The UK’s National Grid has called for the re-coupling of the UK and EU Emissions Trading System (ETS) frameworks to prevent significant disruptions to the Irish wholesale electricity market when the EU's Carbon Border Adjustment Mechanism (CBAM) is fully enacted in 2026. Under CBAM regulations, companies must purchase certificates to offset the carbon emissions tied to imported products, including electricity. This policy could intensify issues for the Integrated Single Electricity Market (I-SEM), as Ireland currently depends solely on interconnectors with the UK grid. Without exemptions, Irish power prices could rise further, placing additional financial strain on market participants.

The combination of bottlenecks, limited transmission capacity, and rising energy demands due to data center expansion already drives elevated electricity costs in Ireland. Analysts have warned that implementing CBAM without coordinated ETS alignment risks exacerbating these issues while fostering political tensions, especially for Northern Ireland, which is part of the I-SEM but remains under UK jurisdiction. Experts, including National Grid Interconnectors Managing Director Rebecca Sedler, argue that reconnecting the UK and EU ETS schemes would streamline carbon pricing, eliminating CBAM-induced trade barriers and stabilizing the market. Such a move would also align with the UK’s ambition to transition from a net electricity importer to a net exporter by 2030.

CBAM Reports is here to support businesses navigating the complexities of CBAM regulations, including the technicalities of the CBAM XML template. Find out more about the planned CBAM regulations in the UK and contact us for expert advice.

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