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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 proposed a coordinated withdrawal by the EU from the ECT, with the European Parliament expected to vote on the bloc's exit from the treaty in April 2024. IISD has consistently promoted this outcome, both publicly and behind the scenes. We will continue to lead the efforts to create a sustainable international energy investment landscape in Europe and beyond.

The Energy Charter Treaty (ECT), introduced in 1994, is an international investment treaty in the energy sector spanning Europe and parts of Asia. Today it is widely recognized as an obstacle to the green energy transition and a safeguard for the fossil fuel industry. The ECT has attracted more investor-state dispute settlement (ISDS) claims from fossil fuel companies than any other investment treaty, costing governments hundreds of millions of dollars for enacting energy transition policies.

In July 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. In February 2024, the UK also announced its departure from the treaty. The European Parliament is expected to finally vote on the EU's withdrawal from the ECT in April 2024.

IISD has consistently argued for a coordinated EU withdrawal from the ECT, both publicly and behind the scenes, and has performed extensive legal analysis to help policymakers understand its implications. 

"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 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 EU withdrawal negotiations evolve.

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 the green energy transition and helps accelerate the phase-out of fossil fuels.

 
 

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