The Department for Energy Security and Net Zero (DESNZ) has today (22 February) confirmed the UK’s withdrawal from the Energy Charter Treaty (ECT).
Signed in 1994 before coming into effect in April 1998, the ECT was created to provide a multilateral energy framework for participating countries to promote energy security by creating more open international energy markets and historically providing protections for investors in fossil fuels.
Unfortunately, the context in which the treaty was signed 30 years ago differs significantly from today’s energy market, a fact pointed out a year ago by 110 UK academics who signed a letter to the then energy security secretary, Grant Shapps, calling for the UK to leave the ECT over fears that it now risks inhibiting decarbonisation.
A number of EU members – including the Netherlands, France and Spain – have already withdrawn from the ECT; moves reportedly spurred by proposed modernised terms put forward in June 2022. The consensus was that these terms – which the UK government had claimed to have played a “leading role” in negotiating – promoted the prolonged use of fossil fuels.
The letter highlighted that the modernisation proposals extended the protection of foreign investment in fossil fuels until 2030 and gas until 2045 under the ECT’s investor-to-state dispute settlement (ISDS) mechanism, allowing investors to “continue to use the treaty to challenge the phase-out of fossil fuels.”
Since then, further proposals to modernise the ECT have taken place to better support decarbonisation by providing investment incentives in technologies such as carbon capture, utilisation, and storage (CCUS) and hydrogen. However, after months of debate, these conversations have stalled, eventually reaching a “stalemate”, according to DESNZ.
Following a review into the UKs membership, which began in September 2023, the UK has now joined nine EU member states in withdrawing from the ECT.
“The Energy Charter Treaty is outdated and in urgent need of reform but talks have stalled and sensible renewal looks increasingly unlikely,” said minister of state for energy security and net zero, Graham Stuart.
“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.”