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UK pulls out of Energy Charter Treaty
28/2/2024
News
The UK has become the latest country to announce its withdrawal from the Energy Charter Treaty (ECT) that allows fossil fuel companies to sue governments over climate policies, after the failure of efforts to update the Treaty to align with net zero emissions goals.
Signed in 1994, the Energy Charter Treaty was designed to promote international investment in the energy sector, historically providing protections for investors in fossil fuels.
Discussions to modernise the ECT to better to support cleaner technologies, including hydrogen and carbon capture, utilisation and storage (CCUS), while maintaining existing benefits for the energy sector, have gone on for several years, with a new agreement brokered in 2022.
However, environmental bodies condemned this as ‘greenwashing’, as the proposal left existing fossil fuels projects protected for 10 years and some gas projects protected until 2040.
Due to be adopted in November 2022, an impasse was reached when the new agreement was rejected by nine EU member states, including France, Germany, Spain, Italy and the Netherlands – all of whom decided to withdraw.
Concerned that the European Parliament elections in 2024 mean any modernisation ‘could be delayed indefinitely’, the UK government is now following suit. Its withdrawal will take effect after one year, removing protections for new investments after this period.
The decision is expected to support the UK’s transition to net zero and strengthen its energy security, with UK Minister of State for Energy Security and Net Zero Graham Stuart stating that: ‘Remaining a member would not support our transition to cleaner, cheaper energy, and could even penalise us for our world-leading efforts to deliver net zero.’
The move was welcomed by environmental campaigners and organisations. Shaun Spiers, Executive Director, Green Alliance, said: ‘Civil society organisations and parliamentarians from all political parties have been clear that the Energy Charter Treaty is an out-of-date agreement and undermines our efforts to tackle climate change. We welcome the UK’s decision to leave, which will strengthen global efforts to roll out cheap, clean renewable energy.’
However, it is understood that a 20-year sunset clause means the UK government could still face legal action for existing investments for many more years to come. On the other hand, campaigners and experts are reported to have argued that a coordinated withdrawal from the ECT and a new pact among the exiting EU states could neutralise this clause.
Environmental campaigners also point out that mechanisms similar to the investor-state dispute settlement (ISDS) provisions in the ECT still exist within other treaties, such as the Pacific Trade Deal, leaving governments in many nations, including the UK, vulnerable to being sued by overseas fossil fuel companies and investors if climate policies are seen to be detrimentally impacting their businesses. ‘To truly safeguard our planet, we need to rid ourselves all of agreements that prioritise the business interests of a few wealthy shareholders above our collective future,’ comments Friends of the Earth campaigner Kierra Box.
