Slow progress on proposal to modernise Energy Charter Treaty
The modernisation of the Energy Charter Treaty (ECT) has faced mounting criticism. Spain and France have been pushing for the EU to leave the treaty. The treaty, a multilateral investment agreement protecting foreign investments in energy supply, can be used to protect fossil fuel projects. It allows energy companies to challenge governments on measures that could impact the expected income from investments made. It currently has 54 signatories, including the EU and nearly all European countries, as well as Turkey, Central Asia and Japan.
The ECT is currently under review, but progress has been slow on the modernisation process and campaigners claim it will not solve core issues such as arbitration or the protection of fossil fuel investments, as any reform needs unanimous approval from the treaty’s 54 signatories.
The treaty´s Investor-State Dispute Settlement (ISDS) could lead to taxpayers paying up to €1.3 trillion in arbitrations by 2050, of which 42 percent would be paid by EU citizens. For example, in February the German energy giant RWE used the ECT to claim €1.4 billion in compensation from the Netherlands over its planned phase-out of coal from the country’s electricity mix by 2030.
However, leaving the treaty does not end the commitment, as a sunset clause means that countries must uphold their commitments for another 20 years. Italy, for example, left in 2016 and faced a number of post-withdrawal arbitrations.
Taylor. Kira (2021) EU pushes for fossil fuel phase-out in “last chance” energy charter treaty talks. Accessed 19 February 2021. https://www.euractiv.com/section/energy/news/eu-pushes-for-fossil-fuel-p...