EU and UK secure fossil fuel waiver under Energy Charter Treaty

EU and UK secure fossil fuel waiver under Energy Charter Treaty

Investments in new fossil fuel projects will no longer enjoy legal protection in EU and UK territories under an agreement reached on Friday (June 24) to reform the Treaty on the Energy Charter (TCE) of 1994.

Environmental groups have criticized the ECT for violating the goals of the Paris Agreement by offering legal protection to climate-destroying fossil fuel investments.

This has been recognized by the European Commission, which has called the ECT a ” outmoded “ and began negotiating treaty reform on behalf of the 27 EU member states four years ago.

In 2019, Member States affirmed the “EU right to regulate” as part of ECT reform talks and called for the modernized treaty to reflect the bloc’s climate and green energy goals.

These objectives were partially achieved in the agreement announced on Friday 24 June.

“The derogation means that there should be no protection for fossil fuel investments within the EU based on the Energy Charter,” an official said at a press conference on the deal on Thursday.

Legal protections for new fossil fuel investments will cease to apply “after August 15, 2023”, with “limited exceptions”, according to a summary of the agreement posted by a senior ECT official on social media.

For existing investments, the legal protection will expire “after 10 years from the entry into force of the relevant provisions”, specifies the document.

These provisions were also supported by the United Kingdom, which joined the EU initiative.

The ECT’s 54 signatories, which include the 27 EU countries except Italy, are now expected to formally adopt the modernized treaty at a conference of parties scheduled for November.

Unanimity is required for the modernized treaty to be adopted. It will enter into force after it has been ratified by at least three quarters of the signatories, a process which could take several years.

10-year transition for existing investments

Environmentalists have decried the 10-year transition period for existing investments as a ” treason “ towards future generations who are expected to suffer the most from the impact of climate change.

“In other words, it’s the end of the EU’s climate neutrality objective”said Yamina Saheb, a former ECT worker who is now campaigning for Europe to withdraw from the treaty.

Others were more positive, saying that the ECT’s unanimity rule limits EU ambitions.

“It is a very good agreement for the EU given that the modification of the ECT is a cumbersome procedure”said Andrei Belyi, professor of energy law and policy at the University of Eastern Finland.

“If the EU’s Green Deal and the UK’s energy transition programs are successful, then fossil fuel protection will be overtaken by 2030”he told EURACTIV in emailed comments. “Industry knows this and has 10 years to adapt. »

In the meantime, he added, a treaty that works can protect investment in renewable energy, which already constitutes more than 60% of intra-EU business.

New renewable energy sources have also been added to the list of investments covered by the treaty, Belyi noted, noting that the agreement adds biomass, biogas as well as hydrogen and its derivatives such as hydrogen. ammonia and other synthetic fuels to the list of protected investments.

But the activists were not thrilled. “The deal is a disaster because it locks the EU into protecting fossil fuel investments for at least another decade and until 2040 for new gas infrastructure”said Paul de Clerck, head of the commercial campaign at Friends of the Earth.

Building on previous EU proposals, campaigners said the protection will continue to apply until 2040 for low-carbon hydrogen, pipelines and gas plants emitting less than a certain amount. amount of CO2.

“It even expands the protection for hydrogen and biomass, thereby extending the risk of litigation”underlined Mr. de Clerck, considering that the compromise is far from responding to the initial mandate of the EU.

“To make matters worse, European and national parliaments will not even be able to vote on such an important agreement. The whole process is deeply undemocratic and unacceptable, and we call on member states to withdraw from the ECT”he added.

Withdrawal

Activists like Ms Saheb and Mr de Clerck have called on the European Union (EU) and its member states to collectively withdraw from the ECT, saying ambitious reform of the treaty is impossible as it requires unanimity from its 54 signatories .

EU countries have also shown increasing impatience over the years, with France, Germany, the Netherlands, Poland and Spain asking the European Commission to assess how a coordinated withdrawal could be initiated. .

Europe considers withdrawal from the Energy Charter Treaty

More EU member states have shown impatience with the ongoing reform of the Energy Charter Treaty which critics say hampers International efforts to phase out fossil fuels.

But proponents of the reform, including the European Commission, have put forward a “sunset clause” in the existing treaty, which specifies that investments in the field of energy remain protected for 20 years, even after the countries have withdrawn from the treaty.

According to them, the 10-year phase-out period provided for in the modernized treaty is a lesser evil compared to the 20-year sunset clause of the existing treaty, which would have continued to apply regardless, even after leaving the EU.

“We have a better deal with this agreement because we are released from these protections more quickly than we would be under the sunset clause of any withdrawal”explained an official.

Activists have refuted the claims, saying a collective EU withdrawal would have effectively killed the treaty.

“It is the EU countries that bring the treaty to life, not other countries. This agreement is therefore not a lesser evil. compared to the 20-year sunset clause, Saheb said, calling the EU’s decision a ” treason “.

The environmental think tank E3G agreed, saying that the compromise reached does not bring the TCE into line with the Paris agreement or the European green contract, which aims to halve carbon emissions. EU by 2030 and to reduce them to zero by 2050.

“A coordinated withdrawal from the ECT would provide investors with greater certainty of the EU’s commitment to accelerating the energy transition than accepting this compromise. Investors need clear signals to support the Green Deal — this compromise blurs those signals as it continues to hold climate policies hostage to the wishes of fossil fuel investors”said E3G.

Activists like Saheb and de Clerck have called on the EU and its member states to collectively withdraw from the ECT, saying ambitious reform of the treaty is impossible because it requires unanimity from its 54 signatories.

EU countries have also shown increasing impatience over the years, with France, Germany, the Netherlands, Poland and Spain asking the European Commission to assess how a coordinated withdrawal could be initiated. .

ISDS Clause

Oil-rich countries like Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan were among the most reluctant to modernize the treaty. Japan, which relies heavily on coal for power generation, was also a significant obstacle to reform.

According to the text of the modernized treaty, these countries will be able to continue to offer legal protection to fossil fuels in their territory, the officials explained.

“Most of the new investments concern green energies”said an official. “These investments will continue to be protected by the Energy Charter, which is very important for new investments in the transition to green energy”he explained.

Officials also pointed to improvements to the dispute settlement mechanism, which allows private companies to sue ECT member states if their investments are canceled or if regulators significantly reduce their expected profits.

According to the modernized treaty, procedural documents submitted by contracting parties in the context of a dispute will be “publicly accessible” and “hearings may be accessible to the public”indicates the summary document describing the main elements of the agreement.

The EU has sought to fundamentally reform the current Investor-State Dispute Settlement (ISDS) mechanism under the EC Treaty, which provides for the appointment of private arbitrators by contracting parties to settle disputes.

The EU has tried to replace the ISDS system with a new Multilateral Investment Court established under the aegis of the United Nations Commission on International Trade Law (UNCITRAL). However, progress at the UN level has been slow, and a provision has been inserted to ensure that the new UN system replaces the ISDS clause when adopted.

“Of course, we offered the comprehensive dispute resolution mechanism that we usually have in our [accords commerciaux] bilateral, but it’s a bit more difficult because we have 54 countries”explained the official.

“We therefore succeeded in using something that already existed in the ECT, namely a conciliation mechanism adapted in particular to sustainable development with a kind of simplified panel” including a public report written by a “conciliator” that the parties are expected to follow.

“There will be a public report, so it has a certain weight”said the official.
So we’re pretty happy with that.”

Download the full TCE summary here.

Source

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