- Five fossil fuel companies are known to be seeking over $18 billion in compensation from countries as a result of energy policy changes, with the majority of these claims being made under the Energy Charter Treaty.
- In the next years, the number of these corporate court tribunals is likely to grow, a development that environmentalists fear may stymie plans to shift away from fossil fuels.
- “I believe that the only way ahead is to terminate this treaty,” said Yamina Saheb, an energy specialist and former ECT Secretariat staffer who became a whistleblower.
Disturbances caused for Global Heating
LONDON, UK — The Energy Charter Treaty is a little-known document. However, it is feared that the international agreement’s influence alone could be enough to undermine aspirations of limiting global warming to 1.5 degrees Celsius.
The ECT includes a problematic legal provision that permits foreign energy companies to sue governments over climate action that threatens future revenues.
Five fossil fuel companies are believed to be suing governments for over $18 billion in compensation over energy policy changes, with the majority of these cases being launched through the ECT.
“The Dutch government has indicated its aim to shut down the final coal-fired power stations without compensation by 2030,” a Uniper representative told reporters. Uniper is confident that shutting down our Maasvlakte power plant after only 15 years of operation would be illegal if suitable compensation was not provided.”
RWE stated that it “strongly supports the Dutch energy transition.” It also supports the law’s CO2 reduction measures in principle, but believes that compensation is required.”
What will be the expected reaction if countries leave?
Italy left the ECT in 2016, but it is currently being sued over a 20-year “sunset clause,” which means it is still bound by the treaty until 2036.
Member states might agree to eliminate the legal implications of the sunset provision itself if the bloc decided to exit from the treaty collectively.
That sunset clause is not just substantially longer than many other treaty sunset terms, but it is also utterly incompatible with the concept. Regulations based on this approach must evolve in response to the changing reality of climate change. According to Nikki Reisch, head of the Center for International Environmental Law’s Climate & Energy Program, “this continues to respond to the shifting demands of defending the environment and human rights.”
“We can’t let the interests of investors hold us hostage to our ability to handle the worst issue that humanity has ever faced,” Reisch added. “I think it’s simply another reminder of how important it is to get rid of the legal frameworks and fictions that have trapped us in a fossil-fuel-dependent society.”