Stock Groups

The fight to dismantle the little-known Energy Charter Treaty

[ad_1]

Uniper SE operated the electricity transmission poles near Irsching’s gas-fired power station on Wednesday July 7, 2021.

Michaela Handrek-Rehle | Bloomberg | Getty Images

LONDON — The Energy Charter Treaty is not widely known, yet it’s feared the influence of this international agreement could be enough by itself to derail hopes of capping global heating to 1.5 degrees Celsius.

The ECT contains a highly contentious legal mechanism that allows foreign energy companies to sue governments over climate action that could hurt future profits.

The “corporate court” cases are sometimes called investor-state disputes settlements. They can lead to much larger financial awards than what companies would expect.

There are five fossil fuel companies already knownTo seek $18 Billion in damages from the governments for energy policy changes, most have been made via the ECT.

Germany, for example. RWE UniperThe U.K. and the Netherlands are being sued over their coal-phase-out plans. RockhopperItaly has been sued for a ban against offshore drilling.

It is not enough for countries to leave the treaty. They also have to destroy it along their way.

Julia Steinberger

University of Lausanne: Ecological economist, professor

CNBC was told by Uniper spokesperson: “The Dutch government announced that it would shut down all remaining coal-fired power stations in 2030, without any compensation.”

“Uniper believes that closing down Maasvlakte’s power plant after just 15 years would be illegal without proper compensation.”

RWE declared that it supported the Dutch energy transition. It supports in principle the laws to lower CO2 but feels compensation is needed.

Rockhopper has not responded to our request for comment.

Campaigners worry that this trend will cause a halt to plans by increasing the number of corporate courts tribunals. to transition away from fossil fuels.

In the meantime, governments that do not agree to take action to address climate change could face huge fines.

Yamina Saheb (an energy expert who was formerly employed by the ECT Secretariat and whistleblower) said that “The Energy Charter Treaty” is a trap for countries.

Saheb resigned from her position with the Secretariat on June 2019, after concluding that it was impossible to align the ECT and the landmark’s goals. Paris Agreement. Because many members are dependent on fossil fuel revenue, any attempts to amend or modernize this treaty will be rejected.

The cooling towers at the Weisweiler, a lignite-fired power station in Germany, release thick smoke and clouds of water vapour.

Getty Images| picture alliance | Getty Images

Saheb stated, “If we withdraw we can protect ourselves. We can begin implementing climate neutrality targets. And we can stop the promotion of expanding this treaty to others developing countries.”

“I believe that the only path forward is to destroy this treaty,” she said. Either we end this treaty or it will be killed by us.

CNBC reached out to the ECT Secretariat but was unable to reach them immediately.

This treaty is now in effect saidIts fundamental purpose is to “enhance the rule of energy law by creating an equal playing field of rules,” which helps reduce the risk associated with investment in energy-related trade.

How does this work and who is involved?

The ECT is a multilateral, unique framework. applies to more than 50 countries — mostly in Europe and central Asia — and includes the European Union, the U.K. and Japan among its signatories. It’s currently seeking new signatory nations, particularly in Africa and Latin America.

In 1994 the ECT was created to assist western investors in post-Cold War countries. Through binding investment protection, it was designed to aid in the resolution of economic divisions.

More than 200 scientists and climate leaders have criticized it as “a joke” since then.major obstacle“To avert climate catastrophe.

On October 7, 2021, hundreds of people walked through the water in Dhaka after heavy rainfalls caused flooding.

Eyepix Group | Eyepix Group | Barcroft Media | Getty Images

“I feel that the treaty alone is sufficient to end 1.5 [degrees Celsius]CNBC interviewed Julia Steinberger, an ecological economist from University of Lausanne and professor.

“I know that 1.5 is a very tight target and there are a lot of things that can blow it, but it is because it basically saves fossil fuel industries … from the financial collapse that they should face for their risky — and honestly criminal — investments in a harmful technology.”

Corporate court hearings via the ECT are held in private. Investors do not have to confirm the existence or disclose the amount they want.

An estimate of the cost of investor-state disputes settlement cases amounts to approximately 110 million euros (or 123.9 million dollars). analysisOpenExp is aware of over 130 cases and estimates that the average legal fee and arbitration costs are around 4.5 million Euros.

International environmental law experts say that even the threat of legal action is thought to be highly effective in chilling domestic climate action — and fossil fuel companies are acutely aware of this.

This is because government may not be able to dedicate resources to one issue while also accounting for all other priorities. As the country’s budget decreases, the threat of legal action grows more potent.

A decision in favor of the State does not result in zero costs for taxpayers. The defendant state is responsible for paying for arbitration and legal fees.

Steinberger explained that “not only must countries get out from this treaty, but they also have to torpedo the treaty on their way out.” A unit as large and powerful as the European Union can do that.

CNBC reached the EU via phone number but was unable to get a spokesperson.

The EU concluded its 8th round of negotiations for modernizing the ECT in early December. A 9th round is scheduled for Dec.

France, Spain, Luxembourg and Luxembourg each suggested that they could withdraw from the EU if its modernization efforts do not conform to the Paris Agreement.

What happens when countries leave?

Italy withdrew in 2016 from the ECT, but is currently being sued due to a 20 year “sunset clause”, which makes it subject to the treaty up to 2036.

About 60% of the cases that are based upon the treaty involve intra-EU countries. Spain and Italy are the most frequently sued. Saheb explained that most cases based on the treaty are located within the bloc. A coordinated withdrawal will likely cause a domino effect and states like Switzerland, Norway, Liechtenstein, Liechtenstein, and Norway would be likely to follow.

If the bloc decides to withdraw collectively from the treaty the members could also agree to repeal the legal effect of the sunset provision.

“That sunset clause is much longer than many sunset clauses in other treaties but is also completely incompatible with the notion that regulations need to evolve with the changing reality of climate change, to the changing demands of safeguarding the environment and human rights,” Nikki Reisch, director of the Climate & Energy Program at the Center for International Environmental Law, told CNBC.

She said, “There is a very strong case that the enforcement or application of this sunset clause is against other principles of international legal law.”

View of open wagons laden with coal, under the smog. The incident occurred on February 22, 2021 when PM2.5 concentration was at 198 ug/m3 in Czechowice Dziedzice. The central eastern European country has the EU’s worst air, according to a report published by the European Environment Agency (EEA).

Getty Images News | Getty Images News | Getty Images

The European Court of Justice ruledIn September, EU energy companies were unable to use the treaty against EU governments. This verdict has significantly limited the potential scope of intra-EU lawsuits in the future and has cast doubt on the legitimacy of several ongoing multi-billion euro lawsuits.

Reisch declared that they aren’t done yet. She said the ruling was an important step towards blunting an instrument that protects fossil fuel investors. But it does not remove arbitration cases of investors domiciled in countries outside the EU from the discussion.

Reisch declared, “We cannot let our ability confront the largest crisis that we have faced as humans, arguably,”

It is a reminder that legal structures and fictions we have created are not the answer. They can lock us in to a past era of dependence on fossil fuels.

[ad_2]