Energy Charter Treaty
My response to the concerns about the Energy Charter Treaty and Climate Change
November 2022
Thank you for taking the time to contact me about the Energy Charter Treaty (ECT).
Our commitment to tackling climate change as a nation and as a human race has long been an important issue for me.
The ECT is the largest international agreement of its kind and continues to play a crucial role in promoting investment in the energy sector and fostering international cooperation on energy, including in the development of renewable energy worldwide.
For the last two years, those party to the ECT have been negotiating its modernisation to ensure that it is aligned with common climate objectives.
We should all be encouraged by the announcement, on 24 June 2022, of an agreement to this end.
It is important to note that, as of today, the UK has never faced an investor-state dispute under the ECT that has proceeded arbitration. However, the new terms of the Treaty, due to be signed in 2022, will limit costly legal challenges from fossil fuel investors in the UK, reducing the risk to British taxpayers and ensuring the benefits of the ECT remain.
Furthermore, the modernised treaty will protect the UK Government’s sovereign right to change its own energy systems to reach emissions reductions targets in line with the Paris Agreement. It has a stronger climate focus, clarifying that states can regulate to reach emissions reductions targets, and includes new protections for green and low-carbon technologies.
The UK tabled terms which mean new investments in all types of fossil fuels lose protection under the ECT following entry into force. Existing investments in fossil fuels will lose protection under the ECT ten years after entry into force of the modernised treaty, except for existing investments in coal which would lose protection from 1 October 2024. This position includes some exceptions for abated gas, which will play a key role in the UK’s net zero transition.
I have been assured the Government is closely monitoring all developments in the ECT and taking these into account in its own interaction with the modernisation process.
I will ensure that my ministerial colleagues at both the Department for International Trade and the Department for Business, Energy, Industrial Strategy are aware of the important concerns you have raised.
The Energy Charter Conference is scheduled to be held on 22 November, whereby contracting parties to the ECT will decide whether to adopt the modernised Treaty, with decisions regarding Treaty ratification thereafter. This will take time and a relevant response will be shared in due course.
The Government has my support in ensuring that the United Kingdom remains a leading nation in climate change policy.
Thank you once again for writing on this important subject.
Sir Peter Bottomley MP