Spain Withdraws From European Energy Treaty Over Climate Concerns

After months of speculation, Spain has officially kicked off the process of withdrawing from the Energy Charter Treaty, a European treaty that seeks to protect energy investments, over climate concerns.

Spain will become the second country to withdraw from the treaty after Italy pulled out in 2016. Spain’s Energy Minister Teresa Ribera has told Politico that the country is now "certain" to withdraw from the treaty.  

The ECT, which dates back to 1998, was designed to secure energy supply in the region and offer protection to companies investing in the energy industry. It was originally meant to support the energy sector in the former Soviet Union, allowing investors to sue governments over policies that jeopardize their investments. However, over the past few years, the treaty has been used by both fossil fuel and renewable energy companies in other European countries to sue governments for regulation changes that threaten returns on specific investments. For instance, German energy companies RWE and Uniper, are currently suing the Netherlands for 1.4 billion euros ($1.5 billion) and 1 billion euros ($1.1 billion), respectively, as compensation for the Dutch government's plan to phase out coal by 2030.

Back in June, Spain urged the European Union to abandon the treaty, saying that it protects fossil fuel investors at the expense of maintaining a habitable planet.

"At a time when accelerating a clean energy transition has become more urgent than ever, it is time that the E.U. and its member states initiate a coordinated withdrawal from the ECT," Ribera said at the time, making Spain the first country to publicly call for abandoning the accord.

ECT critics have pointed out that in addition to draining billions of dollars in taxpayer money, the treaty hinders more robust decarbonization plans and uses funds that could otherwise be used to fund climate action. Last year, Yamina Saheb, a former employee of the ECT secretariat who resigned in 2018, called the pact "a real threat" to the 2015 Paris agreement, which seeks to limit global warming to 1.5ºC above pre-industrial levels by century's end. 

By Alex Kimani for Oilprice.com

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