The only way is out: 10 reasons the EU must exit the Energy Charter Treaty

With more and more EU countries expressing their intention to withdraw from the Energy Charter Treaty (ECT), it seems the days of this climate-killing pact are numbered.

ECT, an international investment agreement from the mid-1990s, with 53 member countries, including EU member states, the UK and Japan, allows companies to sue governments for early closure of coal, oil and gas plants. But this treaty jeopardises the EU’s climate neutrality target, it’s far from the EU Green deal ambitions and is a real threat to the 2015 Paris climate accords.

In an exercise in greenwashing, the European Commission negotiated a so-called “modernisation” of the ECT. Here’s why the only solution is to exit this obsolete treaty:

1. France, Spain, Germany, The Netherlands,  Poland, Luxembourg and Slovenia have already reached the conclusion that the modernisation of the ECT is not compatible with the objectives of the Paris Climate Agreement and have, therefore, decided to withdraw. Belgium is expected to follow. Italy left in 2016.

Exiting the ECT will not automatically translate into a far and just energy transition, but it is nonetheless a    necessary and urgent step to allow states to take forward radical reforms in the energy sector getting off fossil fuels.  The current energy crisis shaking the EU requires breaking with big energy companies and the planet.

2. The ECT is a treaty that was designed by and for fossil fuel investors.

3. The marginal reforms achieved in modernisation are not enough to correct the historically wrong decision to give oil, coal and gas companies the power to sue governments at international tribunals for implementing climate policies.

4. The European Commission insists that modernisation is better than withdrawal, but this is wishful thinking. The arguments just don’t hold up to scrutiny of the text.

5. In the reformed treaty, the system of ad-hoc investment tribunals, riddled with conflicts of interest (ISDS) remains untouched. The EU agreed seven years ago to get rid of ISDS.

6. The reformed treaty will protect the existing fossil fuels investments for at least ten more years, but it could be for twenty years or more if we have to wait for full ratification. How can we morally justify maintaining this level of protection for fossil fuel investors when every single scientist tells us we are on the brink of climate collapse?

7. In the reformed ECT, the marginal reforms to the most dangerous clauses, like fair and equitable treatment and indirect expropriation, left too many loopholes that investors can use to continue suing.

8. The Commission’s main justification for not withdrawing is to avoid the sunset clause, a rule that would maintain investment protections for 20 years after the treaty’s termination. However, EU member states that agree to withdraw together can sign among themselves an inter-se agreement to neutralise the sunset clause and stop protection immediately.

9. Public opinion and scientists support exiting ECT. More than 1 million citizens have asked governments to pull out of the Energy Charter Treaty and stop its expansion to other countries. The Intergovernmental Panel on Climate Change (IPCC) recently pointed out that international investment agreements, such as the ECT,   “may lead to countries refraining from or delaying the adoption of mitigation policies, such as phasing out fossil fuels.”  Young climate activists, like Greta Thunberg, have also added their voices to the call for withdrawal.

10. The European Parliament voted twice to exclude the protection of fossil fuel investments from investment treaties – in June 2022 and October 2022. The Left is pushing for a withdrawal, coordinated or individually, from this anti-climate treaty. We will also support no ratification in case it comes to a vote in the European Parliament.