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The UK is pulling out of a multi-country energy agreement that allowed fossil fuel firms to sue governments when their profits were negatively impacted by net zero policies.
The Energy Charter Treaty (ECT) was signed in 1994 as a way to incorporate energy sectors in Russia and Eastern Europe after the fall of the Soviet Union. It was signed before climate change had become a major political issue globally, and fossil fuel firms would often use it as a way to recoup some lost revenue when national policies hampered their extraction efforts.
But the ECT has faced ramping criticism in recent years for its ability to act as an obstacle to policies designed to combat climate change, and for actively disincentivising national governments from complying with international climate treaties such as the Paris Agreement.
Proposals to modernise the treaty to better support cleaner technologies have been subject to months of talks between European countries, resulting in a stalemate. In September, it was announced that the UK would be reviewing its membership of the ECT if plans to update it were not adopted.
The UK has now joined France, Spain, the Netherlands and others in withdrawing from the Treaty “after the failure of efforts to align it with net zero”, the Department for Energy Security and Net Zero (DESNZ) said.
Energy minister Graham Stuart said: “The ECT is outdated and in urgent need of reform, but talks have stalled and sensible renewal looks increasingly unlikely.
“Remaining a member would not support our transition to cleaner, cheaper energy, and could even penalise us for our world-leading efforts to deliver net zero.
“With £30bn invested in the energy sector just since September, we continue to lead the world in cutting emissions, attracting international investment and providing the strongest legal protections for those who invest here.”
In 2022, after two years of negotiations, a landmark agreement to modernise the ECT was proposed that would help support the transition to cleaner energy by extending protections to renewables such as carbon capture, utilisation and storage (CCUS) and hydrogen.
However, this led to an impasse and the modernised ECT, which should have been adopted in November 2022, was rejected by nine EU member states. This included France, Germany, Spain and the Netherlands – all of whom decided to withdraw. The European Parliament elections in 2024 mean modernisation could now be delayed indefinitely.
The UK’s withdrawal will take effect after one year, removing protections for new investments in fossil fuel extraction after this period.
Shaun Spiers, executive director of Green Alliance, said: “Civil society organisations and parliamentarians from all political parties have been clear that the ECT is an out-of-date agreement and undermines our efforts to tackle climate change. We welcome the UK’s decision to leave, which will strengthen global efforts to roll out cheap, clean renewable energy.”
