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The Energy Charter Treaty

The Energy Charter Treaty (ECT) is a regional energy investment agreement that has grown into an obstacle to impactful climate policies—and a safeguard for the fossil fuel industry.

The European Commission has recently proposed a coordinated withdrawal by the EU, all of its member states, and Euratom from the ECT. IISD has consistently promoted this outcome, both publicly and behind the scenes. We have had an impactful role throughout the developments and will continue to lead the efforts to create a truly sustainable international energy investment landscape in Europe and beyond.

The Energy Charter Treaty (ECT) was introduced in 1994 to enable multilateral cooperation in the energy sector. However, today it is widely recognized as an obstacle to the green energy transition and a safeguard for the fossil fuel industry. The ECT has become the most used treaty in investorstate arbitration, costing governments hundreds of millions of dollars and preventing more ambitious climate action.

On July 7, 2023, the European Commission proposed a coordinated withdrawal by the European Union (EU), its member states, and Euratom from the ECT, citing the treaty's incompatibility with the EU's climate targets under the European Green Deal and the Paris Agreement. During the twelve months prior to the Commission's proposal, a host of large EU member states - including Germany, France, Spain, and the Netherlands - had decided to walk away from the treaty, due to the lack of climate ambition of its modernization efforts. IISD has consistently argued for this outcome, both publicly and behind the scenes, and has performed extensive legal analysis to help policymakers understand its implications. 

“The outdated Energy Charter Treaty is not aligned with our EU Climate Law and our commitments under the Paris Agreement”, Executive Vice-President for the European Green Deal Frans Timmermans said, adding that the EU instead should focus on building an energy system that "promotes and protects renewable energy investments."

"The European Commission’s decision to recommend a coordinated withdrawal of the EU and its members from the ECT is a step in the right direction. A coordinated exit will contribute to a more coherent climate policy for the EU and its member states", IISD's Interim Co-President and Vice President Nathalie Bernasconi-Osterwalder commented.

“This is a unique opportunity for the EU to speak with one voice and to remove a major obstacle to realizing its climate targets. The Commission’s new proposal of a fully coordinated exit would allow the member states to coordinate their position, clarify their post-withdrawal relationship, and minimize risks of the so-called ‘sunset clause’ by neutralizing it. It would also prepare the ground for a harmonized timeline for the withdrawal, contributing to legal certainty", IISD's ECT expert Lukas Schaugg said.

IISD has played a leading role throughout these developments. Our experts have conducted cutting-edge research and live analysis from the start of the process - and will continue to do so as the negotiations evolve following the Commission's proposal.

Through regular events, direct outreach to political decision makers, and awareness-building across civil society and media, IISD continues to promote an outcome that accelerates rather than undermines the phase-out of fossil fuels. In addition, we are working to prevent the model from being replicated in regions of the Global South.

Together with our academic and civil society partners, IISD will continue to lead the conversation on - and redesign of - the international energy investment landscape in the months and years ahead, to ensure that it promotes sustainable policies and helps accelerate the phase-out of fossil fuels.

 
 

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