The UK could pull out of the international energy charter treaty if attempts to reform it fail, the energy minister, Graham Stuart, has said.
The energy charter treaty (ECT) is a system of secret courts that enables companies to sue governments over policies that would cut their future profits. Companies have sued over phasing out coal-fired power stations, ending offshore oil drilling and banning fracking, with some receiving large taxpayer-funded payouts.
Critics of the ECT include the European Union, which says staying in the treaty would “clearly undermine” climate targets. France, Germany, Spain and eight other countries have already said they will leave and the EU is also set to pull out en masse. The UK and Japan are the only major economies not to have committed to exiting the ECT.
The UK has been a “strong advocate” of reforming the treaty but the intention to leave it by numerous countries has created an impasse. Stuart said that if the reforms were not passed by November, the UK would consider withdrawal.
“Rather than being stuck indefinitely with an outdated treaty, the UK wants to see an agreement on a modernised treaty as quickly as possible,” Stuart said. “In its current form, the ECT will not support those countries looking to make the transition to cleaner, cheaper energy sources and could even penalise our country for being at the forefront of those efforts.”
Cleodie Rickard, trade campaign manager at Global Justice Now, said: “It is welcome to hear the UK is finally willing to review its membership of the climate-wrecking ECT. But putting off the decision until November looks like an attempt to keep the UK sitting on the fence.”
“The reform process to this treaty has failed,” she said. “Eleven countries are voting with their feet and exiting, meaning there is not enough support to get the so-called modernisation through. Rather than more dither and delay, the UK should be joining a co-ordinated withdrawal now to maximise the benefits of leaving this damaging deal.”
The UK’s official advisers, the Climate Change Committee, said in July that the UK should quit the ECT because “continued membership represents risks to both a timely climate transition and to the taxpayer”. ECT critics have estimated the compensation to fossil fuel companies could rise to more than $1tn.
Chris Skidmore, a former UK energy minister who led a net zero review for the government in 2022, has said the ECT was being “weaponised by fossil fuel companies in order to sue governments for introducing climate policies” and was a “threat to the UK’s net zero ambitions”. Skidmore has proposed an amendment to energy bill being considered in parliament next week requiring the UK to withdraw from the ECT.
The ECT was set up in the 1990s to protect energy companies working in former Soviet Union countries from government expropriation. Some renewable energy companies have also used the ECT to sue for compensation after subsidy changes.
