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. The proposed start date coincides with the beginning of CBAM’s definitive phase, but the exemption is not yet binding and importers’ obligations on earlier shipments remain unresolved.
The proposal would connect the EU and UK emissions trading systems, providing a basis to remove CBAM obligations for qualifying British goods. Importers have already begun accumulating emissions-related obligations on covered goods entering the EU from Britain. The draft does not settle the legal treatment of those earlier imports or whether refunds or corrections would be available.
No final agreement or binding retrospective exemption has been adopted. The draft still requires negotiations and the relevant European and British legal procedures. An EU–UK summit was planned for 20 November.
Implications for exporters and buyers
If the markets are linked and qualifying goods are exempted, British steelmakers and aluminium producers could gain access to EU customers without the associated CBAM regulatory 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 influences cross-border generation and industrial supply arrangements.
European importers have been advised to keep calculating their existing CBAM obligations while preserving contractual flexibility in case the rules change. Banks financing British exporters or European industrial buyers have also been advised not to treat the reported arrangement as an established exemption when assessing costs and working-capital needs. The proposed deal concerns the EU and United Kingdom; its effect depends on negotiations and legal procedures still to come.