| | OCTOBER 20259domestic carbon costs while competing with imports that bear none. This asymmetry accelerates carbon leakage and deindustrialisation, undermining the very climate goals these policies aim to achieve.The Risk of Blind Alignment with the EU ETS Recent UK-EU negotiations have opened the door to linking the UK and EU ETS markets. While harmonisation could simplify carbon pricing and trade, the UK must retain the flexibility to adjust carbon pricing, cap levels and FA allocations to reflect its own trade and industrial realities. A one-size-fits-all approach would strip the UK of the tools needed to drive its own climate goals and protect its most vulnerable sectors.A Call for Strategic RebalancingThe UK's decarbonisation strategy must be recalibrated if it is to succeed in avoiding carbon leakage, where the carbon dioxide emissions in its supply chain occur in another country. The UK must avoid sacrificing domestic industrial capacity to satisfy an accounting rule that ultimately doesn't result in the overall emissions reductions required to meet climate goals. This doesn't mean abandoning net-zero--it means achieving it intelligently and equitably. This can be achieved by implementing CBAM for refined products without delay to ensure fair competition, retaining control over free allowance allocations, especially for emissions-intensive, trade-exposed sectors like refining and providing targeted funding for low-carbon initiatives, such as hydrogen-ready infrastructure and carbon capture, to help refineries and other industries decarbonise without shutting down.ConclusionThe recent closure of the Grangemouth refinery and the insolvency of the Lindsey refinery's parent company are not isolated events; they are warning signs. Without urgent policy action, the UK will continue down a path of industrial decline, energy insecurity and climate policy failure.A rebalanced ETS, a robust CBAM and a strategic industrial policy are both an economic necessity and a foundational pillar to a fair and resilient energy transition. Delays or indecision will only deepen the crisis. Without urgent reform, the UK risks becoming a passive consumer in the global energy market, exporting emissions and importing vulnerability.
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