Brexit and EU Climate Policy, From Crisis to Opportunity
By Larissa Iannella Oliveira
Introduction
Brexit, once seen as a significant threat to the European Union (EU)’s cohesion and influence, has instead become a lens through which to evaluate its resilience and adaptability in the face of disruption. This paper examines Brexit’s impact on the EU’s climate leadership through the political and economic dimensions—two critical frameworks for understanding the Union’s capacity to lead globally while maintaining internal cohesion. The concept of "net" costs and opportunities is central to this analysis, as it captures the balance between losses and gains in the EU’s climate policies, allowing for a nuanced assessment of whether Brexit ultimately strengthened or weakened the Union. The timing of this analysis, five years post-Brexit, is particularly relevant as the EU confronts intersecting challenges of energy security, economic recovery, and increased extreme climate events, all within a rapidly shifting geopolitical landscape. Through policies such as the European Green Deal, ‘Fit for 55’, and the EU Emissions Trading System, this paper evaluates how Brexit has shaped the EU’s climate ambitions, testing its capacity to act as a global climate leader while managing the loss of one of its most climate-active members. Ultimately, this assessment offers insight into the EU’s ability to convert external shocks into opportunities for deeper integration and innovation in its climate policies.
I. Political Dimension
EU’s Internal Cohesion and Climate Governance
During the EU-28, the UK was a strong proponent of ambitious climate policies in the EU. It consistently advocated for higher greenhouse gas (GHG) reduction targets, stricter emissions caps in the EU Emissions Trading System (ETS), and higher carbon prices. The original fear in the immediate aftermath of the 2016 UK referendum was that it would lead to a “Brexit contagion” and internal fragmentations within the EU.This, in turn, would have undermined the ability for member states to agree on ambitious climate goals and establish common frameworks, both central to the EU’s reputation of a “climate leader.”
However, the opposite happened. Under Michel Barnier’s leadership, the EU-27 negotiated the UK's withdrawal agreement with a strong and unified voice. Additionally, since the UK’s decision to leave the Union, the EU-27 has passed some of its most ambitious climate policies to date. In 2019, European Commission President Ursula von der Leyen introduced the European Green Deal (EGD), which would later become the cornerstone of her agenda. By July 2021, the European Climate Law came into effect, making EGD's targets legally binding. That same month, the EU introduced the ‘Fit for 55’ package, an umbrella framework of more than twenty legislative acts that included measures such as raising the carbon price, reducing caps under the ETS, making the EU CBAM legally binding, and enhancing the Renewable Energy Directives (REDs).
When asked about a scenario in which the UK had remained in the EU, senior EU energy policy expert Francesco Graziani stated that, “I don’t think the UK would have opposed [the 2021 Climate Law]; quite the opposite, I think they would have played along.” Regarding the ‘Fit for 55’ framework, Graziani noted that, “the ambition the UK has demonstrated in climate policy—both under the Conservatives and now under the Liberal government—suggests they would have been strong advocates for a more ambitious approach.”
Thus, in terms of internal cohesion—essential for effective climate governance—and the pursuit of ambitious climate goals, Brexit has had at worst, a minimal impact on the EU, and at best, it has created an opportunity for the EU to pursue even more ambitious climate policies, ultimately making it a net gain for the EU.
Brexit’s political impact on the EU’s climate governance can only be complete if it also takes into account how internal cohesion translates into external influence. This brings us to the second political consideration: Brexit’s impact on the EU’s external negotiating power in international climate negotiations, specifically COP meetings.
EU’s External Negotiating Power
Prior to Brexit, the EU-28 had a strong voice in international climate negotiations, particularly during COP meetings. This was notably seen with the success of the 2015 Paris Agreement, still viewed as the “most significant global climate agreement to date.” Without the UK, there were legitimate concerns about whether the EU could maintain the same level of influence in future COP meetings.
The first post-Brexit COP meeting, COP26 in Glasgow (2021), faced criticism as having been “ineffective” and the “most exclusionary climate summit ever.” This raises the question: did Brexit weaken the EU’s ability to pull its weight and assert its influence at the international level? Bill Reinsch, Senior Adviser at CSIS, argues that Brexit did not significantly weaken the EU’s negotiating power in COP meetings. Instead, he points the recent COP’s inefficacities to the insufficient climate financing from developed countries,[1] which are driven in part by COVID-19’s economic slowdown and the Ukraine war,[2] issues that would have persisted regardless of the UK's membership in the EU. Thus, the net assessment is that Brexit’s impact on the EU’s external negotiating power in this context is a minimal cost. The EU might have slightly benefited from the UK’s financial contributions and the UK’s diplomatic influence, but these are not decisive factors in how the EU-27 asserts itself in COP negotiations today.
Having addressed the spark of politics, we can now turn to the fuel: economics—the essential resources that translate ambition into concrete action.
II. Economic Dimensions
Financing of Green Projects
One of the most tangible impacts of Brexit on the EU’s climate initiatives is the financing gap initially created within the European Investment Bank (EIB). The EIB, which has committed to allocating 50% of its financing to climate action by 2025, was significantly supported by the UK prior to Brexit. The UK held a 16% capital share, contributing €3.5 billion in paid-in capital and €35.7 billion in callable capital, making it one of the institution’s largest shareholders
alongside Germany, France, and Italy. Following the UK’s departure, the EIB lost access to these funds, creating a financial gap in its climate financing goals. This seemed like a financial setback for the EIB’s climate goals, but the EU-27, led by Romania and Poland, quickly stepped in, leaving the EIB with even more funding than before Brexit.
The EU-27 also demonstrated resilience and innovation by creating tools like the NextGeneration EU recovery plan. Introduced in December 2020, this ambitious initiative combined a €1 trillion budget with €750 billion in additional recovery funds, of which 30% was dedicated to climate change with the goal of “transforming the EU's economy.” In a 2024 lecture based on his book Inside the Deal: How the EU Got Brexit Done, Stefaan De Rynck shared that Ivan Rogers, the UK’s last permanent representative to the EU, had acknowledged the UK would never have approved the borrowing required for NextGen EU. De Rynck added that, while the EU would have probably found a solution outside the treaty, “the process would have been significantly more difficult.’’
Thus, Brexit has proven a net gain for the EU in financing green projects. The EIB emerged stronger with increased funds from the EU-27, and the flexibility post-Brexit enabled the NextGeneration EU plan without UK resistance.
Fragmented Carbon Markets
The EU Emissions Trading System (ETS) is the EU’s main tool for achieving a reduction in GHG emissions, by requiring polluters to buy allowances for their emissions. Prior to Brexit, the UK was one of the member states that consistently advocated for a higher carbon price and stricter caps on the ETS. Following Brexit, the UK also left the EU ETS, leading to a reduction of 11% in the EU ETS cap, meaning that fewer allowances being issued in the EU system. Article 395 of the EU-UK Trade and Cooperation Agreement (TCA) encourages linking the two systems. However, the differences between the two makes this difficult. EU Energy Law expert Jana Nysten argues that there is a strong likelihood that the EU and the UK will link their respective ETS systems as it would be mutually beneficial. For the EU, a linked system would prevent competitive imbalances caused by different carbon prices and contribute to a more stable and larger market. For the UK, alignment with the EU system would notably help avoid CBAM-related costs. For both, linking would reduce the administrative burdens of having to navigate separate compliance frameworks for businesses that work across both systems. Yet, this remains unsolved. Thus, in terms of carbon market integration, Brexit has been a net cost for the EU. The UK’s departure fragmented the EU ETS, the main tool for reducing GHG emissions and a cornerstone of the Green Deal.
Conclusion
Brexit’s impact on the European Union’s climate leadership, when assessed through political and economic dimensions, reveals a clear verdict: it has been a net opportunity for the EU. Politically, Brexit created a greater internal cohesion, as the EU-27 emerged more unified and ambitious in pursuing climate goals, exemplified by transformative initiatives such as the European Green Deal and ‘Fit for 55.’ Economically, while the departure of the UK initially created challenges, such as the loss of financial contributions to the EIB and the fragmentation of carbon markets, the EU adapted through innovative tools like the NextGeneration EU recovery plan.
This assessment underscores that Brexit, rather than weakening the EU’s climate leadership, has allowed it to pursue even bolder policies unrestricted by UK opposition. However, this net opportunity comes with caveats: cooperation with the UK in areas like carbon market integration is still uncertain, and future geopolitical pressures could test the EU’s ability to sustain this trajectory. Ultimately, Brexit has set a new precedent for how the EU converts disruption into progress, positioning it as a stronger climate leader on the global stage than ever before.
