MEPs on Thursday (23 June) called on the European Commission and national capitals to ditch the controversial trade deal that could lock Europe into decades of fossil fuel use – echoing earlier demands made by the Spanish government and the Dutch parliament this week.
This little-known international agreement, officially the Energy Charter Treaty, protects investments in the energy industry – and it was signed by 50 countries, including all EU member states, back in 1994.
Now all EU states are signatories of the treaty except for Italy which withdrew in 2016. But Italy is still involved in an arbitration case over banning oil and gas project exploration in the Adriatic Sea since the treaty protects investments for decades despite countries’ withdrawal.
The highly-controversial treaty has been used by investors on many occasions to challenge EU national climate policies, prompting green experts and campaigners to dub it the “ecocide treaty” or “the world’s most dangerous investment agreement.”
Even the latest IPCC report refers to it as an obstacle to climate action.
Negotiations to modernize the treaty started early in 2020, in a bid to make it compatible with the 2015 Paris Agreement.
The European Commission has since been trying to convince EU member states that treaty reform is the best way forward.
But some countries – like Spain, France and Poland – previously argued in favor of simply withdrawing.
The Energy Charter Secretariat and signatories are expected to meet this Friday (24 June) to announce an agreement over the modernization of the treaty.
But the current proposal, which can still be subject to changes, has been slammed by MEPs, experts and campaigners for still being at odds with EU climate policies and EU law.
“The reform ambition for the controversial Energy Charter Treaty is not good enough… fossil fuels should no longer be protected,” Green MEP Anna Cavazzini, lead MEP on the report, told EUobserver.
In her report on the future of EU international investments, EU lawmakers demanded an end to the ECT’s most controversial mechanism – the Investor-State Dispute Settlement (ISDS).
But attempts to reform the ISDS during modernization negotiations have been blocked by Japan.
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.
Decades of fossil-fuel protection
While new fossil-fuel investments would no longer be protected, they are expected to agree that existing fossil-fuel investments will be protected until 2033, and gas investments until 2040.
But this timeframe should be “significantly shortened” in order not to undermine the EU’s climate objectives, according to MEPs.
In addition, they said that the commission should ensure that the reform should prohibit investors from suing EU countries for their policies aimed at phasing out fossil fuels, in line with their commitments under the Paris Agreement.
This refers to the situation in many countries where the government faces arbitration for putting forward climate policies.
The Netherlands, for example, has been sued by the German companies RWE and Uniper over its coal phase-out law. The case is still ongoing.
Experts argued that green transition money will need to be used to compensate investors under the ECT, arguing that the EU will face an increased risk of litigation because new technologies such as hydrogen and biomass are expected to be also listed as protected investments under the modernized ECT .
On Friday, signatories are also expected to agree to lift Russia’s observer ECT status as a response to its invasion of Ukraine.
But Yamina Saheb, who works at Paris-based think-tank OpenExp and knows the treaty well since she formerly worked at the body overseeing it, said this announcement will be used “to hide the failure of the modernization process and uselessness of the ECT as a geopolitical tool “.
“The war in Ukraine provides additional evidence that this treaty is not useful for our energy security, it is only useful for foreign investors to sue countries [over their climate policies]”she told EUobserver.
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