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Energy Charter, from reform to farewell: exit is inevitable for the EU

Energy Charter Treaty, a threat to EU climate ambition

(sustainabilityenvironment.com) – In July 2020 OpenExp, the global network of sustainable development experts, strongly recommended that the European Union abandon any reform of the Energy Charter Treaty and withdraw from the agreement for the sake of the climate. Today the European Commission may have accepted the advice. According to a document reviewed by the Reuters news agency, the European Commission has called “inevitable” an exit of the EU from the controversial Energy Charter Treaty (ECT). The reason? The same one that in 2019 had induced Brussels to undertake a path of reform of the agreement, considered too obsolete in its dynamics. Especially with regard to the Investment and State Dispute Resolution Clause (ISDS).

The Treaty was born in the 1990s to establish a multilateral framework for cross-border cooperation in the energy sector, mainly in the fossil fuel industry. Today it has about 50 signatories, including the countries of the European Union that had ratified it with the hope of strengthening their security and ensuring a continuous supply of resources from East to West. But over time several penalizing limits for nations have emerged. One of the most critical points in the current approach of the ETC concerns the dispute settlement mechanism between investors and the State for the protection of commercial investments. The provisions of the Treaty allow, in fact, companies to sue states for energy projects blocked as a result of new regulations. And in recent years, as the European climate commitment advances, This possibility has resulted in a growing number of lawsuits against national policies and laws that were some obstacle to the fossil industry.

That is why in 2019 the European Commission launched negotiations to reform the Energy Charter Treaty and restore the bloc’s “right to legislate” in crucial areas such as climate. Attempts at improvement were soon rejected by civil society and environmental associations. And they have found a solid wall of opposition both at the European Parliament level and in some Member States. Except Italy, which had already abandoned the ETC in 2016, nations such as France, Germany, the Netherlands, Poland, and Spain continue to threaten withdrawal by increasing pressure on Brussels to coordinate an EU-wide abandonment.

The option proposed in the document viewed by Reuters and shared with the Twenty-seven. In the text the exit from the ETC would be framed as the “most appropriate” option for the EU and remaining in the Treaty would “clearly undermine” European climate objectives. The European Parliament and at least 15 Member States need to support this move.

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