UK urged to follow European peers and quit controversial energy treaty
The UK has been urged to end its membership of an energy treaty that enables fossil fuel companies to sue governments over policies that threaten their profits.
The Energy Charter Treaty (ECT), which was signed in 1994 and came into force in 1998, is an international agreement governing cross-border cooperation in the energy industry, and focuses primarily on fossil fuels. Courts set up under the treaty initially aimed to protect firms operating in former Soviet Union countries from government expropriation, and allow firms to challenge energy regulations. The ECT currently has 50 member states.
In an open letter, 110 academics warned Grant Shapps, the UK secretary of state for the new Department for Energy Security and Net Zero, that the country’s continued membership of the ECT would “harm our prospects of limiting global warming to 1.5C”.
They explained that failing to exit the treaty would “prolong the UK’s dependence on fossil fuels and impede the transition to renewable energy”.
“Investors have already brought cases against countries for phasing out coal-fired power stations, banning the exploitation of oil and gas near their coastline, and requiring environmental impact assessments,” the group said, adding that there is also evidence that countries are “shying away from introducing new legislation for fear of being challenged in claims under the ECT”.
They noted that “we have a very limited time to undertake a drastic reduction in greenhouse gas emissions” and urged Shapps to “take this opportunity to announce that the UK will withdraw”.
Signatories include Rick Battarbee, emeritus professor of environmental change at University College London, Alex Archibald, professor of atmospheric chemistry at Cambridge university, and Ersilia Verlinghieri, senior research fellow at the University of Oxford.
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The European Commission has also backed withdrawal. It said that by being members of the treaty, countries would “clearly undermine” their climate targets, and that exit from the treaty by countries in the European Union was “unavoidable”.
EU countries including France, Italy, Germany, Luxembourg, the Netherlands, Spain, Poland and Slovenia have already committed to withdrawal.
Attempts to modernise
The UK has backed what it called “modernisation” of the treaty. In June last year, the UK government announced that it had reached an agreement to update the terms of the ECT, which it said would maintain its benefits whilst “winning new legal protections for taxpayers and investors”.
It said updating the treaty would “focus on promoting clean, affordable energy” and would “protect the UK government’s sovereign right to change its own energy systems to reach emissions reductions targets in line with the Paris Agreement”. The updated treaty was due to be signed in November 2022, but has been delayed until April of this year.
Responding to the academics’ letter, a UK government spokesperson said: “We have been a strong advocate for updating the treaty to ensure it is aligned with modern energy priorities, modern international treaty practice, and international commitments on climate change.”
Critics have said that even under the updated terms of the treaty, ECT’s courts would continue to protect oil and gas projects for at least a decade, making it harder to reduce carbon emissions and stabilise global temperatures.
So far, ECT tribunals are estimated to have awarded more than US$100bn to oil, gas and coal firms. According to OpenEXP – a Paris-based global network of independent experts that aims to help policymakers, business leaders and scientists achieve the UN’s sustainable development goals – final compensation awarded to these firms through the courts could reach US$1.3 trillion, out of which it has said “42% will be paid by EU taxpayers”.
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About Jack Aldane
Jack is a British journalist, cartoonist and podcaster. He graduated from Heythrop College London in 2009 with a BA in philosophy, before living and working in China for three years as a freelance reporter. After training in financial journalism at City University from 2013 to 2014, Jack worked at Bloomberg and Thomson Reuters before moving into editing magazines on global trade and development finance. Shortly after editing opinion writing for UnHerd, he joined the independent think tank ResPublica, where he led a media campaign to change the health and safety requirements around asbestos in UK public buildings. As host and producer of The Booking Club podcast – a conversation series featuring prominent authors and commentators at their favourite restaurants – Jack continues to engage today’s most distinguished thinkers on the biggest problems pertaining to ideology and power in the 21st century. He joined Global Government Forum as its Senior Staff Writer and Community Co-ordinator in 2021.
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Why should there be a treaty at all to protect the interests of these companies? Isn’t the primary role of government to protect the interests of its citizens, and not the profits of big corporations? The UK should be ashamed at the prospect of merely ‘modifying’ the terms of the treaty, and should be ending it altogether. If we are to live in a capitalist society, and given no choice, then everyone in that society has to trust the markets, even the big corporations …… If they are out-manoeuvred by new, smaller, more nimble companies who are able to corner the market in specific areas of renewable technology, and/or to directly deliver products which satisfy the needs and expectations of the consumer, then they win. Treaties specifically designed to protect such dinosaur companies have no place in this age.