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24 Jan 2023

Christina Eckes, University of Amsterdam. Lea Main-Klingst, ClientEarth. Lukas Schaugg, International Institute for Sustainable Development (IISD).

Opinion: EU withdrawal from the Energy Charter Treaty is inevitable

'Why a coordinated withdrawal from the Energy Charter Treaty is inevitable',

"Since October 2022, seven EU member states have announced plans to withdraw from the European Charter Treaty (ECT). Across the board, the message is clear: the insufficient and potentially climate-damaging treaty reform effort is no longer a politically viable option, write Christina Eckes, Lea Main-Klingst and Lukas Schaugg.

The ECT is an international agreement dating from the 1990s with the EU and its member states among the contracting parties. Among other functions, the treaty enables energy investors to sue for compensation before international arbitration tribunals if political measures or laws have an adverse effect on their profits. And this is the case even if these measures serve the legitimate objectives of protecting the environment and climate.

Seven EU member states have recently announced a withdrawal from the treaty, and a coordinated withdrawal of the EU is now inevitable.

Past arbitration claims have, for instance, concerned the phase-out of coal or restrictions on offshore drilling or fracking. An arbitral tribunal has recently awarded the British company Rockhopper €190 million in compensation, holding that Italy had banned the development of further oil fields near the coast for environmental reasons.

Meanwhile, according to a large consensus across multiple climate and energy pathways, developing any new oil and gas fields is incompatible with the Paris Agreement and limiting global warming to 1.5°C, as demonstrated in IISD’s recent report “Navigating Energy Transitions”.

The ECT is thus doubly at odds with the climate crisis: On the one hand, it protects climate-damaging investments in fossil energies, and on the other, it puts the brakes on measures to protect the climate and the environment. The threat of astronomical compensation payments alone acts as a deterrent..."