The ECT modernisation process is bound to fail; pulling out is the only option
The clock is ticking on climate change, but ECT parties are wasting time with potentially endless negotiations to ‘modernise’ the dangerous treaty. In November 2018 a list of topics for modernisation negotiations was approved. The 7th round of negotiations took place in October 2021with no progress been made on the substantial parts of the Treaty. Negotiations are now underway with a stocktaking planned for 16-17 December 2021, when the Energy Charter Conference will meet in Baku, Azerbaijan.
The agenda for the modernisation talks does not live up to the promise of making the ECT climate-friendly. Two of the most obvious and effective reform options are missing from the list of topics that will be discussed: firstly, the exclusion of carbon-intensive energy investments from the scope of the ECT, and secondly, the exclusion of investor-state dispute settlement or ISDS. Both options would prevent polluters from challenging climate change mitigation actions by states outside of their national legal systems, limiting the risk of a chilling effect on climate action.
Cosmetic changes such as those proposed by the European Commission, will not prevent ECT lawsuits against climate action. While the EU proposal for the ECT modernisation contains nice-sounding formulations on states’ right to regulate and the Paris Agreement, they will not shield climate response measures from ISDS challenges. As environmental law group ClientEarth argues: “The ECT, even if revised according to the Commission’s proposal, would still lead to a dangerous chilling effect on environmental and social regulation. The fossil fuel industry does not need to win on the legal arguments. The threat or initiation of an ISDS claim can be enough to delay or undermine policy action, even across borders, regardless of the arbitration’s outcome.”
“It is unlikely that Contracting Parties would reach an agreement to align the Treaty with the Paris Climate Agreement.”
Masami Nakata, former assistant to the ECT Secretary General, on the ECT modernisation
A revised ECT may never see the light of day: members have clashing interests and any change requires unanimity. ECT parties such as Japan have already stated that they see no need for any amendments. An internal European Commission report from 2017 already considered it “not realistic” that the ECT will really be amended. As energy expert Yamina Saheb, a former employee at the ECT Secretariat, put it in a scathing report on the ECT modernisation in February 2020:
“The potential outcomes of ECT modernisation, if any, will be rather marginal compared to the challenges raised in more than two decades of the existence of the ECT…. Withdrawing from the ECT is, therefore, the only option left.”
Civil society calls on states to withdraw from the ECT if negotiations fail to deliver a fossil fuel-free and climate friendly ECT within a reasonable timeline. Rather than waste time and effort on a process that won’t improve the ECT and is unlikely to succeed, we need to focus on the real flaws. The ECT has no chance to be compatible with the Paris Agreement, unless, at the very least it:
1- Excludes fossil fuels from any treaty protection;
2- Removes the investor-state dispute settlement provisions from the agreement.
Anything short of these will not address the risks the ECT poses to climate policies and a just energy transition.