Latest reports suggest that the UK is pulling out of a treaty that lets fossil fuel firms sue governments over their climate policies.
The government announced late on Wednesday that the UK will quit the controversial energy charter treaty (ECT) after efforts to align it with net zero emissions plans failed.
Among other things, the treaty allows fossil fuel investors to sue states for lost profit expectations in an opaque corporate arbitration system set up to protect fossil fuel investors in the former Soviet economies in the 1990s.
Graham Stuart, the energy security and net zero minister, said: “The energy charter treaty is outdated and in urgent need of reform, but talks have stalled and sensible renewal looks increasingly unlikely. Remaining a member would not support our transition to cleaner, cheaper energy, and could even penalise us for our world-leading efforts to deliver net zero.”
Treaty protections for new energy investments will cease in one year’s time when the withdrawal takes effect, the government statement said.
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It is unclear whether continuing cases such as the UK-listed Ascent’s €500m (£428m) ECT suit against Slovenia will be affected. The company launched the compensation claim after Slovenia requested an environmental impact assessment before the firm proceeded to develop an oil and gas field. Slovenia has since withdrawn from the treaty.
Kerry McCarthy, the shadow climate change minister, said: “We are in an urgent global fight against the climate emergency. We cannot allow fossil fuel companies to stop democratically elected governments from taking strong climate action. Labour has long argued that the energy charter treaty is clearly outdated and not fit for purpose. It is good that the government has finally taken the step to leave it.”
The ECT is the world’s most litigated investment agreement and the UK’s continued presence within it has raised fears of “climate-wrecking lawsuits” if the government manages to pass its offshore petroleum licensing bill, which aims to jack up UK oil and gas extraction. About 40% of North Sea oil and gas licences are owned by foreign investors, according to research by the Common Wealth thinktank.
Campaigners welcomed the news, with Global Justice Now saying it “untied a straitjacket” to a just transition. “The ECT is now a dead man walking, and only those profiting from the destruction of our planet will mourn its passing,” said the group’s trade campaigns manager Cleodie Rickard.
Story was adapted from the Guardian.
