The European Energy Charter was first signed in 1991, mainly to connect the resource rich fuel producing regions in Eastern Europe with much-needed Western European investment. But the world has changed a great deal since then, writes Howard Chase.
By Howard Chase, Director of Government Affairs for Dow Europe and Chairman of the Industry Advisory Panel of the Energy Charter.
The world has changed a great deal since the European Energy Charter was first signed in 1991. That Charter reflected the geopolitical realities of the day and was designed first and foremost to connect the resource rich fuel producing regions in Eastern Europe with much-needed Western European investment. The Charter aimed to usher in a new era of East-West energy cooperation that protected investment and underlined the rule of law in the pan-European energy market.
Today we are facing a very different situation. The world has globalised much faster and much deeper than could have been imagined twenty years ago. Climate change has exploded onto the international agenda and new economic giants have emerged on the world stage. It has consequently been clear for some time now that a new and renewed Energy Charter is required and one that is truly global in scope.
It is to that end that between the 20th and 21st May 2015, the Ministerial Conference on the International Energy Charter was held in The Hague, the Netherlands. It was a real success and great credit should go to the Government of the Netherlands, the Energy Charter Secretariat and all involved. A total of 75 countries, the European Union, the European Atomic Energy Community and the Economic Community of West African States (ECOWAS), signed up to or adopted a new and expanded International Energy Charter, with new signatories from right across the globe. Importantly, this list includes China; arguably the single most important energy market on the planet.
As with the Charter it has replaced, the International Energy Charter commits signatories and adopters to the efficient functioning of energy markets, investment protection, free transit of energy resources, promotion of trade in energy and energy-related goods, and cooperation in energy policy development, including energy efficiency and environmental protection. Building on the ’91 Charter, the International Energy Charter also recognises the importance of fair access to modern energy and the growing importance of low-carbon and renewable energy.
The success of the new International Energy Charter demonstrates that signatories and adopters understand the critical need for investment in accessible, affordable, secure and sustainable energy, underpinned by appropriate legal protections.
For businesses and investors in all parts of the energy chain, the potential benefits of the Energy Charter framework are clear. As was recognised during the Ministerial Conference, businesses need pragmatic investment and innovation rules and a level playing field in order to flourish, and the International Energy Charter promises to deliver both.
In this respect, the International Energy Charter also plays into a wider trend for better regulation, recently championed in Europe by Commission President Jean-Claude Juncker and First Vice-President Frans Timmermans. To my mind, better regulation means more effective regulation and the promotion of innovation. Innovation can best flourish in successful economies which are open, flexible and dynamic and which reward effective risk management. The new International Energy Charter goes a long way towards helping to create just such an environment in the energy field and should be welcomed.
With the International Energy Agency forecasting that some $48 trillion in investment is needed to meet the world’s growing energy demand up to 2035, the International Energy Charter could not have come at a better time. The world requires cooperation, investment and innovation to combat the energy challenges that lie ahead, and the International Energy Charter is an important next step in this endeavour.