Commonalities and Differences Between the EU ETS 1 and the UK ETS

Abstract

The European Union Emissions Trading System (EU ETS 1) and the United Kingdom Emissions Trading System (UK ETS) are cornerstones of the respective jurisdiction’s climate mitigation policy. Yet, 19 May 2025 marked a turning point in the history of both ETSs: When UK and EU leaders met for their first joint summit since Brexit, they agreed a Common Understanding that includes the intention to link both ETSs. The linking intention is part of a larger effort to reduce unnecessary barriers to trade and investment across the two jurisdictions. This paper compares the EU ETS 1 and UK ETS to identify their commonalities and differences. It highlights areas where regulatory and legal alignment is necessary for linking and considers the broader context that would influence linking.