Closer energy and climate cooperation with the EU

Definitions

Carbon Border Adjustment Mechanism (CBAM)

A pricing mechanism on carbon-intensive imports based on their carbon emissions to prevent carbon leakage.

Carbon Capture, Utilisation and Storage (CCUS)

Carbon capture encompasses the methods and technologies required to capture carbon dioxide from large emitters thereby preventing it from entering the atmosphere.

Carbon Capture and Storage (CCS) is when carbon dioxide is captured and transported to be stored safely and permanently in deep underground geological formations, preventing it from contributing to climate change.

Carbon Capture and Utilisation (CCU) is when captured carbon dioxide is used as a feedstock in chemicals, fuels or materials production, giving the carbon dioxide economic value whilst playing a role in sustainable manufacturing and forming part of the circular economy.

Carbon leakage

The occurrence where companies move production to countries with less stringent climate regulations. This moves the emissions of greenhouse gases overseas and does not reduce them.

Carbon pricing  

Carbon pricing aims to reduce greenhouse gas emissions by placing a cost on emissions and incentivising investment in decarbonisation technologies.

Electricity trading

Electricity trading refers to the transaction between power generators, who produce electricity, and power suppliers, who sell it on to consumers. It encompasses a network of arrangements and actors, including cross-border interconnectors, facilitating the buying and selling of electricity within GB and across borders.

Emissions Trading Scheme (ETS)

An Emissions Trading Scheme (ETS) is a ‘cap-and-trade’ system which caps the total level of greenhouse gas emissions, and creates a carbon market where participants must buy allowances to cover their annual greenhouse gas emissions, as an incentive to reduce emissions. The UK ETS came in to force on 1 January 2021 to replace the UK’s participation in the EU ETS, which was established in 2005.

Interconnector

Electricity interconnectors are high-voltage land and subsea cables that connect the electricity systems of neighbouring countries. They allow electricity to be traded and shared between countries. They are one of the key tools used by electricity system operators to manage any surplus or deficit in electricity.

North Seas Energy Cooperation (NSEC)

The North Seas Energy Cooperation (NSEC) supports and facilitates the development of the offshore grid development and the large renewable energy potential in the region. Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway and the European Commission are currently members of the North Seas Energy Cooperation, since the withdrawal of the UK from the EU on 31 January 2020.

A Memorandum of Understanding between NSEC and the UK was signed in December 2022 establishing a cooperation framework. More details on NSEC are available here.

Price coupling

Price coupling refers to a process whereby multiple electricity markets are connected to create a single, integrated marketplace. This process allows electricity to flow across borders more seamlessly.

Renewable and low-carbon hydrogen

Renewable hydrogen (also referred to as Green Hydrogen) is hydrogen produced via electrolysis of water using renewable electricity and is zero carbon.

Electrolysis is the process of using electricity to split water into hydrogen and oxygen.

Low-carbon hydrogen (also referred to as Blue Hydrogen) is hydrogen produced via natural gas reformation or biogas in conjunction with carbon capture with high carbon capture rates.

Rules of Origin (RoO)

Rules of origin are a set of criteria that determine where a product is from. To benefit from the advantages of a trade agreement the UK has with another country, a Scottish exporter must prove that the product it is selling was produced in the UK or has had sufficient work done to it in the UK.

EU-UK Trade and Cooperation Agreement (TCA)

The EU-UK Trade and Cooperation Agreement (TCA) is an agreement which governs the relationship between the EU and the UK after Brexit, signed in December 2020. Title XIII of the TCA covers energy cooperation between the EU and the UK, and it is scheduled to expire on 30 June 2026 unless the EU and the UK decide to extend it.