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Euractiv | 17 May 2022
Europe edging closer to withdrawal from Energy Charter Treaty
By Frédéric Simon
More European Union countries have shown signs of impatience with the ongoing reform of the Energy Charter Treaty (ECT), which critics say impedes international efforts to phase out fossil fuels, according to leaked diplomatic cables seen by EURACTIV.
Germany, the Netherlands, Poland and Spain are frustrated with attempts to reform the ECT and expressed doubts that the EU can fulfil its mandate of aligning the treaty with the Paris Agreement on climate change.
The four countries have invited the European Commission, which negotiates on behalf of the 27 EU member states, to assess how a coordinated withdrawal could be initiated according to EU procedures and prepare for “possible exit scenarios in a timely manner,” the leaked cables reveal.
“Spain also made it clear that it would consider an exit scenario, as it did not see how the Energy Charter Treaty could be adapted to the Paris Agreement,” according to the leaked cables, which were translated into English from an unspecified European language.
Japan continues to be a significant obstacle in the talks and has “taken steps backwards in the definition of investment and sustainable development,” which are legal cornerstones of the treaty’s architecture, the cables say.
Together with Azerbaijan, Tokyo also “resist(s) the reference to workers’ rights” in the reformed treaty and opposes changes to the definition of “economic activity”, which is the most controversial aspect because the EU intends to gradually phase-out investment protection for fossil fuels.
Signed in 1994 to protect cross-border investment in the energy sector, the Energy Charter Treaty has faced growing criticism from environmental groups and governments who say it impedes countries’ efforts to phase out fossil fuels.
The agreement is controversial because it enables foreign investors to seek financial compensation from governments if changes to energy policy negatively affect their investments. Energy utilities RWE and Uniper have used the treaty to sue the Dutch government over its planned coal phase-out.
Talks to reform the treaty began in July 2020 but have made little progress so far.
Reforming the charter is tricky because it requires unanimity among its more than 50 signatories, which includes almost all EU countries and the European Union as an international organisation.
France and Spain have been the most vocal supporters of radical reform and called on EU countries to jointly quit if negotiations did not deliver progress by the end of 2021.
But although the last negotiation round improved the atmosphere, “the discussion remained difficult, and progress was less than the European Commission had hoped for,” the leaked cables say.
The EU executive is now trying to forge a bilateral compromise with Japan involving a 15-year phase-out time for existing investments.
The Commission hopes that other Contracting Parties will follow these arrangements and reach a political agreement on 24 June during an ad-hoc Energy Charter Conference in Brussels. The Conference would be preceded on 23 June by a one-day meeting of the treaty’s Modernisation Group, which could iron out last-minute disagreements.
Environmental campaigners, meanwhile, are raising the pressure on the Commission with a protest planned in Brussels later today at the Schumann roundabout in the heart of the European quarter.
“The climate-action killer ECT can never be made compatible with the Paris Agreement and the European Green Deal,” said Paul de Clerck, a campaigner at Friends of the Earth Europe.
He denounced the tentative compromise being negotiated with Japan, saying: “The expected deal will extend protection of fossil fuel investments for at least another decade, which is incompatible with the Paris Agreement.”
“The only sound option for the EU and member states to live up to their climate responsibilities is to withdraw from this toxic ECT.”
> Download the diplomatic cable here