Thank you for taking the time to contact me about the Energy Charter Treaty (ECT).
As you will be aware, the ECT, which is the largest international agreement of its kind, 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. I am 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 note your calls for the UK to withdraw from the ECT.
The Energy Charter Conference was scheduled to be held on 22 November, whereby contracting parties to the ECT were supposed to vote on whether to adopt the modernised Treaty, with decisions regarding Treaty ratification thereafter.
However, as I understand it, the vote has been delayed because seven EU Member States (Poland, Spain, The Netherlands, France, Germany, Slovenia, and Luxembourg) have announced their intention to withdraw from the ECT and have successfully blocked the EU Council vote in favour of the modernisation.
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. Nevertheless, 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 concerns you have raised.
Thank you again for taking the time to contact me.