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EU Plans to Let the UK Trade Power and Pay for Regional Equality

Published December 22, 2025

Goal: Keep EU market united

This resolution asks the EU Council to start talks with the UK so the UK can trade electricity with the EU and pay a fair share of money to help EU regions, but the UK won’t get any voting rights.

Environment
Environment

Recommendation for a Council Decision (COM(2025) 804)
The European Commission proposes that the Council authorise negotiations with the United Kingdom (UK) on two new agreements:

  1. UK participation in the EU internal electricity market – allowing the UK to trade electricity on EU platforms, use interconnectors, and follow EU rules on market integrity, renewable energy, environmental protection and state‑aid.
  2. UK financial contribution to reduce regional disparities – a legally binding payment that reflects the UK’s share of the EU market and the size of its economy.

Context

  • The UK left the EU on 31 December 2020.
  • The Withdrawal Agreement (including the Windsor Framework for Northern Ireland) and the Trade and Cooperation Agreement (TCA) now govern the relationship.
  • Since 1 January 2021 the EU and UK have separate electricity markets, except for Northern Ireland where EU wholesale rules still apply.
  • In May 2025 the EU and UK summit confirmed the need for closer electricity cooperation and agreed to explore the UK’s participation in the EU market.
  • In November 2025 the EU Council and Commission said that any agreement on market participation should also include a financial contribution to help reduce economic and social gaps between EU regions.

Legal Basis

  • Article 194(2) TFEU – allows the EU to negotiate an agreement on market participation.
  • Title XVIII, Part III TFEU – allows an agreement on financial contributions to cohesion.
  • Article 218(3) and (4) TFEU – gives the Commission the power to recommend that the Council open negotiations and to nominate the EU negotiator.

Key Provisions of the Proposed Agreements

Area Main Points
Institutional • UK will not have voting rights in EU decision‑making. • UK will be consulted early on draft EU rules that affect the electricity market. • Dynamic alignment: UK must adopt EU rules on electricity, renewables, environment and state aid as soon as they are adopted in the EU. • Dispute resolution through an independent arbitral tribunal that can refer questions to the Court of Justice of the EU.
Scope • Applies to the EU territories and to Great Britain (excluding Northern Ireland where the Windsor Framework applies). • Covers wholesale and retail electricity markets, participation in EU trading platforms, and relevant bodies such as ENTSO‑E. • Does not give the UK access to EU financial‑services markets.
Market Rules • UK must follow EU rules on market integrity, transparency, and interconnector capacity allocation. • UK may adopt technical adaptations only if justified and not giving it an advantage over EU member states.
Renewables & Environment • UK must set a renewable‑energy target comparable to the EU’s, based on EU definitions and methodologies. • UK must maintain at least the same level of environmental protection as EU law.
State Aid • UK must apply EU state‑aid rules for the electricity sector, with an independent authority having powers equal to the EU Commission. • Existing aid remains valid; new aid must be reviewed.
Financial Contribution • The contribution will be calculated from the EU’s cohesion budget, adjusted for the UK’s economic size and its share of the EU market. • The agreement will include a dispute‑settlement mechanism.
Other • UK will pay for access to EU agencies, systems and databases. • The agreements will enter into force simultaneously. • Where the new agreement overlaps with the Windsor Framework, the Windsor Framework prevails.

Expected Outcomes

  • Improved electricity trade – smoother cross‑border flows, better integration of renewable generation, and a more efficient market for both sides.
  • Financial support for EU cohesion – a predictable, legally binding UK contribution that reflects its participation level.
  • Clear legal framework – dynamic alignment ensures that UK laws stay in sync with EU rules, while dispute mechanisms protect both parties.
  • No EU membership for the UK – the agreements do not grant the UK any decision‑making power in the EU.

The Commission’s recommendation is to ask the Council to authorise these negotiations, nominate the Commission as the EU negotiator, and set the procedural framework for the talks. The decision would be made on 22 December 2025 (document COM(2025) 804).

Licensing: The summaries on this page are available under Creative Commons Attribution 4.0 (CC BY 4.0).

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