A reported draft declaration envisages linking the European Union and United Kingdom carbon markets and exempting qualifying British exports from the EU’s Carbon Border Adjustment Mechanism (CBAM) retroactively from 1 January 2026. That is the date CBAM entered its definitive phase, when importers began accumulating emissions-related obligations on covered British goods.
The proposed link between the EU and UK emissions trading systems would provide a basis for removing CBAM obligations on eligible UK goods. The draft could therefore remove a regulatory cost and associated compliance requirements for qualifying exports, but the proposed exemption is not yet in force.
No final agreement or binding retrospective exemption has been adopted. The draft still requires negotiations and the relevant European and British legal procedures, while the treatment of imports already brought into the EU—including any refunds or corrections—remains unresolved.
Trade and compliance implications
An EU–UK summit was planned for 20 November. If the markets are linked and qualifying exports receive the exemption, British steelmakers and aluminium producers could gain access to EU customers without the related CBAM cost and compliance requirements.
Exporters in Serbia, Montenegro, Bosnia and Herzegovina, Türkiye and Ukraine would continue to face CBAM unless their countries qualified for exemptions under applicable legislation. A preferential EU–UK arrangement could widen differences in effective market-access costs between competing suppliers.
The outcome could also affect negotiations over electricity trade, where carbon-market linkage affects cross-border generation and industrial supply arrangements. European importers have been advised to continue calculating their existing CBAM obligations while preserving contractual flexibility for a possible future change.
Banks financing British exporters or European industrial buyers have been advised not to treat a reported agreement as an established exemption when assessing costs and working-capital requirements. The legal treatment of imports dating from 1 January 2026 remains unsettled pending negotiations and the required legal procedures.