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We cannot have a Green Brexit without leaving the Energy Charter Treaty

In 2016, the UK voted to make its own laws and to be beholden no longer to a supranational body that could override legislation passed by our own parliament. Many of us welcomed this boost to our sovereignty – especially as it provided an ideal opportunity to increase our efforts to protect and restore our natural environment.

We’ve been able to extract ourselves from the European Union’s inefficient and regressive agricultural subsidy system, instead rolling out a new system that directly rewards farmers for delivering environmental public goods such as cleaner water and more biodiversity.

Yet despite Brexit, our freedom to protect the environment and tackle climate change remains hamstrung due to our membership of another international treaty. The Energy Charter Treaty (ECT) is a legally binding agreement comprising more than fifty signatories. Its purpose is to protect cross-border energy trading and investment. In theory, it aims to protect foreign energy investors from discriminatory treatment and breaches in contracts by governments. In practice, it enables energy investors to sue governments for compensation when those governments take action to tackle climate change.

The agreement directly constrains the sovereignty of signatory countries. A growing number of voices are sounding the alarm about the environmental threat this treaty poses. Laurence Tubiana, one of the architects of the Paris agreement, did not mince her words when she said that the “integrity of the Paris agreement is critically undermined by the Energy Charter Treaty”.

Even our government, which remains a member, has expressed concerns. Earlier this year, Greg Hands, a minister, described the current ECT as “an outdated treaty which holds back investment in clean energy and puts British taxpayers at increased risk from costly legal challenges”. The Government also welcomed proposed reforms to the treaty, following a ‘modernisation’ process of negotiations among the signatories.

Yet in recent months a growing number of European countries have come to the conclusion that the reforms are by no means sufficient to make the ECT compliant with climate change objectives. They are walking away instead. So far Germany, France, Spain, Poland, the Netherlands, Slovenia, and Luxembourg have announced their intention to leave. More are expected to follow. Italy already left in 2016.

Last week, the Council of Ministers decided it could not support the reforms to the ECT. This week the European Parliament passed a resolution calling for a coordinated exit. The whole modernisation process promoted by the European Commission is now at risk of collapse. Rishi Sunak’s government should make common cause with these countries and leave too. It should work with our friends and allies to neutralise the ‘sunset clause’ in the agreement that can lead to parties being sued after they leave the deal.

For the moment, the Government is saying only that it is “closely monitoring” what others are doing. Instead, as an international climate leader and recent president of COP26, the UK should join the vanguard. We should not defend an agreement that allows fossil fuel investors to file speculative lawsuits in which taxpayers have to foot the bill. This is exactly what happens under the ECT, such as when London-based oil company Rockhopper sued the Italian government over Italy’s ban on offshore oil drilling near the Italian coast. Rockhopper was awarded £210 million, more than six times the money they had invested in the project.

It is welcome that the Government has recently reintroduced the moratorium on fracking in the UK. But when the Slovenian parliament responded to the concerns of local people by introducing a ban on fracking, Ascent Resources, a UK company, initiated legal action under the ECT. Similarly, the Dutch government is being sued for nearly €2 billion by coal power station operators RWE and Uniper, because it brought forward a phase-out of coal fired power.

The seriousness of climate change and the imperative of moving away from fossil fuels has been clear for many years now. Successive UK governments have set clear, legally-binding targets for reducing emissions across the economy. It is wrong that taxpayers are being made to compensate fossil fuel investors for the ‘stranded assets’ that result from unwise investment decisions. If fossil fuel projects are instead bailed out by taxpayers and their losses are socialised, this will disincentivise governments from taking action to decarbonise the economy and will undermine the companies that have rightly shifted their investments towards cheap, clean energy.

The Energy Charter Treaty is another area where our parliament needs to reclaim the right to make its own laws without fear of costly legal action. For the good of taxpayers, the planet, and future generations, our own government should announce it is leaving too.

First published by ConservativeHome. Ben Goldsmith is Chairman of the Conservative Environment Network.


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