EU member states gave their agreement late last week to the European Commission to formally begin negotiations on linking the UK and EU’s greenhouse emissions trading systems (ETS) and for an agreement on a common sanitary and phytosanitary area (SPS). These are key parts of a wider UK-EU ‘reset’ in relations that led to the production of a Common Understanding in May 2025.

Agreements on SPS and ETS are significant as these will help to reduce frictions to trade in agricultural products and carbon allowances. Furthermore, for the UK, linking its ETS with the EU’s will mean that exporters to the bloc will avoid carbon-related charges (which some estimate to be as much as £800 million per year) under the carbon border adjustment mechanism (CBAM) and which is set to begin in earnest from January 2026 – though a deal is unlikely to be made in time to avoid any/all costs.  

Bumps in the road

The Financial Times (here and here – behind a paywall) has been reporting on a rift between EU member states claiming that France, amongst others, has been seeking payments from the UK into core EU budgets in exchange for closer trading arrangements (including also on key initiatives around defence procurement and youth mobility), whilst Germany and the Netherlands have pushed back on this, saying that it went too far. The I paper (behind a paywall) reported on Friday that France had dropped its demands and the Council subsequently gave its green light for negotiations to continue.

For the UK Government though, the symbolism of the UK paying into the EU’s general budget appears to cross a political ‘red line’ – even if there is likely general agreement on all sides that the UK could and should make some limited contributions to get an agreement.

Turning words into action

Indeed, after the early jubilation of a turn in the corner in UK-EU relations in May, 6 months on from the summit it is clear that turning the Common Understanding document into action has been challenging, to say the least.

The issue of money – the amount that the UK might need to contribute to different programmes – has not gone away. There will still be wrangling in the weeks and months ahead. An obvious prize of successful negotiations is reduced friction to trade, from which both sides’ economies will benefit. The UK could also avoid some of the expected hit from CBAM charges. Yet part of the objective for the UK should also be about rebuilding trust with the EU after years of missteps and mishaps following Brexit. After all, a warmer, friendlier relationship is far likelier to yield better terms in future agreements and deals when we come back to the negotiating table for more.

The pace of agreement might also mean that tackling new areas of cooperation including more closely aligning our regulation of harmful chemicals or sharing data and information so that we can better understand the state of our shared environment, may be less likely in the near term.  

You may be interested to read two other timely publications of relevance to this topic:

– The House of Lords European Affairs Committee report, Unfinished Business: Resetting the UK-EU relationship (12 November 2025). 

– The House of Commons Library briefing on the 2026 review of the Trade and Cooperation Agreement and the UK-EU reset (07 November 2025). 

Photo by Guillaume Périgois on Unsplash