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Talks to reform energy pact blocking climate action face 'failure'

by Arthur Neslen | @arthurneslen | Thomson Reuters Foundation
Tuesday, 6 July 2021 21:38 GMT

The lignite power plants of "Neurath New", Niederaussem, and "Neurath Old" of German energy supplier and utility RWE are pictured in Neurath, north-west of Cologne, Germany, February 5, 2020. REUTERS/Wolfgang Rattay

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Under existing rules, fossil fuel firms can sue countries that take climate action for lost 'anticipated' income

By Arthur Neslen

BRUSSELS, July 6 (Thomson Reuters Foundation) - Talks to reform an international energy treaty that allows investors to sue states that take climate action are grinding towards failure, according to leaked diplomatic cables seen by the Thomson Reuters Foundation.

The cables suggest that little progress has been made in the last year of negotiations aimed at updating the Energy Charter Treaty (ECT) and bringing it into line with the Paris Agreement on climate change.

Adding to the pressure, more than 400 environmental groups, unions, charities, and NGOs called Tuesday for European countries to walk away from the modernization talks.

The treaty currently allows energy firms in more than 50 nations, from Britain to Uzbekistan, to sue governments that pass climate change laws for losses of anticipated earnings.

Earlier this year, German energy firms RWE and Uniper filed claims worth more than a billion euros against the Dutch government for moving to phase out coal power by 2030.

The ECT was signed in 1994 to integrate former Soviet countries into regional energy systems and facilitate investment. A modernization process for the treaty began in 2009 and the first negotiating text was produced last year.

However, the atmosphere in talks, which resumed Tuesday, has been so difficult that some European Union countries are pushing for a coordinated exit from the treaty, according to leaked cables.

France is among the countries urging an exit, according to a diplomatic report from a June meeting of the council of the EU's working party on energy.

"There is little progress on important issues," the cable noted. "We have to work on weighing the consequences of a failure of the negotiations."

Speaking to the National Assembly last week, the French minister for the ecological transition Barbara Pompili said that her country was considering proposing a coordinated EU withdrawal from the talks.

It is not clear if a majority of EU states favor withdrawal.

"If our attempts to seriously reform the energy charter treaty are not successful, we will need to examine... all possible alternatives, including a withdrawal," a European Commission spokesperson confirmed to the Thomson Reuters Foundation.

Even if European states exit the treaty, a sunset clause gives companies the right to sue states that enact climate laws up to 20 years after any withdrawal, the spokesperson added.

Environmental law charity ClientEarth contends the clause could be neutralised for suits within the EU - which it says make up 60% of cases - if the bloc coordinates its withdrawal. (Reporting by Arthur Neslen. Editing by Laurie Goering. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

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