EU tries to stop energy treaty exit stampede

EU countries reject Brussels-led reforms to the Energy Charter Treaty, saying they fail to stamp out protections for fossil fuels.

The European Commission is hitting back against a rebellion from national governments which say the bloc has failed to stop a global energy pact from being a climate killer.

Spain, the Netherlands and Poland have all declared their intention to exit the Energy Charter Treaty (ECT). Italy left in 2015. Germany, France and Belgium are examining their options, officials from those countries said.

But a Commission spokesperson warned that leaving the treaty would not protect those countries from lawsuits against their climate policies due to a sunset clause in the deal that binds members to its obligations for two decades after leaving.

“The risk of further claims from existing investors, including on fossil fuels remains,” the spokesperson said.

The pact, which was designed to create a stable investment environment in post-Soviet Europe, allows international investors in energy projects to sue governments for profits lost as a result of policy changes. That’s now viewed as a major threat to national climate plans to shut down coal plants or limit production of oil and gas.

The EU's 27 countries asked the Commission to negotiate an end to fossil fuel protections with the other members of the 50-plus country treaty. Those talks ended in the summer with the EU being offered a carve-out so that its member countries could phase out protections for fossil fuel investments over the next 10 years.

The Commission spokesperson said the result of the talks brought the treaty “in line with … modern standards of investment protection and the Paris Agreement” on climate change. In an email, the spokesperson noted that “all” EU countries had “endorsed” the outcome of the negotiations in June.

But an increasing number of governments are distancing themselves from the deal brokered by the Commission.

“We are critical of the result achieved on a number of points. The treaty continues to offer too much protection to the fossil fuel industry,” said Dutch Energy and Climate Minister Rob Jetten on Wednesday, a day after he announced his country’s departure from the deal. Spain’s assessment has been even blunter, calling it “no improvement.”

Yamina Saheb, a former Energy Charter Treaty official-turned-whistleblower, told POLITICO that the Commission was “misleading” the member countries “by trying to make a success story out of the failed modernization.”

She said the Commission should expect more countries to peel away in the coming days. “The ball is finally rolling in the right direction. Nothing will stop it.”

Germany is drawing up plans to leave the deal, a spokesperson for Economy and Climate Minister Robert Habeck said, although a final decision has not been made. "Minister Habeck has repeatedly expressed his critical position on the ECT and its possible negative effects on climate action. The German government is currently defining its position on the ECT."

On Wednesday night, France’s High Council on Climate — a governmental advisory body — released an opinion that the reforms being proposed were incompatible with the EU’s climate goals and said only withdrawing from the ECT coupled with the “neutralization” of the sunset clause could “restore the sovereignty of Member States in their climate policies and energy by limiting the risk of litigation.”

Leaving the deal, the Commission argues, would only make things worse, because the 10-year phase out of protections for existing fossil fuel projects would not apply, leaving governments exposed to the 20-year sunset clause even as they ramp up their efforts to reach net zero emissions.

“That is the major downside to withdrawing,” said Johannes Tropper, a researcher and lecturer in Public International Law at the University of Vienna. “If you want to take regulatory action against fossil fuel investments, the problem are the existing investments, not new investments.”

The French council endorsed a Commission proposal for a side deal among EU countries that would make it impossible for EU-based investors to target governments within the bloc. This would immediately defuse the majority of investments currently protected by the ECT in Europe. 

“​​I think there's a lot of legal uncertainty about that approach,” said Tropper. “There's an indication that tribunals wouldn't necessarily view it the same way.”

Several countries, including France, have previously demanded that the Commission conduct a legal assessment for the bloc to leave en masse. 

“The Commission is not preparing a coordinated withdrawal,” said the spokesperson. “The EU will remain party to the ECT in its own right.”

Leonie Kijewski and Barbara Moens contributed reporting.

By Karl Mathiesen and Sarah Anne Aarup

coverphoto: The EU's 27 countries asked the Commission to negotiate an end to fossil fuel protections | Maja Hitij/Getty Images