A New Collaboration on Strategic Issues Between Europe And The United Kingdom

On May 19, 2025, an event of major significance for the European landscape occurred. Five years after the start of Brexit, the European Union, and the United Kingdom convened for their first official bilateral summit, marking a significant turning point in relations between the two blocs and laying the groundwork for a new phase of collaboration focused on future challenges. European Commission President Ursula von der Leyen, European Council President António Costa, and British Labour Prime Minister Keir Starmer addressed highly relevant and timely issues, such as climate change, energy, security, and international cooperation.

One of the central themes of the meeting was relinking their respective emissions trading systems. Before Brexit, the United Kingdom was part of the European ETS like any other member state, but after the split, it had to establish a separate, national-level ETS, which was necessary to maintain the existence of an ETS, yet the separation immediately created numerous problems. This was true for the European side, which had to manage the exit of a significant portion of companies from the system, and for the British side, which had to ensure the same level of competitiveness for the companies involved.

The UK’s split from the EU ETS resulted in a smaller, less liquid market subject to volatility, regulatory divergence, and economic inefficiencies. British companies, in particular, were more exposed to additional costs and reduced competitiveness. This is especially true in light of the entry into force of the CBAM, the Carbon Border Adjustment Mechanism (from 2026 for Europe and from 2027 for the United Kingdom). During the meeting, the leaders reiterated the importance of the emissions trading system for decarbonizing the economy and technological development for businesses. Therefore, a link between the two systems would benefit both blocs. It would create a larger, more stable market with greater predictability for investors and consistent price signals, which is especially crucial for sectors like steel, cement, and refining that operate in a large, international market that requires long-term price stability as much as possible.

Relinking is also essential to avoid excessive economic losses for British companies, which risk paying environmental tariffs under the CBAM, potentially reaching around £800 million by 2030. However, relinking the two systems will require a great deal of regulatory harmonization. Making the two once-united systems communicate again, maintaining their differences but establishing shared administrative and legal foundations, is daunting. It will be necessary to redefine a shared governance mechanism, agree on MRV (Monitoring, Reporting, and Verification) rules, and determine the extent of the British contribution to the EU ETS’s administrative costs.

Measures will also need to be introduced to grant a temporary exemption from the CBAM for the companies involved during the transitional period, pending the complete linkage of the two systems. The summit also addressed the importance of cooperation on carbon capture, utilization, and storage (CCUS). Since the UK is already a European leader in this field and with this agreement, it could become a central hub for the geological storage of CO2 in the North Sea, with subsequent positive impacts on both regions’ economies and job markets. Another important aspect in favor of relinking the ETS systems would be the real possibility for European emitters to access British infrastructure and create a legal framework to regulate the cross-border transport of CO2, which is essential to building an efficient and integrated carbon capture and storage network.

During the summit, energy issues were discussed, with Europe and the UK agreeing to maintain the current trading arrangements outlined in the “Trade and Cooperation Agreement.” They will also manage the UK’s participation in European electricity trading platforms. This decision is significant as it aims to reduce costs, increase efficiency, and encourage the development of innovative technologies, including green hydrogen and biomethane. It will also allow for correcting economic inefficiencies introduced by Brexit, which have contributed to price increases and market fragmentation. With this plan, the United Kingdom intends to become a net exporter of electricity, leveraging its vast national potential from offshore wind and investing in new technologies and infrastructure, such as Offshore Hybrid Assets, which are submarine structures connecting offshore wind farms between multiple countries.

However, the UK’s return to the electricity market also requires the UK’s partial adoption of European laws. This step could face political obstacles, especially from Eurosceptic elements in the British Parliament. Therefore, a gradual and progressive approach is suggested so the UK can progressively align with European standards while maintaining its independence and individuality.

The summit also advanced security and defense cooperation, with the UK set to participate in the EU’s Common Security and Defense Policy and both blocs reaffirming their geopolitical alignment on issues like the Ukraine war and the stability of the Middle East. On the commercial and practical front, leaders extended mutual access to fishing waters until 2038 and established joint migration and border security approaches. Crucially, discussions also addressed key post-Brexit challenges by exploring a common sanitary area, more straightforward rules for worker mobility, mutual recognition of professional qualifications, and a potential UK return to the Erasmus program, all aimed at restoring the vital freedom of movement and opportunities diminished by Brexit.

While the renewed cooperation on security, trade, and mobility signals a significant thaw in UK-EU relations, the landmark agreement to relink the Emissions Trading Systems truly anchors this new partnership. This commitment is more than just a climate policy fix; it’s a mutual recognition that the greatest challenges, from ensuring industrial competitiveness to achieving net zero, are shared. The path to a unified carbon market will be complex, requiring immense work on regulatory harmonization and governance. However, its success will be the ultimate symbol of this new, pragmatic collaboration, providing the stability businesses need, avoiding punitive tariffs, and turning the page on years of costly division to build a sustainable future for both sides of the Channel.