EU Finalizes Decision to Quit Energy Treaty Over Climate Issues

The European Union member states formally adopted on Thursday a decision to withdraw from a 1990s energy pact that allows oil companies to sue governments over their climate policies.

The Council’s decision today gave the final green light for the EU and Euratom to withdraw from the Energy Charter Treaty after the European Parliament approved it during its last plenary session in April 2024, the EU said in a statement.

The Energy Charter Treaty (ECT), signed in 1994 and in force since 1998, was originally designed to promote international investment in the energy sector and has historically provided protections for investors in fossil fuels. The treaty basically allows oil firms to sue governments for compensation for lost profits if they think energy policies have harmed their business. 

As the EU and other developed economies are looking to become carbon neutral by 2050, staying in this treaty has become problematic for many of them.

Last year, the European Commission proposed a coordinated EU withdrawal from the pact, as the treaty has been “largely unchanged since it was agreed in the 1990s, and is no longer compatible with the EU’s enhanced climate ambition under the European Green Deal and the Paris Agreement.”  

“Member states who wish to remain contracting parties after the EU’s and Euratom’s withdrawal will be able to vote during the upcoming Energy Charter Conference – expected to take place by end-2024 – by approving or not opposing the adoption of a modernized agreement,” the EU said today.

Following approvals from all EU institutions and member states, the decisions on the withdrawal of the EU and Euratom, as well as the decisions on the modernization of the Energy Charter Treaty, enter into force as of today.

The withdrawal will take effect one year after the receipt of the notification by the depositary of the treaty.

By Tsvetana Paraskova for Oilprice.com

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