Energy Charter Treaty reform might expand, rather than reduce the risk of investor-state arbitration claims

The European Union is supposed to put forward this Monday 15 February its position for the definition of the “economic activity in the energy sector”, one of the most important parts of the modernisation of the Energy Charter Treaty (ECT). The early proposed definition would expand dangerous investment protection to hydrogen and biomass.

MEDIA ADVISORY

The Energy Charter Treaty is an investment agreement from 1994, which protects investments in the energy sector and this definition should clarify which economic activities should benefit from the extensive investment protection provisions of the agreement.

Based on the initial leaked negotiation position of the European Commission, a large share of fossil fuel investments would continue to be protected under the ECT for a long period and most controversially, the EU intends to even expand the definition of economic activity to new technologies.

READ our extensive analysis of this proposal outlining its pitfalls and long-term consequences.

Trade and Climate Project Manager at Climate Action Network (CAN) Europe, Cornelia Maarfield, declared: “This half-hearted proposal would continue to allow coal, gas and oil corporations to extract compensation from governments that pursue Paris-compatible energy policies. 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?”

“If the EU enters the negotiations with this disappointing level of climate ambition, any hope must be buried that the reform will make the ECT climate-compatible. We therefore urge all European countries to show more climate leadership in the lead-up to COP26 and withdraw from the ECT now, either individually or jointly,” Cornelia Maafrield added.

A negotiation position in line with the climate ambition should include:

1. Investment protection for future fossil investments should have been ended without the proposed exemptions for gas infrastructure.
2. Investment protection for existing fossil investments should be ended immediately but at the latest 1-2 years after the amendment takes effect, whereas the Commission had proposed 10 years in the draft from October.
3. The Definition should not expand investment protection to hydrogen, biomass, other technologies or the operation and maintenance of energy-related equipment.

The EU needs to submit a final version on Monday 15 February in order for this issue to be discussed at the upcoming modernisation round discussions from 2-5 March. Few changes to the original draft are expected.

Note to editors:
CAN Europe policy briefing on the Energy Charter Treaty

Contact:

Cristina Dascalu, communication coordinator, cristina@caneurope.org