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EU Commission to axe laws protecting fossil fuel investments

The Energy Charter Treaty has hampered the ability of governments to impose climate policies for years. As we speak, however, the European Commission is reportedly redrafting the treaty to ensure its 52 nations are phasing out fossil fuels.

As the world aims to transition to more renewable forms of energy, a covert layer of bureaucracy protecting fossil fuel investment could soon be removed. Yeh, this is potentially very good news.

If you haven’t heard of the Energy Charter Treaty, it was a reform created in the 1990s to protect the profitability of its 52 nations.

Whenever foreign policies popped up threatening a country’s projected finance prospects, this would allow members of the bloc to sue states within a covert court system.

It’s often used by corporations to side-step domestic tribunals, keeping everything under wraps and settling disputes away from prying eyes in the mainstream media.

A dream for the fossil fuel industry

Given that last point, it probably won’t come as a surprise to hear that this mechanism is used by the fossil fuel industry more than any other.

Policy measures intended to keep us on track for our climate targets are constantly challenged – you just don’t always hear about it.

We recently wrote a story divulging the sheer scope of the problem, and how a complex web of legality could lead to $340bn in settlements to some of the biggest polluters.

There’s no cap on the size of compensation windfalls either, meaning governments are at odds with curbing global warming and getting slapped with huge reprisals from disgruntled fossil fuel giants.

One high-profile story that did make the papers recently involved the eyewatering award of £210m to British oil firm Rockhopper, after Italy’s 2015 offshore oil ban put several of its projects on hold.

In recent years, there has been constant pressure to get the reform amended. As we sit here today, potentially vital changes are finally on the cusp of being pushed through.

The European Commission steps up

The recent changes to the treaty are as wholesale as we’ve seen to date.

The commission notes that the risk of legal conflict between companies and governments is such ‘as to render an agreement incompatible with EU law.’

In essence, the element of risk is eliminated for governments wanting to push through ecological changes, and put squarely at the feet of fossil fuel proprietors refusing to recognise the natural changing of the guard.

The document states that the pesky sunset clause has also been abolished. Previously, any widescale investment had legal protection for 20 years beyond the treaty’s termination, but this will no longer be the case for those within the EU.

Given the amount of money that still resides within gas and oil, you can expect that there will probably be some exploitable loopholes. Critics are concerned about potential ‘letterbox shopping,’ where investors move from one jurisdiction to another and continue as normal.

Nevertheless, this certainly makes life more difficult for those quite literally ignoring the current climate, and forces them to operate out in the open where we can see them. There’s room for cautious optimism.

How effective the changes will be is yet to be seen, but with Cop27 around the corner the timing couldn’t be better. The pressure is well and truly on!