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Brussels calls for pause in ECT reform talks after losing key EU vote

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Euractiv | 21 November 2022

Brussels calls for pause in ECT reform talks after losing key EU vote

By Frédéric Simon

The European Commission will ask to remove the modernisation of the Energy Charter Treaty (ECT) from the agenda of an ECT summit on Tuesday (22 November) after EU countries failed to reach a majority in favour of reforming the charter.

EU member states ambassadors met on Friday evening to vote on a proposed reform of the 1998 ECT, an international agreement initially designed to promote oil and gas investments in the former Soviet bloc.

But they failed to reach an agreement after France, Germany, the Netherlands, and Spain abstained.

“A compromise has not been found, and hence the decision to support the modernisation was not approved,” said a spokesperson for the Council of the European Union, representing the EU’s 27 member states.

In force since 1998, the treaty caught media attention last year when German energy giant RWE used it to file a €1.4 billion compensation claim from the Netherlands over the country’s planned coal phase-out.

Campaigners denounced the move as proof that the treaty was incompatible with the Paris Agreement on climate change and needed to be reformed or scrapped.

The European Commission acknowledged those shortcomings, calling the ECT “outdated”, notably in relation to the Paris Agreement on climate change and the treaty’s controversial investor-state dispute settlement clause.

In 2019, it started negotiating a reform on behalf of the EU with the ECT’s 53 signatories. This process ended in June when the Commission announced a breakthrough in the reform talks and presented an amended treaty text, which included provisions to end legal protection for new fossil fuel projects and a ten-year phase-out for existing investments.

However, the reform was denounced as insufficient by a growing number of EU countries. Germany, preceded by France, the Netherlands, Poland and Spain, all recently announced their intention to withdraw from the treaty, citing the charter’s incompatibility with the EU’s climate goals, which require a quick phase-out from fossil fuels.

They were joined last week by Slovenia and, on Friday, by Luxembourg.

“Even if the modernisation of the Energy Charter Treaty leads to some progress, the treaty is still not compatible with the goals of the Paris Climate Agreement, as it continues to protect investments in fossil and nuclear energies,” said Claude Turmes, the energy minister of Luxembourg.

The European Commission is a staunch supporter of reform, saying the modernised treaty includes provisions to cease legal protection for new investments in fossil fuels and addresses concerns regarding the right of governments to regulate for environmental and climate purposes.

Moreover, the EU executive underlined that a 20-year sunset clause would come into effect immediately after countries leave the treaty, meaning that fossil fuel investments will continue enjoying legal protection during that period in any event.

Contacted by EURACTIV, the European Commission said it took note of the Council vote.

“The European Commission will now request to remove the adoption of the modernisation from the agenda of the ECT conference of 22 November,” the EU executive said in an e-mail statement.

The Commission will represent the EU and its 27 member states at a conference of ECT signatories scheduled on Tuesday, which was expected to launch the treaty’s reform process.

Unanimity is required to reform the treaty, whose signatories include countries like Japan, Kazakhstan and Uzbekistan, which were reluctant to reform.

 source: Euractiv