A new UK industry body has pushed for the linking up of the nation’s Emission Trading Scheme (ETS) with the EU’s, not only to facilitate frictionless trade ahead of the introduction of a carbon border levy, but also to support post-Brexit trading agreements in Northern Ireland.
West Scotland has also received a funding boost, with its National Investment Bank supporting a project that would spur green manufacturing. The value of the equipment to be manufactured (energy cables) was illustrated by a wind-powered boost to UK electricity exports recorded last week – this being the lone benefit of high winds caused by Storm Eowyn.
CBAM complaint
Northern Ireland could once again begin caught between post-Brexit trading rules, as both the UK and EU may insist that it should adhere to their version of the Carbon Border Adjustment Mechanism (CBAM), a business group has warned.
CBAM is a tax levied against high-carbon imports, to ensure that businesses are not offshoring costly carbon-intensive production processes to evade domestic taxes.
The BBC reports that Energy UK said that, if such a disagreement was to break out, it could call into question the legal framework supporting post-Brexit trading arrangements:
"If the UK were to insist that the EU CBAM should not apply in Northern Ireland, this would have serious consequences for the government's 'reset' with the EU,” the industry body said, adding that it would also “risk reopening the Windsor Framework”.
''A likely consequence of this action would be the imposition of barriers to trade in the form of retaliatory tariffs from the EU."
To prevent the need for such barriers, the body urged the relinking of the EU and UK’s ETS, which underpins the pricing of any carbon levy.
Energy UK said that, by “creating a combined carbon market”, not only would the carbon price be the same, it “would remove carbon borders between both jurisdictions”.
Under the Windsor Framework, Northern Ireland remains in the EU’s single market to prevent checks on goods crossing its border with the Republic of Ireland, while those checks do take place when goods move from Great Britain into NI.
Starmer’s push
Linking the UK and EU ETS appears to be a priority within UK government. Ahead of his trip to Brussels for the European Council’s informal gathering of leaders yesterday (3 February), the FT reports that prime minister Sir Keir Starmer listed ETS linkage among his key aims for the meeting.
Last week, EU relations minister Nicholas Thomas-Symonds told the Business and Trade Committee that “linking our respective systems is absolutely what the ambition is” for CBAM.
This follows calls from industry not only to align on ETS pricing but also the timeline of implementation for the two party’s respective CBAMs.
The revenue-collecting phase of the EU’s levy is set to come into force in 2026, whereas the UK tax is not slated to be in place until at least 2027. This discrepancy has concerned some affected sectors, such as UK steel manufacturers, who last year expressed concern that the UK could be flooded with carbon-intensive imports in the interim.
Scottish green infrastructure investment
In a win for progress towards net zero and UK regional development, the Scottish National Investment Bank has announced it will support a £2bn factory in Hunterston, North Ayrshire, set to produce underwater energy transmission cables.
This follows the BBC’s report late last year that the town’s former coal-handling port benefits from a £150m funding scheme to revitalise the area for predominantly sustainable energy projects.
The FT reports the factory announcement is part of a broader drive to encourage supply chain manufacturing in Scotland, especially production of the equipment and infrastructure needed to facilitate the net zero transition.
Gillian Martin, acting Scottish secretary for net zero and energy, said she hoped the project would help “propel manufacturing” and “demonstrate local supply chains”, while Scottish National Investment Bank’s Laura Fidao said she hoped it would address an overreliance on imports of equipment needed to support net zero ambitions.
“It’s widely felt that Scotland and the UK failed to build out local supply chain for fixed-bottom wind, instead relying on imports of equipment used in the sector.
“We have a mandate to help build out the domestic supply chain to turn that around for floating offshore wind projects.”
The subsea cables are set to be produced by start-up XLCC, which anticipates supplying products commercially from 2030.
The cables are used in a number of areas: transmitting power from offshore wind farms and reinforcing grid infrastructure.
They also play an important role in trade, building interconnectors that enable the transfer of energy between countries.
UK energy export boost
In an example of the cables in action last week, the FT reported that high-speed gusts of wind from Storm Eowyn boosted electricity exports to France.
Currently, cables link the UK grid to other neighbouring countries including Norway, the Netherlands and Belgium.
During the storm, France was able reduce power consumed by its nuclear energy source by 4 gigawatts, which is enough to power millions of homes.
The UK will always seek to export excess wind capacity, given that it must otherwise pay wind farms to curb their output during high winds. Despite its high level of exports, this was still a necessity during Storm Eowyn.
