Hard to believe but true, given the record-breaking profits generated by energy companies over the past 12 months, there is currently legislation in place that will allow oil, gas, and coal companies to sue governments for huge sums of money over policies that could affect future profits.
The Energy Charter Treaty (ECT), a secret court system, made news this week, not because of the outcry over energy companies profits (although that would be justified) but because over a 100 academics wrote to Grant Shapps, the secretary of state for new Department of Energy Security and Net Zero, urging him to withdraw from the treaty over concerns prolong the UK’s dependence on fossil fuels.
Investors have already brought cases against countries for phasing out coal fired power stations, banning the exploitation of oil and gas near their coastline, and requiring environmental impact assessments.
Oil, gas and coal firms have already been awarded more than $100bn (£82.5bn) by ECT tribunals. “There is also evidence that countries are shying away from introducing new legislation for fear of being challenged in claims under the ECT,” the academics said. The Intergovernmental Panel on Climate Change (IPCC) 2022 report was clear that the ECT risks blocking the phase out of fossil fuels.
The European Commission said this week that remaining part of the treaty would “clearly undermine” climate targets and that an exit by EU countries appeared “inevitable”. Seven EU countries, including France, Germany, Spain and the Netherlands, have already said they will quit the ECT.
The ECT was introduced over 30 years ago in the context of the end of the Cold War when there was less understanding and consensus of the impact of energy usage on climate change. It does nothing to help the UK to achieve increased energy security. Other major suppliers of gas and oil, including the USA, Russia, Saudi Arabia and the United Arab Emirates are not members.
A government spokesperson said:
“The UK is closely monitoring the situation surrounding the energy charter treaty’s modernisation process, including the positions taken by other [member nations].
“We have been a strong advocate for updating the treaty to ensure it is aligned with modern energy priorities, modern international treaty practice, and international commitments on climate change.”
Agreement on modernisation was due in November but has been delayed until at least April. (Guardian 10.02.23)
What exactly is Grant Shapps monitoring? How much revenue energy companies can generate by suing governments for attempting to reduce production of fossil fuel?
It is time for leadership and decisive action, but our government again appears to be adopting a ‘wait and see’ strategy instead of taking control of our future.