Monday

10th May 2021

Green NGOs demand EU dumps controversial energy treaty

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

Green groups have renewed their demand for the EU and member states to jointly withdraw from the controversial Energy Charter Treaty (ECT).

The ECT is an international agreement that grants cross-border cooperation in the energy sector, signed in 1994 by nearly 50 countries, including all EU member states, plus most countries from eastern Europe, central Asia, and Japan.

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The European Commission and national capitals participated by videoconference last week (6 to 9 July) in the first round of negotiations for the ECT reform - which is based on an agreed list of 25 topics. It now awaits ratification.

The ECT is controversial because it legally protects foreign energy investments in signatory countries - thus often being branded by critics the "biggest climate action killer nobody has ever heard of".

Last year, a group of 278 NGOs urged the EU and member states to jointly terminate this international treaty.

All member states are contracting parties except for Italy, which withdrew in 2016.

Fossil-fuels protection extended

Environmental activists previously said that the ECT could undermine the goals of the Green Deal and the Paris Agreement, unless it is fundamentally reformed.

However, they also claim that ECT modernisation is doomed to fail - since any reform would require unanimity from all ECT members.

The first round of negotiations allowed parties to limit the scope of investment protection to exclude fossil fuels - under the modernisation of the definition of 'economic activities in the energy sector'.

"However, no contracting party, including the EU, is proposing such a change," Cornelia Maarfield from NGO Climate Action Network said, adding that all protection for fossil fuels should be scrapped to make the ECT compatible with the Green Deal.

Instead, all parties - except from Japan - want to expand the scope of the treaty and also include "new investment trends and new technologies".

This would expand investment protection to, for instance, hydrogen - which is currently mostly from fossil fuels.

However, according to Thomas Dauphin from Friends of the Earth Europe, "right now, such huge amounts of public money are desperately needed to fund healthcare systems and a just recovery, not to line the pockets of dirty energy companies' for their short-sighted risky investments".

ISDS off the table

Meanwhile, the EU wants to avoid intra-EU claims by reforming the ECT's most controversial mechanism: the Investor-State Dispute Settlement (ISDS).

However, changes to the ISDS are initially off the table, because it is not amongst the 25 negotiation topics agreed so far.

This remains problematic for the EU, since the European Court of Justice previously stated that international treaties providing for ISDS must meet certain standards that are not foreseen in the ECT.

"It is highly likely that years will be wasted attempting to 'modernise' a treaty that will not even pass the basic test of compatibility with EU law," said Maarfield.

The second round of negotiations will take place from 8 to 11 September.

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.

Energy treaty 'undermines success of Green Deal'

Over 250 civil society organisations and trade unions say that the Energy Charter Treaty is incompatible with the Paris Climate Agreement and the new Green Deal - becoming an obstacle to the clean-energy transition.

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EU budget commissioner Johannes Hahn owns 2,200 shares in Austria's largest electricity provider. Those shares have tripled in value since he first declared them in 2014. In January, the firm met his head of cabinet to discuss climate policy.

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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.

MEPs urge EU to be ready to dump disputed energy treaty

Cross-party MEPs called on the European Commission to prepare to withdraw from the controversial Energy Charter Treaty (ECT) if negotiations for its modernisation fail. At the heart of the row is fossil fuel companies ability to sue governments for compensation.

EU Commission could pull out of controversial energy treaty

Brussels is now considering withdrawal from the controversial Energy Charter Treaty, if negotiations to modernise it fail. A leaked European Commission proposal, dated October, revealed that loopholes remain regarding the protection of fossil-fuel investment.

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