UK Steel, which has advocated for the linking of carbon markets since 2019, had long emphasized that the UK’s carbon market was small and lacked liquidity. According to the official statement, the mutual recognition of carbon allowances will establish a single carbon price across both markets. As a result, steel exports from the UK to the EU will be exempt from the costs and administrative burdens arising from the EU’s Carbon Border Adjustment Mechanism (CBAM).
Approximately 75% of the UK’s steel exports are destined for EU countries, representing a market worth around £3 billion. The improvements to the EU’s steel quotas will help ease export restrictions, particularly on products such as steel angles and heavy sections.
Without these arrangements, UK producers would have faced increased trade frictions; EU buyers would have been required to pay CBAM levies, and tight quotas would have made access to UK steel products more difficult. This could have led to higher costs being passed on to UK exporters or even a loss of market share.
UK Steel Director General Gareth Stace commented on the matter:
"UK Steel welcomes the formalised plan to link the UK and EU Emissions Trading Schemes and new, improved market access. This will be a significant step in reducing trade frictions in steel with the EU, our biggest export market, by ensuring equivalent carbon costs and easier exports. It also eliminates the risk of costs from the EU Carbon Border Adjustment Mechanism, where the burden particularly falls on SMEs.”
“Crucially, linking the schemes lowers costs for the sector and provides long-term security, particularly if UK ETS prices were to exceed those in the EU in the years ahead, making linkage all the more important for competitiveness.”
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