The price of carbon in the UK ETS has surged an impressive 13% in early trading on Tuesday following an article in the Financial Times. As a result, UKAs closed the day at £40,02, a level last seen in November 2024.

According to the newspaper, citing two EU officials, “the UK had requested that ETS linkage and CBAMs be included on the agenda for the spring summit, expected in March or April.” The idea of holding regular EU-UK summits was agreed in principle last October following talks in Brussels between British Prime Minister Starmer and European Commision President Ursula von der Leyen.

UK allowances were at a record of £97,15 (around €115) in August 2022 but prices have been falling sharply since, reaching a record low of £31,48 (around €36.86) in January 2024 amid concerns over the government’s commitments at that time to reform a market faced with growing surplus.

After an initial short-lived period of close correlation between UKA and EUA prices, followed by a premium of as much as €32, the British carbon price is now trading at a discount of over €20. “Given the significant discount of UKAs compared to EUAs, ETS linkage would imply price convergence between the two systems,” warns ICIS analyst Lewis Unstead, quoted by Reuters. 

Currently, there is a linkage agreement in place since January 2020, between the Swiss ETS and the EU ETS, following 10 years of negotiations. Norway, Liechtenstein and Iceland, although are not members of the EU, have been participating fully in the EU ETS since 2008.