The European Union could be preparing a significant change to its Carbon Border Adjustment Mechanism (EU CBAM), with British goods potentially receiving an exemption dating back to January 1, 2026.

A draft declaration reportedly points to progress on linking the UK ETS and EU ETS, a development that could reshape carbon-related trade between the two economies. However, the proposed CBAM exemption has not yet become law.

The development was first reported by Rapporteur, which obtained access to a draft declaration prepared ahead of the November 20 EU-UK summit in Brussels. The document reportedly indicates that linking the two carbon markets could allow British goods to avoid the EU’s carbon levy, including retrospectively from the beginning of 2026.

The proposed arrangement builds on commitments made during the May 2025 EU-UK summit. In its Common Understanding, both parties agreed to pursue a formal link between their respective emissions trading systems, with the intention of enabling mutual exemptions from their CBAM regimes.

The European Council subsequently authorised negotiations on ETS linkage in November 2025, explicitly identifying reciprocal CBAM exemptions as a potential benefit. The UK government has also confirmed that negotiations are underway.

For businesses, the implications could be substantial. EU importers purchasing British steel, aluminium, cement, fertilisers and other covered products could potentially avoid CBAM obligations on qualifying UK-origin goods. British manufacturers would also benefit from reduced administrative requirements and potentially improved access to European customers.

Despite the reported progress, the proposal would require changes to EU legislation, subject to approval by both the European Parliament and the Council.

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