Britain and the EU have signed a wide-ranging agreement which includes plans for closer collaboration on carbon pricing and electricity trading.

The main focus of the agreement is a security and defence pact which formalises mutual cooperation in areas such as hybrid warfare, cybersecurity, infrastructure resilience and maritime safety. In terms of a “common understanding” reached as part of the agreement however, the two sides will also cooperate more closely on the energy transition.

As described in an article published by Politico, this means the U.K. will effectively “rejoin the single market for electricity and follow EU regulations, with oversight from the European Court of Justice.” In addition, the UK-EU Emissions trading schemes will be linked.

According to a statement issued by GOV UK, “Closer co-operation on emissions through linking our respective Emissions Trading Systems will improve the UK’s energy security and avoid businesses being hit by the EU’s carbon tax due to come in next year – which would have sent £800 million directly to the EU’s budget.”

Prime Minister Keir Starmer has described the May 19 agreement as the herald of a “new era” in Britain’s relationship with Europe. For a detailed analysis of what the UK EU reset means for energy read more here.