EU and UK could ease fertilizer trade by linking carbon markets

The European Union and the United Kingdom are moving closer to an agreement to link their emissions trading systems, a step that could significantly reduce trade barriers for a range of industrial products, including mineral fertilizers. According to market participants, negotiations are in their final stages, and the agreement could be presented at the EU–UK summit on November 20, 2026.

Amid the negotiations, European carbon allowance prices declined at the end of the first week of November, following a sell-off in global equity markets. On November 6, December futures for EU ETS allowances fell by 1.3% to €87.23 per ton of CO₂. Additional pressure came from forecasts of stronger winds across Europe, which could boost renewable electricity generation and reduce demand for carbon allowances from conventional power producers.

Prices also declined in the UK market, with December UK ETS allowance futures trading at £64.85 per ton of CO₂ on November 6, down 2.4% week over week. Meanwhile, the price spread between European and British carbon allowances narrowed to €8.99 per ton, its lowest level in nearly ten months. The convergence reflects market expectations of future integration between the two emissions trading systems.

One of the main economic consequences of a potential agreement could be an exemption for eligible British goods from obligations under the EU Carbon Border Adjustment Mechanism (CBAM), which entered its definitive phase at the beginning of 2026. The mechanism covers imports of carbon-intensive products, including fertilizers, steel, aluminum, cement, electricity and hydrogen. Linking the emissions trading systems, subject to the necessary legal arrangements, would reduce additional costs for British exporters seeking access to the EU market.

According to government estimates, approximately £7 bln worth of UK trade is exposed to the EU’s CBAM. Successful linkage of the carbon markets could reduce regulatory costs for fertilizer producers and other energy-intensive industries, improving bilateral trade conditions. At the same time, the EU and the UK are advancing negotiations to simplify trade in agri-food products, although the final terms and implementation timeline remain uncertain.

Tags: EU, UK, fertilizers