LONDON — Officials in Brussels have stalled new Brexit reset talks after EU countries clashed over the issue of British payments to the bloc. 

Ambassadors from the bloc’s 27 member states on Friday failed to give the green light for negotiations on linking U.K. and EU emissions trading systems (ETS), as well as talks on an agri-food deal.

Talks are set to resume on Tuesday. 

The U.K. and EU agreed in principle to negotiate on the two topics at a summit in May. But only once member states give their approval can talks truly begin.

The delay is a setback for British negotiators, who had hoped to get an ETS deal in place before the EU implements its new carbon border tax regime in the New Year.

Without a deal in place by the end of December, British firms exporting carbon-intensive goods to the EU such as steel and cement will be hit by the taxes from Jan. 1.

One EU diplomat with knowledge of Friday’s talks confirmed there was disagreement over the issue of how much the U.K. should pay to participate in the EU’s single market.

A second official confirmed there was “political sensitivity” on the issue, with specific concerns over when the U.K. would be expected to pay. 

“[Should it be] on the occasion of the next electricity trading agreement, as the majority of member states suggest? Or after that, as some member states still claim,” they said. 

The same official added that there was also “frustration that other talks are lagging behind” on the more contentious issue of youth mobility. Both officials were granted anonymity in order to speak freely about the ongoing talks. 

Carbon tax hit

Adam Berman, director of policy and advocacy at Energy UK, said it was now “not realistic” that a linkage negotiation would be completed by the end of the year.

This will be “problematic” for British firms, Berman said, which will suddenly be subject to the new tax from Jan. 1, with the energy sector likely to be hit the hardest. But it could also harm the EU, which could see emissions increase as it seeks to replace relatively “cleaner” U.K. imports.

Another headache for both sides is the fact the new regime will apply in Northern Ireland, which has no hard border with the EU, meaning the region could become a backdoor into the EU market for high-carbon goods.

Berman said there was speculation of a time-limited exemption from CBAM while the U.K. was in linkage negotiations with the EU. “The big question is — Can both sides have an honest conversation about what the implications might be if there isn’t an exemption from the beginning of next year?” he said.

Nevertheless, Berman is hopeful of an eventual agreement, pointing out that the issue of ETS was “not highly politicized” like other, more contentious aspects of the reset like youth mobility.

“There is a pretty high level of alignment between these two policy mechanisms in the U.K. and the EU and high levels of environmental ambition on both sides. So really there are more technical questions to resolve than there are political questions, which bodes well for the likelihood of an eventual positive outcome.”

Agri-foods deal

Meanwhile, the U.K.’s EU Relations Minister Nick Thomas-Symonds has said he wants a Sanitary and Phytosanitary deal — which would see the U.K. align with EU agri-food standards — up and running by 2027.

To meet this timeline, talks with the EU would need to be wrapped up sometime in 2026 so parliament has time to enact legislation.  

The U.K. is also racing to negotiate a deal to join the EU’s €150 billion rearmament scheme by “mid-November.” EU member countries have until the end of November to submit their own plans detailing how they would spend their allotted shares of the €150 billion in loans. 

London fears that, if the U.K. isn’t in the room when that happens, it could end up losing out.

The issue of Britain offering financial payments to the bloc is also politically sensitive for the U.K. Responding to the reports, a spokesperson for Britain’s right-wing Conservative Party said the government’s post-Brexit reset had “turned out to be an outrageous hit job on British taxpayers, with demands from the EU for billions of pounds from our country.”

“Starmer doesn’t have the backbone to stand up to Brussels, with their attempt to extort cash from us as a punishment for having the foresight to leave the EU,” they added.