The UK government announced on Thursday its intention to follow the example of several European countries by withdrawing from a controversial energy treaty. This move is in response to the inability to modernize an agreement established in the 1990s, after negotiations to update it failed.
Among the other countries in disagreement are France, Germany, Spain and the Netherlands, which have confirmed their withdrawal from the Energy Charter Treaty. This decision is in line with the European Parliament’s call for the 27 members of the European Union to leave the pact as a whole.
A controversial decision in the face of the energy treaty
In 2015, Italy decided to leave the energy treaty after losing a high-cost arbitration dispute against Rockhopper, a British oil company, highlighting the adverse financial implications of remaining in the agreement.
With its roots in the 1990s, an era dominated by fossil fuels such as coal, gas and oil, the treaty initially aimed to promote investment in the energy sector internationally.
However, the treaty has been instrumental for foreign corporations to challenge national energy policies that put their investments at risk, through a non-transparent arbitration process.
Eliminating the fossil fuel dependency gap
This mechanism has resulted in multiple costly legal challenges for countries seeking to reduce their dependence on fossil fuels and encourage the use of renewable energies.
According to Graham Stuart, UK Minister for Energy Security and Net Zero, “The Energy Charter Treaty is outdated and requires urgent reform. However, negotiations to update it are at an impasse, and the prospect of effective reform seems increasingly distant.”
Minister Stuart added that remaining in the treaty is not only incompatible with the UK’s goals towards cleaner and cheaper energy, but could impose penalties for its pioneering efforts globally towards achieving net zero emissions.
A historical and consecutive rejection between nations
This energy treaty was signed in 1994 by the EU and Euratom, the European Atomic Energy Community, and entered into force in 1998, marking an important stage in international energy cooperation.
The treaty was designed to integrate the Eastern European energy sectors within a framework of cooperation with their Western European counterparts, making it easier for energy companies to sue governments for policies that compromised their investments.
However, the growing commitment of countries to renewable and sustainable energy has led to widespread rejection of the energy treaty among European governments.
Introduction of new laws and opportunities favorable to the environment
David Boyd, UN Special Rapporteur on Human Rights and the Environment, warned of an “explosion” of multi-billion dollar claims by extractive and fossil fuel industries, which have stymied climate and environmental action through the use of opaque investment tribunals.
“The introduction of more stringent laws and policies by governments often results in compensation payments reaching millions, even billions of dollars,” Boyd explained.
Developing nations, in particular, have become frequent targets of these lawsuits, with the fossil fuel and mining industries garnering awards in excess of $100 billion.
A decision supported by EU members
The UK’s decision to leave the energy treaty has been welcomed by Shaun Spires, chief executive officer of Green Alliance, a “think tank environmentalist, stated, “Civil society and legislators from different political spectrums have argued that the Energy Charter Treaty is an obsolete vestige that undermines our efforts against climate change.”
Among other words, Spires emphasized, “… we welcome the UK’s decision to withdraw, which will reinforce global efforts towards the implementation of renewable energies that are not only clean, but also economical.”
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Source: Energy Daily
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