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Climate concerns arise from Europe’s withdrawal from the Energy Charter Treaty

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Monday saw Belgium leave the European Union alongside France, Germany, the Netherlands, Spain, and Poland. They contended that the investment deal has not been sufficiently modernized to be in line with the Paris Agreement. Guy Lentz, the head of the ECT, admitted incredulously to Politico that it would “absolutely” be better for the environment if the treaty did not exist before changing his mind. Last week, his Twitter account attacked detractors, labeling them “clowns” and “the green army” in since-deleted remarks.

An entire global system of investor safeguards is now in doubt as a result of the action. Hundreds more bilateral investment treaties (BITs) protect fossil fuel interests in the same way, allowing energy companies to sue governments over climate policies that decrease the value of their assets. These BITs are agreements between European and other, largely developing countries. The senior ECT negotiators for the European Commission, Carlo Pettinato, and Switzerland, Jean-Christophe Fueeg, emphasized these bilateral agreements in support of the ECT.

“We know quite well that all the bilateral investment treaties do not exclude fossil fuel protection,” Pettinato said in support of the European Parliament’s support for the modernized ECT on Monday. Additionally, there are a lot of BITs with participants in the Energy Charter Treaty. “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,” Fueeg, who opposes both reform of and withdrawal from the treaty, told Climate Home.

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At Queen’s University in Canada, Kyla Tienhaara studies commerce and the environment and has regularly criticized the ECT. “These BITs are substantively the same as the ECT,” she said, according to Climate Home. “If these countries have determined that the ECT is incompatible with the Paris Agreement, they must likewise recognise that their BITs are incompatible.” However, “global challenges compel us to consider beyond our borders,” according to Tienhaara, who added that BITs between developed and developing nations “do not represent the same threat to climate policy within Europe that the ECT does.”

France, among other nations, “should definitely be reaching out to their BIT partners and proposing mutual termination in a manner that neutralizes any sunset clause,” she continued. Sunset clauses make a treaty’s regulations continue to be in effect after it has been terminated. Cornelia Maarfield, a trade activist with Climate Action Network Europe, stated that the European Parliament had requested that Cop27 in Egypt cover the topic of protecting fossil fuel investments. She suggested using other international fora, such as the G7 or G20, to further this agenda if it wasn’t debated at Cop.

Following the conclusion of the Cold War, nations established the ECT to safeguard international energy interests in the former Soviet Union. Europe, Turkey, Central Asia, and Japan are among its members. The 20-year expiry provision of the treaty still applies to Italy and Russia despite their departure. The European Commission persuaded other ECT members to agree to allow them to gradually remove protections for fossil fuels in June 2022 after a number of European fossil fuel firms sued or threatened to sue European governments over their climate policy.

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The EU as a whole resolved to gradually end protection for new investments in fossil fuels one year after the ECT modernization is approved, most likely in November 2022. After that period, the majority of current fossil fuel investments will be safeguarded for ten years. To fulfill the 20-year sunset clause on more environmentally friendly terms, the member states getting ready to withdraw from the treaty are expected to ratify the modernization first. The UK has not made any indication that it will abandon the pact but will gradually remove fossil fuel protections in a manner similar to the EU. The remaining ECT members—including Switzerland, Turkey, Japan, and the nations of Central Asia—have no plans to discontinue or scale back their protections for fossil fuels. Nigeria and other nations are among those interested. The ECT will surely suffer from this flight, both in terms of reputation and resources, according to Switzerland’s Fueeg, but “Switzerland’s stance has not changed.”

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