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Energy cooperation
Despite Brexit, the European Union and United Kingdom remain linked through energy. In 2023, trade in energy accounted for 10 percent of EU-UK trade, and energy accounted for 20 percent of the UK’s exports to the EU 1 . The UK is a major supplier of crude oil to the EU with around €1 billion in exports monthly. Increased exports of natural gas and electricity from the UK into north-west Europe were essential for surviving the winter 2022-23 energy crisis 2 (Figure 1).
This post-Brexit bilateral relationship is based on the Trade and Cooperation Agreement (TCA), signed by the EU and the UK in May 2021 3 . It includes specific provisions on electricity and natural gas trade that have so far sustained cross-border energy flows in those commodities. However, the temporary nature of these trading arrangements weakens the business case for British and European companies to make clean energy investments. Establishing a more solid relationship on energy has also been hampered by political red lines, with UK policymakers keen to avoid any notion of ‘rejoining’ elements of Brussels bureaucracy and European policymakers keen to dispel the notion that the UK, having left the single market, can pick-and-choose areas for policy alignment.
The change in UK government in July 2024 may enable an improvement in energy trading relations with the EU. On energy and climate policy, the UK and EU have more in common than differences, and deeper cooperation can be mutually beneficial. The shared renewable resource in the North Sea means cooperation can lower the cost of the energy transition for both.
Deeper cooperation can be realised through a series of bespoke arrangements. First, the current temporary electricity trading arrangements should be agreed and finalised. Second, trade disruptions arising from carbon border tariffs should be mitigated, especially when the results might be counterproductive. Third, the UK and EU should approach climate policy – on which they share similar ambitions – as an area for cooperation on the international stage to leverage shared goals....
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