The European Commission has proposed a mass exit from the Energy Charter Treaty (ECT) on climate grounds, as the treaty has allowed fossil fuel companies to sue governments over climate action.

But the treaty’s head Guy Lentz wrote an angry letter to the president of the European Parliament Roberta Metsola on Monday, arguing that leaving the treaty without reforming it would actually give more power to fossil fuel companies.

Lentz accused the European Union of inconsistency, spreading misinformation. He also warned that the EU exiting the treaty before it is modernised will prolong investment protections for fossil fuels in Europe and elsewhere.

Friends of the Earth campaigner Paul de Clerck accused Lentz of “a rather desperate attempt” to stop the EU leaving the ECT. “Guy Lentz and the ECT missed the boat and now try to call it back, but that will not work,” he told Climate Home.

A post-Soviet treaty

The 1998 Energy Charter Treaty, which has around 50 signatories including European Union countries, was designed to protect companies in the energy industry by allowing them to sue governments on policies affecting their investments.

After several European countries were sued over climate policies that hurt fossil fuel profits, the European Commission persuaded reluctant members like Japan and Azerbaijan to agree to reforms. If enacted, those would give countries the power to end protections for fossil fuels under the treaty.

In June 2022 the EU and UK announced they would end protection for new fossil fuel investments and phase out protection for existing fossil fuel investments in ten years’ time.

This was a slower phase-out than climate campaigners and some EU governments had hoped for, but it was the only compromise other EU members accepted.

At the end of last year, several big European countries said they would quit the treaty despite the reforms. Last week the European Commission backed the proposal of a collective exit.

The European Commission was unable to get all EU states to agree to approve the reforms it had negotiated so a vote on the treaty’s reforms was postponed until April 2023.

The EU has been the driving force behind the reforms, meaning that, without its members’ support, they are unlikely to pass.

The consequence is that remaining ECT member states like Japan, Switzerland, the United Kingdom and countries in Central Asia will not be able to remove investment protections from fossil fuels.

Locking Asia in?

In his letter, Lentz says that if the EU doesn’t modernise the ECT then they will be enacting “an express prohibition” for other ECT members from better aligning with the Paris agreement.

But Yamina Saheb, a Paris-based campaigner against the ECT, says that the EU should withdraw without reforming the treaty and what other countries do “is up to them to decide”. Climate Action Network campaigner Cornelia Maarfield agreed EU countries should leave.

Lentz said that leaving without reforming the treaty will help fossil fuel companies sue governments within the EU over climate action for longer.

This is because the ECT has a 20-year sunset clause, which means it applies to countries for 20 years after they leave.

Study: IPCC asks emerging countries to drop coal faster than rich nations did

Italy left the treaty in 2016. But last year, a British oil and gas company used it to force the Italian government to pay €190m ($204m) over their decision to ban oil drilling near Italy’s shoreline.

If the treaty is reformed before the EU leaves, the 20-year sunset clause will not protect new investments in fossil fuels. If it is not, then new fossil fuel investments will remain protected.

The EU governments who are pushing to leave hope to enforce a joint agreement stopping fossil fuel companies based in the EU from suing EU states while the 20 years runs down.

But Lentz warned that this agreement “may not provide the expected legal certainty”, citing complex legal arguments in four bullet points.

Paul de Clerk said Letnz was “bluffing”. Maarfield said the ECT head made a “number of legally unsound claims that we have already heard from groups with a vested interest in undermining solutions such as the arbitration industry”.

Inconsistency?

Lentz also pointed out EU countries could lack protection from claims outside the bloc. He said EU member states have around 1,500 bilateral investment treaties with other – mostly developing – countries that “do not exclude fossil fuels and do not contain any provision on the Paris agreement on climate change”.

A similar argument has been made by Carlos Pettinato, the European Commission diplomat who negotiated the modernisation and by Jean-Christophe Fueeg, the lead on the ECT for Switzerland and a defender of the treaty.

Some critics of the ECT, like Queen’s University trade and environment academic Kyla Tienhaara, have also said these bilateral treaties are a problem.

She told Climate Home in October: “These [bilateral investment treaties] are substantively the same as the ECT – so if these countries have concluded that the ECT is incompatible with the Paris Agreement then they have to acknowledge that their BITs are also incompatible.”

Tienhaara said that these treaties between European countries and developing countries "do not pose the same threat to climate policy within Europe that the ECT does" but "global issues require us to think beyond our borders".

Misinformation?

Lentz also took issues with the European Parliament claiming that an April 2022 Intergovernmental Panel on Climate Change (IPCC) report described the ECT as a "serious obstacle to climate change mitigation".

"On the contrary," he says, "the report considers the modernisation of the ECT as part of the ongoing reform process incorporating climate change".

As Lentz pointed out, the IPCC report did not explicitly call the ECT a "serious obstacle to climate change". That quote was wrongly attributed to them by a Friends of the Earth press release and repeated by several media outlets.

After Climate Home asked Friends of the Earth about this, the campaign group said the quotation marks had been " a mistake in the editorial process on our part" and had now been removed from their website.

The IPCC said that tackling climate change is "gradually" becoming one of the goals of global energy governance although "the realignment is far from complete and there are still examples of international cooperation having a chilling effect on climate [action]".

This article was updated on 17 February to include the information that Friends of the Earth had corrected their mistake

The post ECT boss accuses EU of protecting fossil fuels by blocking reforms appeared first on Climate Home News.

Belgium on Monday joined France, Germany, the Netherlands, Spain and Poland in heading for the exit. They argued that modernisation of the investment pact has not gone far enough to align with the Paris Agreement.

ECT boss Guy Lentz made the extraordinary admission to Politico that it would “definitely” be better for the climate if the treaty did not exist – then backpedaled. His account lashed out at critics on Twitter last week, calling them “clowns” and “the green army”, in since-deleted messages.

The move calls into question a whole international system of investor protections. There are hundreds of bilateral investment treaties (BITs) between European and other – mostly developing – countries that protect fossil fuel interests in the same way: enabling energy companies to sue governments over climate policies that devalue their assets.

The European Commission’s chief ECT negotiator Carlo Pettinato and Swiss ECT negotiator Jean-Christophe Fueeg highlighted these bilateral treaties in defence of the ECT.

Pettinato, defending European Parliament to back the modernised ECT on Monday: “We know very well that all the bilateral investment treaties do not exclude fossil fuel protection. And there are many of the BITs with members of the Energy Charter Treaty.”

Fueeg, who opposes both reform of and withdrawal from the treaty, told Climate Home: “One important factor often ignored by ECT-criticism is the widespread practice in the oil industry to enshrine [investor-state dispute settlements] in individual contracts, which are sanctioned by national parliaments or presidents.”

Kyla Tienhaara studies trade and the environment at Queen's University in Canada and has frequently criticised the ECT. She told Climate Home: "These BITs are substantively the same as the ECT - so if these countries have concluded that the ECT is incompatible with the Paris Agreement then they have to acknowledge that their BITs are also incompatible."

Tienhaara said that BITs between European countries and developing countries "do not pose the same threat to climate policy within Europe that the ECT does" but "global issues require us to think beyond our borders".

She added that countries like France "should absolutely be reaching out to their BIT partners and proposing mutual termination in a manner that neutralises any sunset clause". Sunset clauses are when a treaty's rules apply even after it's been ended.

Climate Action Network Europe's trade campaigner Cornelia Maarfield said that the European Parliament had called for fossil fuel investment protection to be discussed at Cop27 in Egypt. "If not discussed at Cop, it would be sensible to use other international fora to take this agenda forward such as the G7 or G20," she said.

Breakdown: Who is contributing what to South Africa’s clean energy shift

Nations set up the ECT to protect foreign investments in energy in the former Soviet Union after the Cold War ended. Its membership spans Europe, Turkey, Central Asia and Japan. Italy and Russia have left but are still subject to the treaty's 20-year sunset clause.

After a series of European fossil fuel companies sued or threatened to sue European governments over their climate policies, in June 2022 the European Commission persuaded other ECT members to allow them to phase out protections for fossil fuels.

As a bloc, the EU decided to phase out protection for new fossil fuel investments a year after the ECT modernisation is ratified, likely in November 2022. Most existing fossil fuel investments will be protected for ten years after that date.

The member states preparing to leave the treaty are expected to ratify the modernisation first, so they can serve the 20-year sunset clause under greener terms.

Fear of farmer protests hampers methane-cutting ambition

The UK will phase out fossil fuel protections in the same way as the EU and has not indicated it will leave the treaty.

All other ECT members, including Switzerland, Turkey, Japan and Central Asian countries are not planning to phase out fossil fuel protections or leave. Several countries like Nigeria are interested in joining.

Switzerland's Fueeg told Climate Home: "The ECT will undoubtedly suffer from this exodus, both in reputation and resources" but "Switzerland’s position has not changed."

The post European exodus from Energy Charter Treaty raises climate questions appeared first on Climate Home News.