Power Shift | 25 July 2022
Energy Charter Treaty: How it drove up the costs of the German coal phase-out
by Fabian Flues
This briefing highlights the role the Energy Charter Treaty (ECT) has played in the German coal phase-out. It reveals that the ECT has influenced the coal phase-out in two important ways:
(1) To ensure the companies do not use the ECT to raise investment disputes, a contract was negotiated between the German federal government and the largest coal companies, RWE and LEAG. Within this legal framework, the companies held enormous negotiating power and were thus able to offload the risks of the coal phase-out to the general public.
(2) The coal companies were compensated at an unusually high level for waiving their ability to sue under the ECT, as agreed in the contracts. As the German government has admitted, this waiver was an important factor in the otherwise inexplicably high compensation granted to LEAG and RWE.
The case of the German coal phase-out demonstrates how the ECT makes the fossil fuel phase-out considerably more complicated and expensive. Immediate with- drawal from the ECT is therefore essential to ensure that it does not similarly impede the phase-out of the remaining fossil fuels.