Little progress has been made to modernise a controversial agreement on energy investments that activists warn could derail decarbonisation efforts in Europe and across the globe, according to leaked documents.
The fifth round of negotiations on reforming the Energy Charter Treaty – an international agreement that allows energy companies to sue governments for decisions impacting their investments – took place in early June.
But attempts by the European Commission to bring the treaty in line with international climate goals have so far fallen flat, according to two leaked diplomatic cables.
“The atmosphere was constructive, but progress was limited, especially on energy issues,” reads one of the leaked diplomatic cables, which was written after a meeting the EU Council’s Working Party on Energy, where the European Commission recently gave EU countries an overview of progress made in the negotiations.
“No substantial progress was made on the definition of economic activity in the energy sector,” the cable says, referring to a section listing which types of energy infrastructure are protected under the treaty.
At the moment, that definition includes almost all energy sources, from coal to renewables. The European Commission, which negotiates on behalf of the 27 EU member states, has proposed gradually reducing protection for fossil fuel investments but has seen little support from other treaty signatories.
Unanimity is required to modify the treaty, whose 54 members include countries like Azerbaijan and Kazakhstan, which are heavily reliant on fossil fuel export revenues and have little incentive to reform.
A sixth round of negotiations to reform the Energy Charter Treaty is opening on Tuesday (6 July) by which point the European Commission hopes to have rallied more support from non-EU states, like the UK and Balkan countries.
However, support for the EU’s reform plan was close to non-existent in the last negotiation round, where only six signatories even expressed views on the Commission’s proposal.
Kazakhstan was the only country to express an official position on the EU proposal and it “openly rejected” it, the documents show.
“After two hours of negotiations, it was clear that the EU proposal did not have enough support. None of the larger contracting parties was prepared to support the EU proposal in its current form. It would be necessary to examine where the EU’s flexibility could lie,” one of the leaked cables says.
EU countries growing impatient
Even if negotiations were to be successful, the EU proposal has been criticised by environmental groups for lacking ambition.
“What is being negotiated here is incompatible with the Paris Agreement. The climate crisis allows no time to wait for negotiations that go nowhere, so EU member states must pack up and leave the ECT by November’s UN climate summit,” said Paul de Clerck, economic justice coordinator at Friends of the Earth Europe, an NGO.
The cables also show that, despite pressure from countries like France and Spain, “withdrawal was not option A” for the European Commission, which continues to negotiate in good faith, hoping to find an agreement.
Some EU countries, however, are growing impatient.
“France renewed its demand for an EU exit plan. They were still sceptical about the developments. Many contracting parties would not get involved. There is little progress on important issues,” according to one of the leaked cables.
There are now suggestions that Poland is ready to back a joint withdrawal, according to one of the diplomatic documents, which says: “Poland and France reiterated their position to look at the consequences of a possible failure of the modernisation process, and they wish to concretely study the option of a coordinated EU exit.”
Germany, meanwhile, is “open to consider compromise proposals” while Austria said modernising the treaty is still the preferred path to leaving.
An out of date treaty
Concern has grown about the treaty hampering the energy transition following two lawsuits against the Netherlands for its coal phase-out law. The Dutch plan to ditch coal by 2030 has been met with compensation claims from German company, RWE, and Uniper.
“This toxic treaty is a sword of Damocles threatening to come down with multi-billion euro compensation claims when countries enact climate policies. We call on European leaders to end this perverse system by immediately withdrawing instead of wasting time in a failed reform process,” said Cornelia Maarfield, trade and climate project manager at Climate Action Network Europe.
The NGO is one of over 400 signatories to a joint statement on the treaty, calling it “an obstacle to the clean energy transition” that must be ended.
“The ECT discourages governments from taking bold decisions: any attempt to change public
policies or public subsidies in the energy sector can lead to millions or even billions in claims
that are paid with taxpayers money,” it warns.
On Tuesday, campaigners protested in Brussels, hanging a sword of Damocles over caricatures of European Commission President Ursula von der Leyen, German Chancellor Angela Merkel, French President Emmanuel Macron and Dutch Prime Minister Mark Rutte.
They called for the European Union and all EU countries to exit the treaty by the COP26 climate summit in November.
However, there are concerns that leaving the treaty could be ineffective because of a sunset clause that means investments will still be protected for twenty years. While walking out would mean no new investments are covered, protection would still be granted to fossil fuel investments.
To get around this, European countries could agree on a change to the treaty applicable only to them that would prevent certain claims. This would be effective as most of the claims are between EU countries.
[Edited by Frédéric Simon]