Concerns are growing that a treaty originally intended to protect EU energy firms when the Soviet Union collapsed could undermine the Paris Agreement on climate change. Arthur Neslen discusses the issues in an article on the Thomson Reuters Foundation News website.
Energy lawsuits pact seen threatening Paris climate deal
Fear of multi-billion-euro lawsuits from fossil fuel investors is putting the Paris agreement on climate change at risk, one of the deal’s architects has warned.
Compensation claims from a pact that allows companies to sue countries over policies that affect their investments could amount to more than a trillion euros by 2050, according to one estimate.
The Energy Charter Treaty (ECT) was originally drawn up to protect energy firms as the Soviet Union crumbled, but new analysis suggests it could allow coal plants in 54 signatory states to keep belching carbon dioxide for more than a decade.
“The integrity of the Paris agreement is critically undermined by the Energy Charter Treaty,” said Laurence Tubiana, the French climate change ambassador during negotiations for the Paris agreement.
“Europe and others should withdraw from this shambolic and dangerous anachronism if we are to stay within 1.5C (of global warming),” she told the Thomson Reuters Foundation.
The treaty’s primary aim was to protect investments by European Union energy majors in Russia and the new republics said Yamina Saheb, the ECT’s former energy efficiency chief, who left in June 2019.
“What they never thought about is that the treaty could be used against the EU countries themselves,” added Saheb who is now working as the lead author of a U.N. Intergovernmental Panel on Climate Change working group on climate mitigation.
The sums involved could soar to 1.3 trillion euros ($1.51 trillion) by 2050, she estimates, potentially bringing the treaty into conflict with the 2015 Paris accord.
Under pressure from countries including France, which favours withdrawal from the treaty, the European Commission proposed a compromise to end ECT protections for future investments in coal, oil and some gas projects. However, that would still allow investors in existing coal plants to sue governments that tried to shut them down for 10 years after an agreement was signed, according to the new study by the International Institute for Sustainable Development. Tim McPhie, a Commission spokesperson, said the proposal was “aligned with the EU commitments under the Paris Agreement and the EU long-term decarbonisation and energy transition policy objectives.”
But an EU official acknowledged that talks on a withdrawal “are taking place and have taken place in parallel and irrespective of the progress of the negotiations.”
A petition of more than one million people calling for the EU to exit the ECT was delivered in Brussels on September 21.
Globally, five energy multinationals are now suing governments for a total of $18 billion, claiming a loss of earnings due to climate action. Four of these suits are taking place in the ECT’s investor-state tribunals.
The British firms Rockhopper and Ascent Resources are respectively suing Italy for $325 million in a dispute over an offshore drilling ban, and Slovenia for $118 million after it required an environmental impact assessment on fracking plans.
Energy firms RWE and Uniper are separately suing the Dutch government for $1.6 billion and $1.06 billion after it decided to phase out coal.
In the largest case, TC Energy is claiming more than $15 billion from the U.S. government for cancelling its Keystone XL pipeline project, under the North American Free Trade Agreement (NAFTA).
NAFTA has also been used by the oil and gas company Lone Pine in an ongoing $119 million lawsuit against Canada over a fracking moratorium in Quebec.
Many bilateral free trade deals such as the EU’s agreements with Canada, Mexico and Singapore also include provisions for investor court mechanisms that allow investors to sue states.