Prospects have brightened for green reforms to a controversial international treaty that protects fossil fuel investments, as ministers of European Union states agreed on Thursday that countries can still choose to support the reforms despite the bloc’s decision to quit the pact.
In a statement, a gathering of EU ministers called the Council of the EU said the decision “unlocked the process of modernisation of the Energy Charter Treaty (ECT) for its non-EU contracting parties”.
The compromise allows the EU as a body to withdraw from the treaty, while individual EU member states can stay in and approve the green reforms at a conference due to take place this year, if they wish.
The ECT currently allows all energy companies – including coal, oil and gas firms – to sue governments over climate and other policies they see as a threat to their current and future profits.
The proposed reforms to modernise the ECT, which are due to be voted on in November, would make it easier for ECT countries to prevent the treaty being used as a basis for lawsuits involving fossil fuel assets that are affected by green economy measures.
However, with several European countries already filing their notice to leave the ECT, it is unclear whether a sufficient number of EU states will stay in the treaty long enough to get the reforms approved. As part of today’s EU Council agreement, the EU confirmed it would leave the treaty.
Other ECT member states, including Japan and Kazakhstan, only grudgingly agreed to back the reforms under pressure from the European Commission.
For the ECT “modernisation” proposal to be adopted, none of the treaty’s member governments – now numbering 49 – must vote against it at November’s conference. Then three-quarters of ECT members need to ratify the reforms for them to take effect.
If the reforms fail, the ECT’s members across Europe and Asia will be unable to remove its protection for fossil fuel investments and – due to a 20-year sunset clause – even EU countries that have left would be exposed to lawsuits for that period.
Post-Soviet treaty
The ECT was conceived in the 1990s to boost investment flows between Western and post-Soviet countries. But its provisions to deter states from grabbing private assets have since been used by energy companies to fight back against climate policies.
In 2020, a British oil and gas company sued Slovenia over what it called “unreasonable” environmental protections”, while German energy company Uniper threatened to sue the Dutch government for €1 billion ($1.1bn) over its coal phase-out plans.
In lawsuits brought under the ECT last November, British oil company Kelsch is suing the EU, Germany and Denmark for at least 95 million euros ($102m) over a windfall tax on energy firms.
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The European Commission reacted to these and other cases by attempting to remove fossil fuels from the list of investments protected by the ECT – with the aim that it would apply only to clean energy assets.
For two years, efforts by EU negotiators were repeatedly blocked by Japan and Kazakhstan. But in June 2022, a “flexibility mechanism” was agreed that would allow ECT states to end protection for fossil fuels, as long as no other ECT state objected.
Europe divided
Despite European Commission negotiators finally winning this right, EU member countries were divided on how to apply it.
Governments like France, Spain and Luxembourg wanted to immediately end protection for fossil fuel investments but faced push-back from several Eastern European countries.
They agreed a compromise to stop protection for new fossil fuel investments but to continue it for existing investments for ten years – a decision that angered climate campaigners.
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Friends of the Earth’s Paul de Clerck said at the time it would “lock the EU in fossil fuel investment protection” for a decade.
Despite this agreement, by the time the annual ECT conference came around in November 2022, EU governments no longer unanimously backed the reforms the European Commission had negotiated, and so they were shelved.
Locking in Asian fossil fuels
The EU’s stalling on the reforms drew an angry response from then head of the ECT secretariat, Guy Lentz of Luxembourg.
In a letter to the leader of the European Parliament in February 2023, he warned that if the EU withdrew as a bloc before approving the modernisation, it would amount to “an express prohibition” for other ECT members to better align with the Paris Agreement on climate change.
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He added that failure to agree reforms would essentially allow fossil fuel companies to sue EU states for longer because of an existing 20-year sunset clause, which means energy companies can bring lawsuits against governments for two decades even after a country leaves the treaty.
EU states wanted to neutralise this sunset clause by agreeing a side deal between themselves not to apply the treaty. But Lentz said these attempts “may not provide the expected legal certainty”. Campaigners accused him of “bluffing”.
Numbers game
EU countries then continued to debate among themselves whether to stay in or leave the ECT and – if they withdrew – whether to modernise it before exiting.
Despite the ongoing talks, France, Germany and Poland officially left the ECT in December 2023. Luxembourg and Slovenia will leave in June and October 2024 respectively. Portugal, the UK, Spain and the EU will leave next year.
This debate was resolved today, with EU states’ ministers agreeing to a compromise, brokered by the Belgian government. Governments that want to can stay and support the modernisation, but the EU itself can start process of exiting right away.
Belgian energy minister Tinne Van der Straeten said her government had “worked tirelessly to break this complex deadlock and found a balance acceptable and useful to all”.
The deal essentially makes the reforms contingent on timing and EU countries’ commitment to reform.
By November, after Luxembourg and Slovenia exit, there will be 47 ECT member states, including 22 from the EU. Eleven more – including the United Kingdom and Switzerland – are in Europe but not in the EU. Nine others are in Central Asia and three in the Middle East, with Japan and Mongolia the remaining two.
E3G analyst Eunjung Lee said ECT modernisation “is still uncertain” but added “with the EU Council decision today, it is probable that the modernisation might pass, particularly if the voting takes place via correspondence”.
The ECT approved this option in October 2022. It means the conference’s chair sets a deadline by which any objections should be sent in.
“This will make things easier than voting at a conference, because unless there is a clear objection, the modernisation will be adopted”.
But even if the reform is approved, Lee said the ratification by three-quarters of countries “could take forever”.
De Clerck of Friends of the Earth agreed, saying “it is unclear if the reform would ever be ratified”.
(Reporting by Joe Lo; editing by Megan Rowling)
The post Despite exit, EU seeks to save green reforms to energy investment treaty appeared first on Climate Home News.
Despite exit, EU seeks to save green reforms to energy investment treaty
Delegates will soon gather in the Turkish resort city of Antalya for UN climate negotiations, against a backdrop of war, energy crisis and climate extremes.
At COP31, nations will try to find agreement on various issues, including climate finance for developing countries and a global “just transition” towards a cleaner economy.
This summit is unusual due to its joint presidency, which means that Australia is leading the negotiations while Turkey hosts the conference.
Outside the formal negotiations, Turkey is also pushing its own priorities as part of a wider “action agenda”, including electrification, oceans and “green industrialisation”.
In order to track parties’ positions on key negotiating points and wider issues at COP31, Carbon Brief has analysed around 100 documents and captured them in the interactive table below.
The first column shows the countries and UN negotiating blocs, the second shows the topics up for debate and the third indicates specific issues within those topics.
The final column indicates the positions that the parties have expressed on each topic. These range from “priority” – meaning the party is likely to be pushing the issue – to “oppose”, meaning it is likely to push against it.
This is a “living document” that will be updated over the course of COP31.
Please get in touch if you would like to offer additions by emailing policy@carbonbrief.org.
Brief explanations of the key issues and jargon-filled language that permeate the talks can be found below the interactive table.
Just transition
At COP30 in Brazil in 2025, nations agreed to establish a practical mechanism to help drive a “just transition” to a low-carbon economy.
Key aspects of this “Belém-Antalya mechanism” (BAM) – often referred to as the “just transition mechanism” (JTM) – were agreed during the June climate negotiations this year, but many details are missing and dividing lines remain between parties.
Parties have disagreed about the scope of the mechanism and whether it should be tied to the provision of finance.
Nevertheless, following progress in June within the “just transition work programme” (JTWP), civil society groups highlighted that getting the mechanism up and running is a “key expected outcome” from COP31.
Climate finance
Climate finance is always a highly contested issue at UN climate negotiations.
Developing countries have successfully pushed for a “work programme” on climate finance to feature on the conference agenda.
These parties see this programme as a way to pressure developed countries into providing more funding from their public coffers, specifically under Article 9.1 of the Paris Agreement. Some are even proposing a “burden sharing” arrangement for climate-finance provision.
This comes against a backdrop of major donors cutting their aid budgets and the Trump administration in the US pressuring multilateral development banks (MDBs) to drop their climate objectives.
Developed countries, which have traditionally been responsible for providing finance, would prefer to keep a broader focus on issues such as improving access to existing finance and broadening the range of donors. Some developing countries, such as small-island states, also support these goals.
Nations have also been discussing Article 2.1c of the Paris Agreement under the “Veredas dialogue”. This focuses on making all global “financial flows” consistent with climate action.
Countries have different views about what this involves, with developing countries again hoping to keep the focus on developed countries’ responsibilities to financially support them.
Adaptation and mitigation
At negotiations in June, parties were unable to agree on the details of a “global goal on adaptation” (GGA), which is intended to drive climate adaptation worldwide.
Having agreed at COP30 on a list of 59 “indicators” – ways to assess progress towards the GGA – nations now need to refine these before COP32 in Addis Ababa, Ethiopia. This is a highly technical process that involves a taskforce working out how to use and track these indicators.
Broadly, developing countries stress the importance of finance to fund adaptation efforts, rather than simply to track progress. They also want reassurances about a pledge made last year to “triple adaptation finance”.
At the June climate negotiations, negotiators also failed to make any progress when discussing the mitigation work programme (MWP) – the only formal agenda item that concerns cutting greenhouse gas emissions.
Among other things, parties disagreed on whether the MWP should continue running over the next few years, or simply be brought to a close.
Global stocktake and NDCs
Back in 2023, the first “global stocktake” (GST) of the Paris Agreement set out the state of climate action and what needed to be done to set the world on course.
On mitigation, nations agreed to a package of measures, including “transitioning away from fossil fuels”, tripling renewable energy and “halting and reversing deforestation” by 2030.
Some of these outcomes remain contentious among certain parties, particularly large, developing countries and those with economies that rely on fossil-fuel exports.
Developing countries have persistently argued that they need more climate finance to implement the global stocktake outcomes.
Parties were meant to update their climate plans under the Paris Agreement, informed by the first global stocktake, by 2025. These plans, known as nationally determined contributions (NDCs), cover the period out to 2035.
So far, only 150 parties – responsible for three-quarters of global emissions – have submitted new NDCs.
Iran, Vietnam, Egypt and Argentina are among those without new NDCs – and the US has withdrawn its climate plan under the Trump administration.
Some parties, such as the EU, have stressed the need for countries to submit their new NDCs ahead of COP31 – and to ensure they are aligned with the 1.5C temperature limit.
COP31 will also see the launch of the second global stocktake, which will conclude in 2028.
Action agenda and other issues
Turkey will be pushing its “action agenda” priorities at COP31, including global targets for electrification, reducing waste and reducing building-sector emissions.
(The Australian “presidency of negotiations” is intending to pursue a “cover text” decision at COP31 that may capture some of these wider targets, such as the electrification goal.)
The action agenda is meant to provide a complementary track to the formal negotiations, where governments and non-state actors can advance specific, real-world solutions.
A new COP31 presidency effort dubbed the “climate implementation bridge” is also meant to complement these ambitions by turning NDC goals into an “investable project portfolio”
Some parties have explicitly signalled their support for various elements beyond the formal negotiations, in the run-up to COP31.
For example, a joint letter signed by 105 parties called for COP31 to “put the ocean at the heart of climate action” by embedding ocean-based climate action in the UNFCCC architecture.
The post Interactive: Who wants what at the COP31 climate change summit appeared first on Carbon Brief.
Interactive: Who wants what at the COP31 climate change summit
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