Argentina seeking asylum
Trinidad Leader Applauds U.S. Naval Strike and Advocates Forceful Action Against Traffickers
Kim Jong Un Oversees Final Test of New High-Thrust Solid-Fuel Rocket Engine
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Supreme Court temporarily allows Trump to pause billions in foreign aid
Charlie Sheen says his father, Martin Sheen, turned him in to the police: 'The greatest betrayal possible'
Vatican hosts first Catholic LGBTQ pilgrimage
×