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French President Emmanuel Macron made international news headlines when he announced after an EU summit on Friday that France would leave the Energy Charter Treaty, an international agreement meant to safeguard energy investments, including those in fossil fuels.

For some, France’s decision to withdraw was the final nail in the coffin of the treaty, which was conceived in the 1990s at a time when oil and gas majors were looking to shield their investments from political instability in the former Soviet Union.

Like the Netherlands, Spain, and Poland, which also announced their intention to withdraw earlier, Macron explained his decision by underlining the ECT’s misalignment with modern-day objectives, like the fight against climate change, which implies ditching fossil fuels as quickly as possible.

But the ECT was conceived precisely to survive political mood swings, including those created by politicians’ desire to go green.

At the centre of the treaty is a “sunset clause”, which extends the validity of the ECT’s provisions to investments for 20 years after the date of withdrawal.

In other words, withdrawing from the treaty will do nothing to lift the protection for fossil fuel investments for another 20 years, and will leave the departing countries exposed to litigation from energy companies seeking to safeguard their expected benefits.

It’s Halloween season, so let’s call this the ‘zombie clause’.

Environmental activists, who hate the treaty most, have called for a coordinated withdrawal of all EU member states and the EU itself as the best solution to circumvent the zombie clause.

Since most litigation cases are filed by companies in the EU, they argue that the clause can be neutralised with an intra-EU agreement. They also point to a 2021 ruling by the European Court of Justice, which stipulates that the ECT cannot be used in lawsuits between EU countries.

This would address about 80-90% of all investor-state disputes brought under the ECT, said Paul de Clerck, a green campaigner with Friends of the Earth Europe.

However, there is no guarantee that the EU can effectively neutralise the sunset clause. Like a zombie rising from the dead, the clause can raise its ugly head during litigation cases brought before private arbitration tribunals appointed under the ECT.

“The problem is that the ECT is interpreted by arbitrators when there is a dispute. And arbitrators have tended so far to completely ignore what the European Commission says and what the European Court of Justice says,” said a source familiar with the treaty’s reform process.

An even bigger problem could be Article 16 of the ECT. Under that clause, any subsequent agreement passed among ECT members “does not apply if it lowers the level of protection for investors,” the source explained.

This little-known ‘non-regression clause’, which the source described as “fairly obscure” and “very powerful”, means energy investments – including those in fossil fuels – would be shielded from subsequent agreements passed between ECT countries, including those aimed at protecting the environment.

Moreover, even if the European Union and its member states were to leave the treaty at once, they would still be exposed to litigation cases brought by companies headquartered in places like Switzerland, the UK, or Japan, which are still members of the ECT.

This is why the European Commission is still convinced that finalising the treaty’s modernisation process is the best option for the EU.

In June, after years of negotiation, the EU executive announced a hard-won deal to carve out fossil fuels from the ECT, under which existing oil, gas and coal assets would enjoy legal protection for another 10 years instead of the 20 years guaranteed under the zombie clause.

It may not be ideal but it is the best deal on offer, the Commission argued at the time, pointing out that unanimity is needed to pass the reform among the treaty’s 53 signatories.

“This has been one of the main reasons that the Commission, together with the member states, opted for modernisation in the first place. In case of withdrawal, the risk of further claims from existing investors, including on fossil fuels, remains,” the European Commission told EURACTIV in emailed comments.

Besides, leaving the ECT would also deprive European energy companies of investment protection in other parts of the world, warned Irina Kustova, a researcher at the Centre for European Policy Studies (CEPS) in Brussels.

“For the rest of this decade, investment in alternatives to Russian fossil fuels will remain vital, as does reliable and uninterrupted transit via the southern gas corridor, which is also covered by the Treaty’s transit provisions,” she wrote in a recent commentary.

In a worst-case scenario, countries like China or Turkey could use the political vacuum left by the EU’s departure from the ECT to strengthen their presence in the South Caucasus and Central Asia, Kustova warned.

Germany, which has not yet spoken out publicly on the ECT, may be sensitive to this argument and has reserved its judgement until after the ECT conference on 22 November, which is expected to endorse the treaty’s modernisation.

And so is a majority of EU member states, which have so far expressed their preference for reforming the ECT rather than leaving.

The stakes are high. If the EU fails to ratify the modernised treaty, the old one – including the fossil fuel provisions hated by Europe – will continue to apply for another 20 years.

Beware of the zombie treaty.

– Frédéric Simon

Note: It’s Halloween season so the author of this Green Brief feels obliged to delight you with a classic song from a cult 1980s metal band aptly named Death. My six-year-old son likes it very much and calls it the zombie song. Enjoy.

This week’s top stories

• EU countries agree ‘fragile compromise’ on green buildings directive
• Energy ministers split on EU gas price cap, move towards joint purchasing
• EU countries agree COP27 stance after row on climate ambition
• France to withdraw from the Energy Charter Treaty
• LEAK: Victory for car industry as EU waters down vehicle pollution rules
• France trades MidCat pipeline for an already controversial new project
• Europe’s citizen-led energy revolution tangled in legal difficulties
• EU leaders back ‘dynamic’ gas price cap idea, default solidarity rules

More:

• From coal to heat pumps: Poland’s transition to green heating
• Brussels cautions against EU-wide gas price cap for electricity
• UAE’s first hydrogen-derived shipment delivered to Germany
• World is in its ‘first truly global energy crisis’, says IEA’s Birol
• Expert: Speeding up energy transition is the only way out of crisis for Poland
• Analysis: Pipeline blasts leave Nord Stream in insurance limbo
• Shell CEO warns about looming ‘industrial rationalisation’ in Europe
• High-emitting countries ‘need to step up’ at COP27, US official says
• Energy crisis sets Poland on rocky transition out of fossil fuels
• Russia poised to largely skirt new G7 oil price cap
• MEPs raise ‘geostrategic dependence’ concerns over shift to electric vehicles
• France must withdraw from Energy Charter Treaty, climate advisors say
• As energy prices drop, Berlin cautions against market intervention
• ‘Not using energy is the cheapest energy’, EU climate chief insists
• Netherlands follows Spain in quitting Energy Charter Treaty
• US sells oil reserves as Biden tackles pump prices ahead of elections
• Parliament backs EU’s maritime fuel law to curtail shipping emissions
• Madrid moves to get Spaniards excited by solar panels

News from the capitals

LJUBLJANA. Slovenia “very likely” to withdraw from Energy Charter Treaty. Slovenia will follow the lead of countries such as the Netherlands, Spain and France and very likely withdraw from the Energy Charter Treaty, Infrastructure Minister Bojan Kumer announced on Tuesday. Read more.

BRATISLAVA. Half of Slovaks could struggle to pay energy bills. Paying off electricity and heating bills is expected to become a serious problem for more than half of the Slovak population, of which many have already shown signs of struggle. Read more.

PRAGUE. Czech-Polish Turów mine deal criticised by German and Czech NGOs. In a complaint filed to the Commission, Czech and German NGOs criticised the agreement between Czechia and Poland, which allows Poland to use the Turów coal mine despite its negative impact on the Czech environment. Read more.

MADRID. Spain is keen to help EU countries that rely on others for energy.  Spain wants to help EU countries with little few electricity generation capacities to mitigate the consequences of the energy crisis, with Ecological Transition Minister Teresa Ribera convinced that other member states would benefit from a mechanism like the Iberian exception. Read more.

LISBON. Portuguese government confident despite foundering Nigerian gas supplies. Nigerian gas supply issues will not significantly impact energy bills and supplies as the energy company Galp will buy gas elsewhere to meet its contractual obligations, the government promised on Tuesday. Read more.

STOCKHOLM. Sweden’s climate ambitions under threat as centre-right takes reins, NGOs warn. Climate policies presented by Sweden’s new centre-right coalition will likely contribute to a drastic increase in greenhouse gas emissions during its mandate, equivalent to half of the country’s annual emissions, a new report published on Tuesday has found. Read more.

VIENNA. Austria concerned as EU executive continues work on gas price cap. The Austrian government has voiced concerns regarding the price caps envisioned by Spain and France to tackle ever-increasing energy prices despite the country speaking in favour of intervention. Read more.

BRATISLAVA. Slovak government to cap energy prices for businesses. Prime Minister Eduard Heger announced that the government will cap energy prices for companies and businesses from 2023. Read more.

PRAGUE. Czech scientists struggle with energy costs, ask government for help. The scientific research department at Masaryk University has spoken out about rising energy costs and the impact it has on work while asking the government for assistance. Read more.

VALLETTA. Malta unveils deficit-busting, energy-focussed budget. Malta’s budget for 2023 was unveiled on Monday with a significant focus on the energy crisis and protecting the vulnerable amid increased prices and global economic uncertainty. Read more.

LISBON. Portuguese PM is confident in EU finance for new gas interconnection system. Prime Minister António Costa on Monday expressed confidence in the negotiations of Portugal, Spain, and France with the European Commission to finance the energy interconnection system, arguing that it is a project of common European interest. Read more.

MADRID. EU should speed up energy transition despite coal return, says, Spanish minister. The EU should speed up its energy transition despite the fact that the shortage of Russian gas has led the bloc to burn more coal temporarily, Spanish Ecological Transition Minister Teresa Ribera stressed Monday. Read more.

DUBLIN. Ireland, UK to launch joint €74 million initiative on climate research. Dublin and London will join forces to fund a programme supporting researchers working on climate change issues, both governments announced on Monday. Read more.

THE HAGUE. Joint purchasing ‘extremely important’, says Dutch energy minister. Jointly purchasing fossil gas is extremely important to help tackle the ongoing energy crisis, which is expected to last into at least 2023, Dutch minister Rob Jetten said ahead of a meeting of energy ministers on Tuesday. Read more. 

BRUSSELS. Belgian environment minister supports withdraw from Energy Charter Treaty. Climate, Environment, Sustainable Development, and Green Deal Minister Zakia Khattabi reiterated her support for Belgium’s withdrawal from the Energy Charter Treaty during the Environmental Council meeting on Monday. Read more.

HELSINKI. Finland to likely reject Brussels’ biodiversity strategy. Finland may vote against the Biodiversity Strategy tabled by the Commission, said Prime Minister Sanna Marin after her Green Environment and Climate Change Minister Maria Ohisalo and a parliament committee opposed Brussels’ involvement in the country’s forest policy. Read more.

LJUBLJANA. Slovenia on cusp of signing gas supply deal with Algeria. Slovenia’s gas trader Geoplin will soon sign a natural gas supply deal with Algeria’s Sonatrach, Infrastructure Minister Bojan Kumer announced on Thursday. Read more.

WARSAW. Poland sets coal price limit for end consumers. The Sejm, the lower chamber of the Polish parliament, adopted a bill establishing a maximum coal price for end consumers, which is another step by the government to mitigate the effects of the energy crisis and embargo on Russian coal. Read more.

PRAGUE. Snag in replacing Czech Environment Minister amid EU Presidency. When Environment Minister Anna Hubáčková (KDU-ČSL, EPP) resigned due to health reasons, she expected to be quickly replaced by her co-partisan Petr Hladík, but his nomination soon became complicated after he came under police scrutiny. Read more.

LISBON. Portugal, Spain working on joint energy storage project. A ‘very important project’ between Portugal and Spain for joint energy storage on the Iberian Peninsula to mitigate matters like the energy crisis and drought was announced by Portuguese Prime Minister António Costa on Thursday. Read more.

MADRID. Spain, France, Portugal abandon MidCat, agree on green energy, gas corridor. The MidCat gas interconnector project between France and Spain will be abandoned and replaced with a green energy corridor, Spain’s Prime Minister, Pedro Sanchez, announced on Thursday. Read more.

BERLIN. Berlin resists price caps, pushes EU to ‘develop new gas fields’. With only weeks to go before a key UN climate conference, the German government is pushing EU leaders to work with countries that have the capacity “to develop new gas fields”, according to a document seen by EURACTIV. Read more. 

BUCHAREST. Romanian company joins forces with Azerbaijan for Black Sea LNG investment. Romanian state-run company Romgaz signed with Azeri SOCAR a memorandum of understanding for joint investment in liquefied natural gas (LNG) facilities in the Black Sea. Read more.

LISBON. Portugal lacks infrastructure to complete energy connection with Spain. Portugal lacks 162 kilometres of infrastructure to complete the energy interconnection with Spain and, Prime Minister António Costa said on Wednesday. Read more.

ATHENS. Washington rejects Putin’s call to make Turkey Europe’s gas hub. The US has reacted negatively to a proposal made by Russian President Vladimir Putin to turn Turkey into a gas hub for the EU. Read more.

MADRID. Sánchez, Costa push for Midcat pipeline, to meet with Macron in Paris. Spanish Prime Minister Pedro Sánchez and his Portuguese counterpart, António Costa, are pulling together again in a “last minute” move to convince French President Emmanuel Macron of the urgent need to build the MidCat pipeline, the project of gas interconnection through the Pyrenees. Read more.

News in brief

Report flags emerging human rights risks linked to renewable energies. Although renewables are essential to the energy transition and reducing greenhouse gas emissions, they are “far from immune” to human rights violations that have plagued the fossil fuel industry, according to a new report.

If not addressed, these can cause project delays, community conflict and ballooning costs for investors, according to research by the Business & Human Rights Resource Centre, a charity registered in the UK and the US. 

“When investors fail to consider human rights an essential part of the energy transition, they expose themselves and their portfolio companies to reputational risk and legal and financial costs,” said Jessie Cato from the Business & Human Rights Resource Centre.

In the hydropower sector, 22% of all individual allegations of abuse related to land rights, a number that reaches 23% in the wind sector. Across the globe, most attacks against indigenous rights defenders were related to hydropower projects (331 attacks), followed by wind (34 attacks), solar (15 attacks), geothermal (8 attacks) and biofuels (1 attack). 

WindEurope, an industry association, did not deny that human rights violations may be taking place but said the vast majority of those occur outside Europe. “The only case featuring indigenous communities in Europe we are aware of is a case on onshore wind in Norway,” said Christoph Zipf from WindEurope. To address the issue, the wind industry has adopted some guiding principles for companies in the  supply chain, which sets standards for company behaviour, including on the consultation of local communities, Zipf said. (Frédéric Simon | EURACTIV.com) 

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Air quality directive revision ‘imminent’. While air quality improved significantly across Europe over the past 10 years, air pollution remains a major cause of premature deaths, especially for those living in cities, according to the European Environment Agency (EEA).

Reducing mortality, and meeting the air quality standards set by the World Health Organisation (WHO), should be guiding principles when the European Commission updates the EU’s Ambient Air Quality Directive, according to a cross-party group of MEPs, who say the revision is “imminent”.

“We are very concerned that you are about to set standards that are by far exceeding the WHO guidelines,” says a letter to the Commission signed by Michael Bloss (Greens/EFA), Javier López (S&D), Martin Hojsík (Renew), and Anja Hazekamp (The Left). “We urge you to follow the scientific advice of the WHO and to introduce binding EU clean air standards that fully meet WHO air quality recommendations by 2030 at the latest,” the letter says. Read the full letter here. (Frédéric Simon | EURACTIV.com) 

Opinions

• Hungary risks billions in EU funds if it goes ahead with investments in coal – by Alexa Botár  
• Ukraine reconstruction must steer clear of energies that allowed Putin to thrive – by Svitlana Romanko

Upcoming events

27 OCTOBER. How to ramp up hydrogen production & speed up the steel industry’s transition, while navigating an unprecedented energy crisis? Join this EURACTIV Hybrid Conference to discuss how to ramp up hydrogen production and speed up the steel industry’s transition in the current context of an unprecedented energy crisis. Speakers include MEP Jens Geier, Rapporteur for the Hydrogen and Gas Directive, and more to be announced soon. Programme and registration here. (Supported by Eurofer).

29 NOVEMBER. The EU methane regulation after REPowerEU – How energy security and methane action go hand in hand. In 2021, the European Commission proposed the Methane Regulation, the first EU-wide legislation aimed at cutting methane emissions. Since then, the file has stalled in the European Parliament. This event is designed to highlight the importance of the regulation, examine the approaches, and to reflect on the radical shifts in the European policy landscape as a result of the Ukraine situation and the Commission’s RePowerEU plan in response. Programme and registration here. (Organised by Clean Air Task Force in media partnership with EURACTIV). 

7 DECEMBER. EU Energy Transition – what role for critical raw materials? The European Commission, together with relevant stakeholders, is working on different action plans and initiatives to address critical raw materials in supply chains. Join this EURACTIV Virtual Conference to discuss the role of critical raw materials in ensuring a fast and ambitious energy transition across Europe. Programme and registration here. (Supported by Nickel Institute). 

On our radar

OCTOBER

• 26 OCTOBER. Zero Pollution Package:
  • Integrated water management – revised lists of surface and groundwater pollutants 
  • Revision of EU ambient air quality legislation 
  • Review of the urban wastewater treatment directive

NOVEMBER

• 6-18 NOVEMBER. Sharm el-Sheikh Climate Change Conference (COP27).
• 9 NOVEMBER. Post-Euro 6/VI emission standards for cars, vans, lorries and buses.
• 9 NOVEMBER. Second round of trialogue negotiations on EU deforestation law.
• 14-25 NOVEMBER. Conference of the Parties – CITES, Panama (COP19).
• 15-16 NOVEMBER. G20 meeting.
• 24 NOVEMBER: Emergency Energy Council 
• 30 NOVEMBER. Circular Economy Package 2:
  • Proposal for a Regulation on substantiating environmental claims using the product / organisation environmental footprint methods (green claims)
  • Policy framework for bio-based, biodegradable and compostable plastics
  • Review of the Packaging and packaging waste Directive to reinforce the essential requirements for packaging and establish EU level packaging waste prevention measures and targets
  • Carbon removal certification

DECEMBER

• 5-17 DECEMBER. UN Biodiversity Conference (COP15). Montreal, Canada. 
• 15-16 DECEMBER. European Council. 
• 19 DECEMBER. Energy Council. 
• 20 DECEMBER. Environment Council. 

[Edited by Zoran Radosavljevic and Frédéric Simon]

Read more with Euractiv

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Coal is a vital source of energy in Poland, and not just for electricity production since 46% of households heat their homes with the highly-polluting fuel. But as prices for lignite skyrocket, the country’s green transition is receiving a welcome boost.