In an article in the March issue of Energy in Buildings & Industry, Andrew Warren, Chairman of the British Energy Efficiency Federation, looks at the evolution of the international Energy Charter Treaty and why the UK government has decided to withdraw from its obligations.
Is the Energy Charter Treaty a sinking ship?
Later this month, the UK will officially leave the “outdated” Energy Charter Treaty (ECT), having concluded it would “stymie efforts” to achieve net-zero by 2050. The Treaty allows energy companies to sue governments over policies that damage their investment, and has been used in recent years to challenge policies that require fossil fuel plants to shut, Since 2001, nearly 160 legal actions based on the ECT have been brought by investors claiming their investments had been damaged by green policies, seeking compensation from governments.
The UK’s exit from the Treaty underscores years of wrangling to try to modernise it for an era in which Europe’s biggest economies have put the green transition at the centre of their energy policy. It comes well after many other countries have withdrawn membership for similar reasons, beginning with Italy in 2016, followed by Spain, the Netherlands. Poland, Germany, France and Belgium in 2022, and Denmark and Slovenia in 2023.
The beginnings of the Energy Chapter date back to a political initiative launched by the European Union in the early 1990s. The end of the Cold War offered an unprecedented opportunity to overcome previous economic divisions between nations. The brightest prospect for mutually co-dependent beneficial cooperation was felt to be the energy sector.
Officials at the European Commission saw this as a way of encouraging former Comecon countries to want to join the European Union- an astute bet, as within twelve years no less than nine of them had done so. One of the key areas identified as likely to be both least controversial, and of greatest value to such governments, was assistance with implementing the. “rational use of energy”, as the EC then labelled energy efficiency.
Efficiency obligations
The guiding figure on this was a Welshman called Clive Jones, then no2 at the energy directorate (then called DGXVII), who became the Charter’s first secretary general up to the time when the formal Treaty was signed in Lisbon in 1994. Deliberately highlighted within that Treaty’s Article 19 was a “protocol; on energy efficiency and related environmental aspects” (PEEREA.) This required each Government to ‘strive to minimize in economically efficient manner, harmful environmental impacts arising from energy use.”
Thirty years on, I think I should acknowledge that Jones did informally approach me then to see if I would get involved with administering the protocol. It was an offer of full time employment I declined, I hope gracefully. Subsequently I did became very active on an external advisory basis.
The PEEREA legally defines improving energy efficiency to be “acting to maintain the same unit of output (of a good or service) without reducing the quality or performance of the output, but while reducing the amount of energy required to produce that output.” It remains an absolutely accurate and unusually precise definition.
Signatory governments were required to “have particular regard to improving energy efficiency… by employing techniques and technological means that reduce pollution”. They were to promote amongst governments “information on environmentally sound and economically energy efficient policies and cost-effective practices”. They were also obliged to ”promote public awareness of the environmental impact of energy systems, and the scope for prevention and abatement of their adverse environmental impacts” And finally “to promote and co-operate in the research, development and application of energy efficient technologies.”
Binding commitments work
As one who was heavily involved in all such activity in the ensuing years, I really do believe that it can be genuinely claimed that having these binding commitments did facilitate considerable progress. It meant that, particularly prior to becoming full EU members, many eastern European governments were introduced to energy saving policies and programmes (the relevant “acquis”) that they would need to comply with when they became full Member States. It is noticeable that subsequently, several ceased being laggards, and are now genuine exemplars.
Such was the perceived value of the Energy Charter that membership extended way beyond the European Union, and became the International Energy Charter, signed in 2015 by 72 countries as a nonbinding political declaration, underpinning key principles for international energy trade co-operation. Whilst the secretariat remains in Brussels, the presidency has recently transferred from Jordan to Mongolia, clear evidence that it is no longer a European organization.
So much so that in 2021 the Treaty was struck down for intra-European government disputes by the European Court of Justice . The Treaty has long come under heavy criticism for being an obstacle to the transition to a greener future. Transnational corporations that have invested in fossil fuel production or nuclear power have been suing national governments for loss of profit on their investments as a consequence of the transition. Critics have long argued that the Energy Charter Treaty has a chilling effect upon energy-related legislation.
My conclusion is that, certainly so far as much of Europe is concerned, the Energy Charter Treaty is now a sinking ship. Which the UK is but the latest of the original signatory rats to abandon. But before doing so, we should acknowledge the amount of good it certainly achieved during its initial incarnation.
Energy in Demand - Sustainable Energy - Rod Janssen 
I had the sense of an article that was schizophrenic. 160 cases of the oil & gas mafia suing governments (roughly 10 per year) vs it did some stuff for energy efficiency – which in the case of the EU was happening anyway – post 2007. The Energy Charter was a big mistake & you can be sure that very sharp oil & gas mafia lawyers inserted clauses to allow the litigation that follows. Gosh lawyers eh!
In the 1990s after the collapse of the Soviet Union, it did not seem to be a mistake at all. And what PEEREA did to promote energy efficiency in those new countries was quite valuable. But I understand your points. I will raise with the author.
Perhaps Mr Parr is too young to recall the state of ignorance, regarding the potential for energy efficiency, in practically all the countries in Eastern Europe that had formed part of the Russian empire until the start of the 1990s?
There is no question that, under the guidance of European Energy Charter activities, there were enormous leaps forward in introducing purposeful practical energy saving programmes in such countries, leading up to their all becoming active members of the EU’s drive to make energy efficiency the first priority.
The widening of the Charter’s activities into other continents has indeed led to the considerable disillusionment with its impact , that has taken place in so many of the original signatory Member States. I wrote this article in order that the Charter’s original objectives and successes should be acknowledged, and not forgotten.
In this debate, might be good to hear from sone of those directly involved with the European Energy Charter at the time.
Don’t condescend to me. In 1983 I was the services engineer for Sony’s TV plant in Bridgend & responsible for energy efficiency – for amongst other things the operation of very large mulit-MW ovens as well as the plant as a whole. So whilst I may not be a policy person – I am an engineer with long-standing experience of energy efficiency & I did not need a charter to incentivise efficient plant operation. East Europe lacked energy efficiency incentives because the energy inputs (oil,gas,coal) were not priced at market.
The energy charter was very poorly designed given it gave free reign to lawyers in pursuit of a fast buck for their clients.