Calls to exit the Energy Charter Treaty are coming from all directions. Will the UK heed them?
A Uniper coal power plant in full operation with smoking chimneys at the Maasvlakte near Rotterdam in the Netherlands.

Calls to exit the Energy Charter Treaty are coming from all directions. Will the UK heed them?

By: Cleodie Rickard
Date: 28 June 2023
Campaigns: Climate, Trade

Thriving in the shadows, the little known, 50-country trade agreement that fossil fuel companies are using to sue governments over their climate action has been a target for climate campaigners for a number of years. It contains notorious Investor State Dispute Settlement (ISDS) mechanisms, which are secret tribunals corporations can use to demand enormous pay-outs when countries act against their harmful projects.

Finally, we’ve dragged it into the light. Now a whole raft of countries are exiting the Energy Charter Treaty (ECT), and a chorus of voices across the political spectrum are joining the call: the UK must follow other countries out of this bind on their ability to secure us a liveable future.

The last country to tip the balance?

As yet, the UK is stubbornly ignoring the example set by other major economies, which have said that proposed reforms to the treaty – drenched in greenwash – fail to make it compatible with their climate aims. Germany, France, the Netherlands, Spain, Poland, Slovenia, Luxembourg and Denmark are all leaving, and the European Commission is now calling for a full withdrawal of all European Union member states from the ECT.

The UK joining this group could be the straw that breaks the treaty, as the reform process crumbles. What’s more, failing to join this coordinated withdrawal will mean the UK missing the chance to neutralise the sting in the ECT’s tail: a 20-year sunset clause. If it acts now, it can join the group jointly agreeing not to apply the sunset clause to each other.

The UK climate watchdog is clear on the risks

Today the Committee on Climate Change (CCC) has said in its annual progress report that reforms to the “outdated” treaty are insufficient and also “increasingly unlikely” as more climate-friendly countries head out the door.

Now that its own independent advisors are spelling out the risks to “both a timely climate transition and the taxpayer”, the government finally must listen. In other countries like France, when their advisors warned of the danger, the government promptly took action and left the treaty.

This isn’t an abstract risk – companies are already suing over coal phaseout and fracking bans. An oil and gas company, Rockhopper, has won six times what it had spent on an oil drilling project which was halted when the Italian government introduced a ban on offshore oil drilling. To add insult to injury, the firm is using the money to finance new oil projects. We need to know the fear of being sued under the ECT is not casting a chill over the UK’s decisions on new North Sea oil fields like Rosebank.

The voices are stacking up from every direction: the Liberal Democrats have formally come out against the ECT, and Labour MP Olivia Blake has an amendment down to the Energy Bill currently going through parliament calling for a UK exit. The government’s own former net-zero chair and Conservative MP Chris Skidmore has called it “a noose around the necks of countries” and is planning his own exit-ECT amendment.

For the climate fight, and for the public pocket

Exiting the ECT is the best way to prevent the public having to foot the bill of massive payouts to big business in the midst of a cost of living crisis. One of our closest neighbours is now facing its first ECT-related case: a London-listed fossil fuel company is seeking a $100 million pay-out after Ireland turned down an application for a new offshore oil field – the only rational decision in a climate crisis.

To have a hope of putting the brakes on the fossil fuel projects that are driving climate breakdown, we need to remove the toxic treaties that are blocking the government’s action. The UK needs to join the coordinated withdrawal from the Energy Charter Treaty to clear the path to a liveable future.

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Photo: A Uniper coal power plant in Rotterdam, the Netherlands. Credit: Catstyecam/Shutterstock