How a 30-year-old treaty is blocking our climate goals

It’s old, worn out, I don’t need it anymore, it can go: We make this decision countless times in our lives. But why not do that with a contract that feels like a modem in the age of high-speed Internet? I am talking about the Energy Charter Treaty. Because he should really go now.

The Energy Charter Treaty is an international trade agreement from the 1990s. It was intended to protect private sector investments in the energy sector after the Cold War and to integrate the energy sectors of the states of the former Soviet Union into international energy trade. And that still has an enormous impact today.

In a nutshell

The ECT protects all investments in the energy sector, including coal mines, oil fields and gas pipelines. Any action by a state that reduces a company’s profits from these investments can be challenged before international tribunals.

So governments can be forced to make enormous indemnities to pay if you lose an ECT case because you decide against fossil fuels and for renewable energies.

To put it in plain English: If I had invested in an oil field and different countries now said “we are switching to green energies”, for example to enable clean e-mobility, then I could sue all these countries in front of a private arbitration court for my lost profit.

It is not just about costs that have already been incurred, but also about presumably lost profits.

Energy Charter Treaty: The Impact

And indeed there have already been a number of lawsuits based on this contract, such as in an article in the Süddeutsche Zeitung is shown: This is how the British oil company Rockhopper took action against Italy, because drilling was refused off the coast of the Abruzzo region.

Gazprom called the arbitral tribunal against the EU in the course of the Nord Stream 2 gas pipeline. And the German energy company RWE sued the Netherlands because they set the coal phase-out to 2030 – it should be around 1.4 billion euros.

It is unacceptable that, due to a treaty that dates from another time, not only are our climate goals prevented and the future of our planet is played with, but that the financial resources of states also have to be used for potential fines in times that are very tense anyway .

Of course, the taxpayers are then asked to pay.

failed reform

A reform should be decided at the end of summer 2022 to make the contract compatible with the goals of the Paris climate agreement. All 53 contracting states would have had to agree. But the attempts at reform are failed. Investments in fossil fuels such as coal, gas and oil are protected for years to come.

There is therefore only one logical step, which is rightly called for by many experts: the safe withdrawal of all European member states from this treaty. Because we can all very well do without such legacies.

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