The Energy Charter Treaty
The Energy Charter Treaty is an energy investment agreement that has grown into an obstacle to Europe's climate transition and a safeguard for the fossil fuel industry. The European Union (EU), Germany, France, the United Kingdom, and other EU member states have all withdrawn from the treaty, which IISD advocated for. We are now leading on legal solutions for neutralizing the ECT's 'sunset clause'.
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 against states than any other investment treaty, costing governments hundreds of millions of dollars for introducing climate change policies.
On April 24, 2024, the European Parliament voted for the European Union's (EU) withdrawal from the ECT. This followed withdrawal announcements from Germany, France, Spain, the Netherlands, the United Kingdom, and a host of EU member states.
The vote was preceded by a European Commission's proposal for a coordinated withdrawal by EU, its member states, and Euratom from the ECT, which underlined the treaty's incompatibility with the European Green Deal and the Paris Agreement.
IISD continues to drive the conversation on the ECT, raise awareness of the need for further withdrawals from the treaty, and provide legal solutions to policy-makers executing the decisions. We act publicly and behind the scenes, including through in-depth research, analysis of unfolding events, seminars, engagement with decision-makers, and media commentary in outlets including Financial Times, the Guardian, and Reuters.
Following the withdrawals, IISD is now advancing solutions on tackling the ECT's contentious 'sunset clause', which attempts to protect existing fossil fuel investments for a further 20 years after states' withdrawals, through bespoke neutralizing agreements (so-called inter se agreements).
In addition, we are working to prevent the model from being replicated across the Global South.
In the News
IISD’s research on the Energy Charter Treaty has featured in media coverage across Europe, including in the Financial Times, Politico, Reuters, and Deutsche Welle. We have co-authored op-eds and blogs published in Euractiv, German Verfassungsblog, and Der Standard.
Commission must stop Energy Charter Treaty hijacking EU climate policy - Euractiv
"Delivery on the EU’s lofty energy transition and climate leadership goals will be critical to von der Leyen’s legacy. Tackling ISDS, one of the fossil fuel industry’s most powerful tools for undermining the energy transition, will be a defining piece in that effort", IISD's Lukas Schaugg writes in an op-ed.
Brussels push to ban ECT disputes gains traction - FDI Intelligence
“'We can see a gradual shift there. This could be an indicator of future tendency of tribunals to increasingly respect that intra-EU [argument],' says Lukas Schaugg, policy advisor at the International Institute for Sustainable Development."
Beyond the Energy Charter Treaty: job half done? - European Energy Innovator
"The EU's exit is 'a job halfdone' unless member states address the sunset clause with the UK. The 2021 ECJ ruling sets a helpful precedent here, Lukas Schaugg, policy advisor at the International Institute for Sustainable Development, said during a panel in June. In August his organisation published a model inter-se agreement proposal for the EU and other exiting members."
EU votes to leave energy treaty as green rules pushed through - Financial Times
"The vote was 'historic', said Lukas Schaugg, international law analyst at the International Institute for Sustainable Development. 'Fossil fuel investors have used the ECT to challenge government climate measures through investor-state dispute settlement more frequently than any other investment treaty,' he said."
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Publications
IISD conducts in–depth research on the ECT’s design, implementation, and implications for sustainable development objectives—especially as they relate to climate action.
Investor–State Dispute Settlement and Fossil Fuels: What role for a carveout?
On March 11, 2024, the Organisation for Economic Co-operation and Development (OECD) hosted its 9th annual Investment Treaty Conference. Delegates discussed a carveout of climate change measures in investor–state dispute settlement (ISDS) as a central reform proposal. In this blog, we assess the implications of this proposal for climate policy and for broader efforts to reform international investment governance.
Im Rücktritt geeint
This blog post in one of Germany's leading constitutional law publications discusses why the European Commission's recommendation of a coordinated EU withdrawal from the ECT is a unique opportunity for Europe to speak with one voice for climate action. In German.
United We Leave or Divided We Stay? Why it’s time for the EU to speak with one voice regarding the Energy Charter Treaty
After a written procedure that was finalized on Friday July 7, the European Commission formally recommended a coordinated EU withdrawal from the Energy Charter Treaty. What does this mean for climate action?
Uncertain Climate Impact and Several Open Questions: An analysis of the proposed reform of the Energy Charter Treaty
An in-depth legal assessment of key aspects of the agreement in principle for a possible reform of the Energy Charter Treaty. It shows that, even if reformed as per the proposals, the climate impact of the treaty would remain uncertain. The proposed reform still leaves key policy questions unanswered.
Submission to the Organisation for Economic Co-operation and Development on Investment Agreements and Climate Change
This document by CIEL, ClientEarth, and IISD was submitted to the OECD's public consultation on how policy–makers can redesign investment treaties and policies in response to the climate crisis.
How the Energy Charter Treaty Risks Undermining the Outcomes of COP 26
This article examines how new climate pledges, including commitments to phase out coal, halt new drilling for gas and oil reserves, and reduce global methane emissions, might be undermined by the ECT.
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Events and capacity building
IISD hosts events and capacity building workshops to address the concerns that the ECT raises for a variety of audiences, including political stakeholders, developing country partners, and civil society.
The Energy Charter Treaty: Endgame in Sight?
This webinar will delve into the pressing legal questions surrounding the EU's mooted withdrawal from the ECT - including the treaty's sunset clause and the implications for the treaty as a mixed agreement. It will also assess the political momentum for further exits both within and outside the EU. The webinar is organized by IISD, CIEL, and ClientEarth.
Aligning Investment and Climate Goals: Where does the Energy Charter Treaty modernization stand?
This webinar, hosted in partnership with the Centre for International Environmental Law and ClientEarth, will discuss the progress achieved so far in the ECT modernization process.
The ECOWAS Energy Protocol: Training workshop for West Africa
This workshop for member states of the West African Economic and Monetary Union focused on the ECOWAS Energy Protocol, its risks in relation to energy transition policies, and potential options for reform.
Leaving the ECT: Overcoming the Sunset Clause obstacle
IISD experts were invited to be panelists at a webinar hosted by the European Parliament on options for withdrawal from the ECT.
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