Energy Charter Treaty irrelevant to Africa
Monitor, 28 February 2025
Energy Charter Treaty irrelevant to Africa
by Elizabeth Namagembe – Enviroment Governance Institute (EGI)
What you need to know:
- The Energy Charter Treaty not only locks countries into outdated fossil fuel investments but also hampers their ability to pursue sustainable, climate-friendly energy policies.
The Energy Charter Treaty (ECT) is an international agreement that was signed in 1994 and came into force in April 1998. The aim of the treaty is to promote and protect foreign investment in the oil and gas sector. This treaty provides a framework for energy cooperation and trade and includes provisions for the settlement of disputes between investors and states.
In context of the growing global energy demand and concerns over climate change, upstream oil and gas investments reportedly rose by 7 percent in 2024, reaching $570 billion, following a 9 percent increase in 2023.
This surge has been largely driven by Middle Eastern and Asian countries, which have ramped up their oil and gas investments by more than 50 percent since 2017.
Meanwhile, Africa continues to attract multinational companies but unfortunately, this interest is primarily directed towards the fossil fuel industry rather than the continent’s vast clean energy potential.
Between 2015 and 2019, Africa received only 2 percent of global investments in renewable energy, with over 87 percent funnelled into fossil fuels despite the continent’s immense potential to exploit a wide range of renewable resources for energy production and services.
In response, Export Credit Agencies from the Global North have largely ignored the need for cleaner energy investments and instead securing legal opportunities under the Energy Charter Treaty.
To-date, the ECT has been the subject of controversy due to concerns about its impact on climate change and the environment, coupled with the economic threats arising from potential high-cost lawsuits that would befall the developing African countries that accede to it.
Currently, Burundi, Eswatini, and Mauritania are in the ratification process of the ECT; Uganda is waiting for the formal invitation to accede to the ECT; and Kenya, Niger, Chad, Gambia, Nigeria, and Senegal are among the countries preparing their accession.
The Treaty contains 50 articles, focusing on four areas: the protection of foreign investments and protection against key non-commercial risks; non-discriminatory treatment in energy trade and provisions to ensure reliable cross-border energy transit flows through pipelines, grids, and other means of transportation; resolution of disputes between member states and foreign investors, involving the use of international arbitration mechanisms; and the promotion of energy efficiency and environmental protection.
A study conducted for the European Parliament’s Legal Affairs (JURI) Committee explains that exit from the ECT is subject to two sectional sunset clauses introduced into the treaty in order to achieve long-lasting cooperation.
It is not surprising that the founding members states of the Energy Charter Treaty like Russia, Italy, Spain, Denmark and recently Luxembourg. This rises further questions about the treaty’s alignment with contemporary energy and climate priorities.
The Energy Charter Treaty (ECT) has recently come under intense scrutiny for its potential impact on global climate change efforts. Originally designed to promote energy cooperation and investment protection among its signatories, the ECT is now being criticised for its potential to undermine crucial climate policies and commitments.
The withdrawal of founding and prominent member states from the ECT reflects the treaty’s growing irrelevance in the context of today’s climate and energy realities. With major economies opting out, there is no reason for developing countries to consider joining a treaty that is increasingly seen as a barrier to the clean energy transition.
The ECT not only locks countries into outdated fossil fuel investments but also hampers their ability to pursue sustainable, climate-friendly energy policies.
