The cross-party UK Trade and Business Commission has called on London and Brussels to agree a reciprocal exemption from each other's carbon border adjustment mechanisms, warning that UK businesses face up to £800 million in EU CBAM costs by 2030 without one. The recommendation appears in "UK-EU Energy Cooperation: Emissions Trading Systems and the Electricity Market", published on July 13, 2026 by the commission chaired by Virgin Group's Peter Norris. It targets the period between the signature of a UK-EU ETS-linking agreement and its entry into force, the window in which UK exporters of steel, aluminium, cement, fertilizers, hydrogen and electricity remain fully exposed to EU CBAM certificate costs.
The report is advocacy, not regulatory action. Nothing in it changes the obligations of EU importers buying UK goods today, and every figure in this article is the commission's own estimate. What the report adds to the UK-EU CBAM agreement debate is a price tag for slow ratification: linking two emissions trading systems takes years, and CBAM costs accrue through the whole of that interim unless both sides switch them off by agreement.
What the commission recommends
The report recommends that the UK and EU exempt each other's goods from their respective CBAMs for the entire period between signing an ETS-linking agreement and that agreement entering into force. The recommendation addresses a sequencing problem. A linking deal removes CBAM exposure only once it is legally in force, because Regulation (EU) 2023/956 exempts only countries whose emissions trading systems are linked to, or participate in, the EU ETS: Annex III currently lists Iceland, Liechtenstein, Norway and Switzerland. Ratification, registry connection and rulebook alignment all sit between signature and an Annex III listing, and the commission wants the CBAM meter stopped for that entire stretch on both sides of the Channel.
Three further recommendations accompany the exemption call:
- Deeper UK-EU energy cooperation to deliver affordable, clean and secure energy
- Joint discussion and consultation on future expansions of either emissions trading system
- A long-term clean energy workforce strategy backed by STEM investment
Launching the report, Norris described its proposals as "the common-sense approach and a clear path forward that will improve markets, strengthen energy security and support much-needed increased investment into Britain's economy."
The numbers behind the £800m warning
The report estimates that UK businesses face up to £800 million in EU CBAM costs by 2030 without a reciprocal exemption, against a £3 billion boost to UK GDP by 2040 if a UK-EU ETS-linking agreement is concluded. The table below lists the report's headline figures, all of which are the commission's own projections.
| Figure | What it measures | Horizon |
|---|---|---|
| £800m | EU CBAM costs facing UK businesses without a reciprocal exemption | By 2030 |
| £3bn | UK GDP gain from a UK-EU ETS-linking agreement | By 2040 |
| £1.38bn+ | Projected regional benefit of an ETS deal to the Midlands | Not stated |
| £641m+ | Projected minimum regional benefit to Yorkshire | Not stated |
| £216m+ | Projected minimum regional benefit to the North East | Not stated |
Why does an EU border mechanism generate a bill for UK businesses at all? The legal obligation sits with EU importers, who must surrender CBAM certificates priced at the quarterly average of EU ETS auction prices, currently €75.28/tCO₂e for Q2 2026. The commercial cost then travels up the supply chain through renegotiated prices, absorbed margins and lost orders. UK-origin goods currently earn no deduction on that bill: Article 9 of Regulation (EU) 2023/956 reduces the certificate obligation where a carbon price was paid in the country of origin, but as of July 2026 no EU implementing regulation confirms the UK ETS as a qualifying carbon price. Member states are due to vote in September on which foreign carbon prices count against CBAM bills, a decision that will shape UK exposure whether or not linking talks succeed.
Why the gap between signature and entry into force matters
A signed UK-EU ETS-linking agreement removes no CBAM costs by itself, and the report warns that without an agreement in place by January 2027, UK firms will still be paying EU CBAM costs in the scheme's second year, the same month the UK's own CBAM goes live. The one existing precedent illustrates how long the lag can run: Switzerland signed its EU ETS linking agreement in November 2017, and it entered into force on January 1, 2020. The dates below frame the window the commission wants bridged.
| Date | Milestone |
|---|---|
| January 2021 | UK launches its independent UK ETS after leaving the EU system |
| January 1, 2026 | EU CBAM definitive phase begins; certificate liability starts accruing |
| January 1, 2027 | UK CBAM launches as a direct tax administered by HMRC |
| February 1, 2027 | EU CBAM certificate sales open |
| September 30, 2027 | First EU CBAM declaration due, covering calendar year 2026 |
From January 1, 2027 the exposure runs in both directions. EU producers selling steel, aluminium, cement, fertilizers or hydrogen into the UK fall under the UK CBAM tax, while UK producers remain inside the EU certificate system, with no mutual recognition linking the two regimes. The structural differences between the two systems are mapped in our UK CBAM vs EU CBAM comparison, and the resulting exposure for firms selling into both markets is analysed in our guide to the UK CBAM and EU CBAM double-payment risk. A reciprocal exemption of the kind the commission proposes would collapse that double-regime problem for UK-EU trade in a single stroke. On the UK side, preparation continues regardless: the UK CBAM secondary legislation, SI 2026/809, was made on the same day the report was published.
What happens next
The recommendation carries no legal weight unless the UK and EU adopt it within the ETS-linking negotiations that have been running since January 2026. An interim UK CBAM exemption for EU goods would need UK legislation, and an EU-side exemption for UK goods would need an EU legal instrument; neither government has committed to either step. The EU framework is also a moving target: since the report's publication, the Commission has tabled an ETS Phase 5 revision that slows the CBAM phase-in, which would reshape the very system the UK is negotiating to join.
The operational advice is unchanged by the report. UK exporters selling into the EU keep supplying verified embedded emissions data to their EU customers, because certificate liability accrues on every 2026 and 2027 shipment either way. EU importers sourcing from the UK budget at official quarterly certificate prices rather than on the assumption of an exemption; the CBAM cost calculator prices UK-origin goods at the current official rate. For the launch timeline, sector scope and registration process on the British side, read the UK CBAM guide.