EU leaves Energy Charter Treaty deemed too protective of fossil fuel investors

Every Saturday we decipher climate issues with François Gemenne, professor at HEC, president of the Scientific Council of the Foundation for Nature and Man and member of the IPCC.

MEPs approved on Wednesday April 24 the coordinated withdrawal of the European Union (EU) from the Energy Charter Treaty. This is’a vast international trade and investment agreement, signed in 1994, which aims to provide guarantees to investors from Eastern Europe and the former USSR. The aim was to secure Europe’s energy supply by protecting its companies’ investments in former Soviet countries.

“The problem is that today, this Energy Charter Treaty is the treaty most used by investors in the fossil fuel sector to challenge before international arbitration tribunals the measures of States in favor of renewable energies and the energy transition”explains François Gemenne.

franceinfo: Are there a lot of trials?

A lot. We talk a lot about lawsuits brought by citizens against their governments for climate inaction – for example we talked about the ruling of the European Court of Human Rights against Switzerland. But we hardly talk about the lawsuits filed by investors in fossil fuels. There are more than a hundred in progress, in which investors are demanding billions of euros in compensation from States. Investors in fossil fuels are demanding compensation from states which decide to gradually do without coal, oil or even natural gas, to respect their climate commitments.

“Italy, for example, was ordered in 2022 to pay compensation of 200 million euros to a company to which it had refused an offshore oil drilling permit.”

François Gemenne

on franceinfo

While Italy left the treaty in 2016. If Italy was condemned, it is because there is a survival clause in the treaty, which protects investments for another 20 years after leaving the treaty. a signatory country. So even if the European Union withdraws now, fossil investments will remain protected for another 20 years.

It seems completely surreal, in the context of a climate emergency. Especially since court decisions are sometimes contradictory. For example, in 2019, the Dutch Supreme Court condemned the Netherlands for climate inaction, and required the government to take more ambitious measures. And so the government has accelerated its coal exit plan. But in doing so, he is now attacked by the German energy giant RWE, which is demanding 1.4 billion euros from him if he maintains the closure of the Eemshaven coal power plant, which has been operated by RWE since 2015. We march on the head.

The European Union therefore wants to get out of it.

Yes, especially since several European states have already decided to exit it at the end of 2022. And it is clear that if we want to exit fossil fuels and achieve the objectives of the Green Deal, the green pact, this Treaty on the Charter of Energy made things very difficult, or at least very expensive. So far, the compensation granted to investors is around 60 billion euros – as much money that will not go to the energy transition.

Is this vote by the European Parliament a step forward for the climate and the environment?

Undeniably, it’s a big step forward, but the decision has been in the pipeline for some time. The Commission had already proposed it in July 2023, the European Council had validated the idea at the beginning of March 2024, all that remained for Parliament to do was approve it, it’s done. Even if there will still be a final validation by governments, and even if there is a clause that would allow countries that wish to remain members of the treaty, which is in the process of being modernized.

“The big problem is this survival clause: the treaty will continue to apply for another 20 years.”

François Gemenne

on franceinfo

This is where the European Union could become more involved and support the project for another treaty. A treaty on the non-proliferation of fossil fuels. In the same way that a treaty on the non-proliferation of nuclear weapons was designed, this treaty would be binding and would prevent the development of new fossil fuel projects, and would be complementary to the Paris Agreement. It was Vanuatu, a small state in the South Pacific, which was the first government to support this treaty, in 2022. But since then, it has been accumulating support, particularly since Colombia declared itself in favor during COP28, even though Colombia is a producer of fossil fuels.

And in Europe, this could help counteract the effects of this Treaty on the Energy Charter. And the European Parliament also voted a resolution in favor of this treaty last year. And Emmanuel Macron, challenged by an activist in the corridors of COP28 in November 2023, even said he was ready to sign it straight away. But from the cup to the lips, you know that sometimes there is a long way.