UK to leave Energy Charter Treaty after renewables adaptation failure
Signed in 1994, the international agreement was designed to promote investment in the global power grid, and has historically protected those putting money into fossil fuel projects.
Proposals to align this with the 21st Century’s move to clean, renewable energy have so far failed, with months of talks between European nations leading to a stalemate.
While some have labelled the Energy Charter Treaty (ECT) a barrier to net zero because it effectively restricts the ability of member states to freely regulate the energy sector, others argue that the reality is far more nuanced. Particularly controversial are provisions for the Promotion, Protection and Treatment of Investment provisions, which demands fair and equitable conditions, prohibits expropriation and provides a system for investors to make claims against member states when they hinder opportunities.
‘Leaving this incredibly flawed treaty is a brilliant win for our environment and the climate, and a sensible move as European governments exit the agreement in ever greater numbers – citing risks to their sovereignty and climate progress,’ said Kierra Box, a campaigner at Friends of the Earth. ‘Future UK governments will now have more freedom to take ambitious action to protect our planet, without the threat of being sued for millions of pounds by companies based overseas.
‘But the problem doesn’t end there – similar mechanisms still exist within other treaties, enabling overseas investors to sue governments in tens of nations around the world, including the UK,’ she continued. ‘To truly safeguard our planet, we need to rid ourselves all of agreements that prioritise the business interests of a few wealthy shareholders above our collective future.’
Although powers have historically been used to safeguard fossil fuel financing and increase profitability, others argue they can and are also applied to renewable projects just as easily. One recent example of this can be found in Spain, which attempted to revoke its commitment to the clean energy sector. As such, the UK’s withdrawal from the ECT, announced last week, may actually prove to damage progress in green power infrastructure when it is most needed.
‘The inconsistency in the arguments around this are clear in the government’s announcement of withdrawal from the ECT’, said James Rogers, Arbitration Partner at Jenner & Block. ‘On one hand they say ‘Remaining a member would not support our transition to cleaner, cheaper energy, and could even penalise us for our world-leading efforts to deliver net zero.’ The Government then goes on to say ‘With £30 billion invested in the energy sector just since September, we continue to lead the world in cutting emissions, attracting international investment and providing the strongest legal protections for those who invest here.’
‘However, by withdrawing from the ECT, the UK is removing some of those legal protections, not just for investors in the fossil fuels sector but also for investors in the renewables sector,’ he continued. ‘Withdrawing from the Treaty may not bring the benefits that the government hopes and may actually make the UK a less attractive option for international investment in our renewable energy sector, as well as jeopardising UK investments abroad as UK investors will no longer enjoy the protections afforded by the ECT when they invest in other ECT member states.’
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Image: Nicolas Thomas