UK-EU Deal Links Carbon Markets, Raises Energy Bills

The UK and EU have agreed to link their carbon markets as part of a broader Brexit trade reset, which ties British firms to EU climate laws and pollution charges, limiting the UK's ability to independently alter its Net Zero policies without risking trade penalties. This integration is expected to raise carbon prices in the UK, potentially increasing energy costs for households and businesses, as gas power stations face higher carbon costs that influence electricity pricing. The UK government argues the deal will prevent new EU border taxes on exports like steel and cement, save UK firms an estimated £770 million by reducing trade friction, and promote a more efficient and liquid carbon market across Europe. Additionally, the deal includes steps toward closer cooperation on energy trading, including potential UK participation in the EU’s internal electricity market and collaboration on emerging technologies such as hydrogen, carbon capture and storage (CCS), and biomethane. These energy and sustainability provisions aim to boost projects like the UK’s Acorn and Viking CCS developments by aligning regulatory frameworks and facilitating cross-border CO2 transport and storage. Critics warn the arrangement could lead to higher energy bills and constrain future UK climate policy flexibility, while supporters emphasize the economic and environmental benefits of deeper UK-EU cooperation.