Energy Charter Treaty makes climate action virtually illegal in 52 countries

Five youths whose resolve had been hardened by floods and wildfires recently took their governments to the European Court of Human Rights (ECHR). His claim relates to each country’s membership of a vague treaty that he argues makes climate action impossible by protecting fossil fuel investors.

The Energy Charter Treaty has 52 signatory countries which are mostly EU states but include the UK and Japan. Claimants are suing 12 of them, including France, Germany and the UK—all countries in which energy companies are using the treaty to sue governments over policies that interfere with fossil fuel extraction. For example, the German company RWE is suing the Netherlands for €1.4 billion ($1.42 billion) because it plans to phase out coal.

The claimants aim to force their countries to pull out of the treaty and are backed by the Global Legal Action Network, a campaign group with an ongoing case against 33 European countries alleging delays in action on climate change. The prospects for the current application for hearing in the ECHR look good. But how easy is it to reward countries with the effect of this treaty?

The Energy Charter Treaty began in 1991 as an EU agreement that guaranteed legal safeguards for companies investing in energy projects such as offshore oil rigs. Under Article 10(1) of the treaty, these investments “should enjoy the most continued safety and security.” If government policies to undercut these projects change, such as Italy’s 2019 decision to ban drilling for oil and gas within 12 miles of its coast, the government could give the company concerned its lost future earnings. is bound to compensate for.

The legal mechanism that allows this is known as investor-state dispute settlement. A letter to EU leaders signed by 76 climate scientists argues it could keep coal power plants open or force governments to pay punitive fees to close them, at a time when emissions There is a dire need of deep and fast cuts.

Money spent to compensate fossil fuel investors would deprive them of investment in other things critical to the green transition, such as renewable energy and public transportation. While it is possible for any country to withdraw from the Energy Charter Treaty, losing the benefits of membership – such as lower tariffs and taxes on oil and gas imports – would be a difficult decision.

In addition, the obligations of the countries signing the treaty do not end upon exit, but last for 20 years thereafter. Investors can still bring disputes against former members and, if successful, must be compensated by the respective state. Russia and Italy withdrew from the Energy Charter Treaty in 2009 and 2016, respectively, and continue to face multiple claims.

Working in the oil fields of Azerbaijan.
in great shape , Working in the oil fields of Azerbaijan.

leave the treaty

Meanwhile, the European Commission is set to extend the effect of the Energy Charter Treaty to countries in Africa and Latin America, potentially engaging these states in the same investor-state dispute settlement that hindered climate action in Europe. Is.

The Political Declaration for a new International Energy Charter based on the principles of the original European Treaty was signed in 2015 by 87 countries. Negotiations are ongoing, but the 25-point list setting out the priorities of the signatories includes only one reference to “sustainable development”.

An update on the talks noted that existing fossil fuel investments are to be protected until 2033, meaning governments would be liable for compensation if a coal plant was shut down prematurely. The UK and EU reached an agreement to exempt new fossil fuel projects from protection by mid-August 2023.

Strict action is urgently needed to meet the goals of the Paris Agreement and reduce greenhouse gas emissions to limit warming to a maximum of 1.5 °C and at worst 2 °C. Countries will need to regulate and shut down emissions sources – yet, at the same time, fossil fuel investors, including oil companies and energy utilities, are demanding more time and money to adapt to the transition.

The claim filed by RWE against the Dutch government in February 2021 argued that the company had failed to give enough time to transition from coal to biomass. But it is something the Dutch government cannot afford – it was found in 2019 by its own Supreme Court to be acting illegally by taking too long to implement emissions cuts.

One way to address this problem is for the parties to the Energy Charter Treaty to collectively withdraw, and therefore avoid the sunset clause that makes them liable two decades after leaving. These countries may also enter into a separate agreement to exclude cases of investor-state disputes against each other.

Continued public pressure—and a favorable regime in the ECHR for the five claimants—could encourage enough governments to act decisively, severely weakening its grip on the treaty and international climate action.

Chamu Kuppuswamy is a Senior Lecturer, School of Law, University of Hertfordshire

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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