Energy security is building the post-Brexit paradigm

Lucas Blasco Argullós, Associate at Khora Consulting, dives into how recent energy shocks and global trade barriers will inform the future of EU-UK relations

Two months after the start of the war in Iran, high oil prices and energy security concerns remain top of mind for British and European policymakers as they try to grapple with the consequences of the biggest oil supply disruption in history.

This new energy shock has reaffirmed what Russia’s full-scale invasion of Ukraine and President Trump’s tariffs had already demonstrated – we are in an era of trade contestation and energy shocks.

Since 2022, Britain and the EU have heavily decoupled their energy consumption from Russian imports, turning instead to other sources, including home-grown renewable power. EU dependency on Russian gas has fallen from 45% of total imports to 12% in 2025, and oil imports fell from 27% to 2% between 2022 and 2025. The UK banned imports of Russian coal, oil, and gas in 2022.

The 2025 EU-UK Summit put energy and trade cooperation at the centre of the “reset” of post-Brexit relations. The dialogue culminated with the adoption of a Common Understanding setting out areas to strengthen bilateral relations including energy security, renewable power generation, and carbon trading.

The EU and UK pledged to link both Emissions Trading Systems (ETSs), integrate the UK into the EU’s internal electricity markets, and continue exploring collaboration opportunities to develop new technologies like hydrogen, carbon capture and storage (CCS), and biomethane production.

These pledges exemplify how Brussels and London envision the future of EU-UK relations – efforts to reduce trade barriers, increase investment opportunities, and protect the economy from future energy shocks a time of geopolitical uncertainty. Linking their emissions systems, for example, can address all three.

As it currently stands, EU imports from the UK are not exempt under the EU’s Carbon Border Adjustment Mechanism (CBAM), meaning European importers must purchase CBAM certificates and record the emissions generated from imported products. Under a future linkage, carbon prices would align. This would exempt British exports from CBAM compliance – eliminating CBAM levies and emissions reporting obligations to facilitate trade.

Beyond easing trade barriers and regulatory compliance costs, linking both systems should result in more investment into home-grown renewable energy, which will help with reducing energy shocks. 100% of EU ETS revenues must be invested into renewable energy, energy efficiency improvements, and low-carbon technologies. It’s likely the UK would include similar provisions into its legislation, as it has already committed to “dynamically align” with laws and regulations governing the EU ETS.

To this end, the UK government announced last week that it would present a bill to parliament to facilitate dynamic alignment with European standards and policies across carbon, electricity trading, and food standards, as outlined in the 2025 Common Understanding.

A linkage would also increase investor confidence. Unifying both trading system will grow the number of market participants and overall volume of trading, increasing liquidity and thus price stability. Moreover, a recent government consultation found that for industry, “stable carbon price and regulatory certainty” are vital for business outcomes and the development of new technologies like carbon capture and storage. A unified carbon price across the channel would facilitate this stability and regulatory certainty.

Negotiations over this linkage started in early 2026. Underlying issues around the considerable difference in prices, sectoral coverage, and financial contributions to the functioning of the ETS will undoubtedly present sticking points, but there is a clear push from both capital cities to reach an agreement sooner rather than later.

Against a backdrop of trade disruptions and indefinite energy market upheaval, London and Brussels are likely to continue finding areas for cooperation that facilitate trade and enhance energy independence. Linking both carbon markets is just the start.

According to EnergyUK estimates, since the UK stopped participating in the EU’s internal energy market (IEM), inefficiencies have cost £120 - £370 million per year, directly impacting UK energy prices. The agreement to include the UK in the EU’s electricity market would not only ease trading and reduce inefficiencies, but also further insulate both from price shocks by pooling European electricity resources that are unaffected by external oil price surges.

A common electricity market would, for example, streamline the production, distribution, and interconnection of new energy, including renewable power, especially as the UK and nine other European countries explore how to increase the offshore wind energy output in the North Sea and boost the output of clean, home-grown energy insulated from foreign energy shocks.

As we mark the 10-year anniversary of the Brexit referendum, London and Brussels are operating in a completely altered playing field characterised by trade barriers, oil shocks, and energy security concerns. In linking their emissions trading systems, developing clean energy, and participating in the same electricity trading market, trade and energy security combine to present a new chapter of EU-UK relations. With current instability persisting, it is fast becoming the defining force of further integration across the channel.