Monday

15th Aug 2022

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.

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