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24th Oct 2020

Energy treaty 'undermines success of Green Deal'

  • The Energy Charter Treaty, signed in 1994, is regarded as protecting the fossil fuel industry - something experts say the proposed reforms will not change (Photo: EUobserver)

More than 250 civil society organisations and trade unions warned the EU on Monday (9 December) that the modernisation of the Energy Charter Treaty (ECT) could undermine the goals of Europe's Green Deal and the Paris Agreement, unless it is fundamentally reformed.

The ECT is an international agreement that grants cross-border cooperation in the energy sector - it was signed in 1994 by nearly 50 countries, including all EU member states, plus most countries from eastern Europe, central Asia, and Japan. It legally protects foreign energy investments in each of these countries.

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However, the ECT sought to expand into more countries in the Middle East, Asia, and Latin America - thus becoming a kind of World Trade Organization (WTO) of energy.

This energy treaty is currently considered one of the key defences for the fossil fuel industry worldwide.

According to NGO Friends of the Earth, the treaty is being used by large fossil and nuclear energy companies to lock-in their investments and challenge national government decisions to gradually phase out fossil fuel-based energy.

"The Energy Charter Treaty is outdated, it's a boon to dirty fossil fuel companies," said the economic justice coordinator at Friends of the Earth Europe, Paul de Clerck, who believes that either the EU and member states should fundamentally revise it, or pull out.

Likewise, the treaty has binding provisions for investment protection, free trade and freedom of transit of energy materials, it has only non-binding provisions for the promotion of energy efficiency and environmental protection by developing renewable and clean energies.

"The ECT can also an obstacle to prioritising investment in renewable energy and energy efficiency," said the group of organisations.

According to the general secretary of the European Federation of Public Service Unions (EPSU), Jan Willem Goudriaan, "the rules for the energy sector need to be rewritten".

"Public investment and ownership can lead the way towards climate justice for our communities and a just transition for all workers concerned," but the treaty revision must reflect this, he said.

Additionally, the majority of ECT disputes take place between member states of the EU.

Spain is the country with the biggest number of lawsuits related to ECT, followed by Italy and the Czech Republic - although Italy withdrew from the agreement in January 2016.

Effective changes?

The negotiations on the treaty will start after the annual conference on the ECT takes place in Albania on Tuesday and Wednesday (10-11 December). Then, there will be rounds of negotiations every three months.

However, civil society believes that the changes are unlikely to bring the treaty in line with European climate policies.

The environmental groups warned the EU that the ECT, as it stands, is incompatible with both the Paris Climate Agreement, the Just Transition policies, and the expected European Green Deal - which will be unveiled on Wednesday.

However, any changes to the treaty require a unanimous decision by the Energy Charter Conference - consisting of 55 members, including energy-exporting countries like Kazakhstan, Turkmenistan, and Uzbekistan.

Analysis

The controversy behind the Energy Charter Treaty reforms

Experts from several organisations say that reform of the Energy Charter Treaty, proposed by the EU Commission, will make it difficult to meet the targets agreed in the Paris Agreement - making it an obstacle to the clean-energy transition.

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Stuck mid-way through a years-long legal battle with the Kremlin, the former owners of Russian oil firm Yukos have urged Brussels to negotiate tough energy rules with Moscow to protect other investors.

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The Green Deal commissioner, Frans Timmermans, said the costs of inaction in climate policy are "tremendously high". However, it is still unclear if member states will unanimously agree on the EU's 2050 climate-neutrality goal at next week's summit.

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The Green Deal is expected to increase the current EU goal on emissions cuts, from 40 to 50 percent by 2030. However, most MEPs believe that this will not be enough to achieve climate neutrality by 2050.

Analysis

Why is EU off track for 2020 energy efficiency target?

Most EU member states are likely to miss the 2020 target on energy efficiency, since they were not legally-binding targets. "Transformative" measures are needed to reduce energy consumption while boosting efficiency, experts say.

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