A leaked European Commission proposal reveals that the EU is not serious about ending the protection of fossil fuels under the controversial Energy Charter Treaty. [1] European Commissioners are expected today to sign off proposals to reform the investment agreement, which is currently being renegotiated to ‘modernise’ it, due to climate concerns. [2]
The European Parliament recently voted to end the protection for fossil fuel investments, and several lawmakers are calling for withdrawal from the treaty if the reform does not succeed this year. [3] Energy Commissioner Kadri Simson claimed days ago that the EU would ensure that coal, gas and oil companies can no longer obstruct the clean energy transition with expensive lawsuits. [4]
However, the leaked Commission proposals would continue to protect some fossil fuels, and even expand investment protection to other controversial technologies. The proposals would therefore fail to bring the Energy Charter Treaty in line with the Paris Agreement and the European Green Deal:
- Existing investments in fossil fuels (coal, oil and fossil gas) would continue to be protected for at least another 10 years; [5]
- Future investments in fossil fuels will be excluded. However, major loopholes remain. Investments for certain gas power plants will remain protected until 31 December 2030, and possibly until 2040 if these plants are coal-to-gas conversions.
- New investments for gas pipelines will be protected until the end of 2040. [6]
- The proposal even foresees expanding the scope of investment protection to new technologies that are currently not covered, including hydrogen and biomass. [7]
The Commission’s proposal will now be discussed with Member States. If approved, it would become the EU’s negotiation position for ongoing talks to reform the Energy Charter Treaty.
Climate Action Network (CAN) Europe, Friends of the Earth Europe and ClientEarth call on Member States to “support phasing out fossil fuels from the scope of protection under the ECT as soon as possible to allow the EU to meet its 2030 climate targets” and warn against any expansions of the scope of the treaty. [8]
Paul de Clerck, economic justice coordinator at Friends of the Earth Europe said:
“While decisive action to halt climate breakdown is crucial within this decade, the Commission is proposing to continue to protect fossil fuels for at least another ten years – and 20 years for gas infrastructure. This blind pandering to fossil fuel interests undermines the Paris Agreement and the European Green Deal.”
Cornelia Maarfield, Trade and Climate Project Manager at Climate Action Network (CAN) Europe said:
“This proposal would make a dangerous treaty even more dangerous. It would continue to allow coal, gas and oil corporations to extract compensation from governments if they pursue Paris-compatible policies to phase-out fossil fuels. To make things worse, the Commission intends to expand the dangerous investment protection provisions of the treaty to hydrogen and biomass – neither of which is clean per se nor is their contribution to the clean energy transition proven. Why set a new trap for policy makers if you haven’t found the way out of the existing one?”
Amandine Van Den Berghe, trade and environment lawyer at ClientEarth said:
“The EU needs to remove treaty protections for investments in heavily polluting energy sources. The Commission’s proposal is a step in the right direction but contains major loopholes around gas and non-renewable hydrogen, which increase the risk of locking in gas infrastructure and more future emissions. It’s a missed opportunity to align the treaty to Europe’s climate obligations, and to remove the risks that the treaty poses for meaningful climate action.”
ENDS
For more information, contact:
Paul de Clerck, economic justice coordinator, Friends of the Earth Europe, paul.declerck@foeeurope.org, (+32) (0)4 9438 0959
Cornelia Maarfield, Trade and Climate Project Manager, CAN Europe, cornelia@caneurope.org, +49 170 8765 271 (English, German).
Martin Watters, Strategic Communications Manager, ClientEarth, MWatters@clientearth.org, +44 (0)7432107787
Notes to editors:
[1] https://www.politico.eu/wp-content/uploads/2020/10/Commission-Proposal-Economic-Activity-and-Scope-ECT-October-26-2020-Scanned-Version1.pdf
[2] The Energy Charter Treaty is an international treaty for energy cooperation. The EU and all EU Member States, except Italy, are members of the treaty. https://www.energycharter.org
It was signed in December 1994 and is heavily criticized for not being compatible with the Paris Climate Agreement and for its investor-state dispute settlement (ISDS) mechanism, because it provides protection for fossil fuel investments. The ECT is the main international treaty that is used by fossil fuel companies to challenge governmental decisions to protect the environment or reduce climate change. Members of the Treaty have started negotiations to reform the Treaty.
Energy Charter Trety’s Dirty Secrets https://energy-charter-dirty-secrets.org
Energy Charter Treaty: An Axe to Climate Action http://www.foeeurope.org/energy-charter-treaty-axe-climate-action
[3] On 7 October 2020, the European Parliament adopted amendment 143/2 to the European Climate Law that states “the Union shall end protection of investments in fossil fuels in the context of the modernisation of the Energy Charter Treaty”.
A cross-party coalition of 140 lawmakers issued a joint statement in September 2020 that calls on the EU to make withdrawal plans if the reform does not succeed by the end of this year. See https://www.euractiv.com/section/energy/news/obsolete-energy-charter-treaty-must-be-reformed-or-ditched-lawmakers-say/
[4] Commissioner Kadri Simson addressed the European Parliament in a plenary debate on 22 October 2020 in a debate on “Aligning the ECT with the Green Deal”.
[5] This is much too late since the EU must phase out coal by 2030 at the latest to achieve the 1.5°C goal of the Paris Agreement. European countries are therefore in the middle of legislating coal exits. Ending protection for coal mines and coal power stations only after 2032-35 (when the change is likely to kick in) will mean that many governments will be faced with similar legal challenges as the Netherlands is already experiencing.
[6] With these rules on gas, the Commission accepts that the ECT will lock EU Member States into gas and risk billions in taxpayers’ money that will have to be paid in compensation to gas investors if their assets get stranded before their regular lifetime – which is a likely scenario given the need to phase-out fossil gas by 2035 if the EU wants to fulfil its climate targets.
[7] These technologies are not per se clean and their use for the clean energy transition is at best unproven. In the case of hydrogen, the proposal doesn’t distinguish between hydrogen produced with fossil and renewable energy. Biomass is a technology associated with multiple environmental and social risks. EU Member States risk expensive lawsuits if they protect this technology and later on realise they have to raise sustainability standards for biomass plants.
[8] Letter to EU Energy and Climate Ministers can be found here: https://caneurope.org/publications/letters-to-policy-makers/2028-letter-to-eu-energy-and-climate-ministers-on-the-reform-of-the-energy-charter-treaty.
