The UK should exit the Energy Charter Treaty – Chris Skidmore MP

Wind turbines set against backdrop of coal power plant.
Wind turbines set against backdrop of coal power plant. The controversial Energy Charter Treaty allows fossil fuel investors to sue governments against policy measures if their interests are undermined.

This comment piece has been written by the Rt Hon Chris Skidmore, MP for Kingswood in Gloucestershire and Chair of the All-Party Parliamentary Group for the Environment.

Efforts to reform the Energy Charter Treaty have failed. The UK government must deliver on its commitment to review its membership of the treaty by the end of this month and use this opportunity to withdraw.

In September, the UK government put its membership of the controversial Energy Charter Treaty under review, setting a deadline of the end of this month to update its position.

The review came after the Climate Change Committee, the government’s independent advisors, said in June that “continued membership of the Energy Charter Treaty represents risks to both a timely climate transition and to the taxpayer” and that the UK should announce intent to withdraw.

There is strong support from my fellow parliamentarians for withdrawal too. Over recent months, members of the All-Party Parliamentary Group for the Environment representing all major parties have called on the government to leave, with a consensus that membership is not the right choice for climate or taxpayers.

This controversial treaty allows fossil fuel investors to sue governments against policy measures if their interests are undermined. The Netherlands has been sued for its coal phaseout law, Italy for banning offshore oil drilling and Slovenia for banning fracking. In just the last few months, Ireland, Germany, Denmark, and the European Union, have all faced new legal cases under the treaty.

Since September 2022, nine European countries have now taken the decision to leave this outdated treaty due to how it limits their policy space to take ambitious climate action. The European Commission has since proposed a collective EU withdrawal.

With so many countries now walking away from the treaty entirely, and the EU still working to find a common position, the Energy Charter Conference once again failed to adopt reforms to modernise the treaty at their meeting on 20 November – having also failed in the same way last year.

The UK government has long been a proponent of reforming the treaty. However, as the UK’s net zero minister Graham Stuart recognises, there are now significant risks that the UK becomes “stuck indefinitely with an outdated treaty”.

Now is the moment for the UK to announce its intent to withdraw – exactly what the government said it would consider if modernisation was not agreed by the end of this month – and begin the process of coordinating UK withdrawal with like-minded countries.

Recent analysis by the climate think tank E3G confirms it is in the UK’s interests to actively pursue an orderly Energy Charter Treaty exit. Leaving the treaty would insulate the UK from legal claims deriving from new fossil fuel investments. A coordinated withdrawal with those countries that have already decided to withdraw would additionally reduce its exposure to potential claims from existing fossil fuel projects by 30%. Importantly, such exposure could decrease by as much as 78% if the EU and all its member states decide to withdraw jointly.

The UK leaving the Energy Charter Treaty should therefore be seen as the beginning of a new diplomatic process rather than merely the ending of one.

The UK has a positive history of climate diplomacy and international climate leadership.  Earlier this month, the UK led an OECD meeting to end export finance, such as loans and guarantees, for foreign fossil fuel projects. The UK has been a leader in driving a change in export finance policies to meet climate goals. In 2021, it mobilised more than 30 countries to join the Glasgow Statement at COP26 to end international public finance support of fossil fuels.

Yet the UK has been lagging behind other European countries in investment treaty policies, despite this being another critical policy area that shapes foreign investments.

By leaving the Energy Charter Treaty, and convening a diplomatic process around orderly withdrawal, the UK can bring its approach to investment governance in line with its climate leadership in other areas.

Following the failure of last week’s conference to progress reforms to the treaty, calls from Westminster for withdrawal will only grow.

With COP28 beginning tomorrow, now is the moment for the UK to take decisive action and leave the Energy Charter Treaty, while working with other countries to ensure an orderly withdrawal process.


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