Secret justice system threatens Paris climate deal, whistleblower says | Energy
A secret judicial system for investors poses a real threat to the Paris climate agreement, activists said, as governments taking action to phase out fossil fuels face a slew of lawsuits involving millions of people. dollars for loss of earnings.
New data seen by the Guardian shows an increase in the number of cases under the Energy Charter Treaty (ECT), an obscure international agreement that allows energy companies to sue governments over policies that could harm their businesses. profits.
Coal and oil investors are already suing governments for billions of dollars in compensation for lost profits on energy policy changes. For example, German energy company RWE is suing the Netherlands for 1.4 billion euros (£ 1.2 billion) over its coal phase-out plans, while UK-based Rockhopper Exploration , continues the Italian government after having banned new drilling near the coast.
“It’s a real threat [to the Paris agreement]. This is the greatest threat I know, ”said Yamina Saheb, a former employee of the ECT secretariat who resigned in 2018 to sound the alarm.
“The Paris agreement… means we need to decarbonize in the current decade before 2030,” said Saheb, also co-author of the Intergovernmental Panel on Climate Change report on mitigation. She estimated that foreign investors could sue governments for € 1.3 billion until 2050 in compensation for the early shutdown of coal, oil and gas factories – a sum that exceeds what the EU hopes spend on his green deal over the next decade.
As compensation to businesses is paid for out of public funds, governments would have less money to pay for new technologies to make buildings, transport and industry greener. Saheb argued that these payments could endanger the green transition. “You can’t do everything,” she said.
A separate analysis of the treaty shared exclusively with the Guardian showed a 269% increase in cases in 2011-2020 compared to the previous decade. “We are going to see many more cases in the future,” said Lucía Bárcena, of the Amsterdam-based Transnational Institute, which compiled the data. Since 2013, two-thirds of cases have been brought against governments in Western Europe.
“The energy charter treaty … has no cohesion with [EU] climate policies, ”said Bárcena. “Trade and investment agreements are binding on states, which means that if they break the contract, they have to pay huge sums of money, while there is no other mechanism that binds the countries to the objectives they set at the Cop26. There is a great asymmetry.
Representatives of the 54-member TEC are meeting next week for a ninth round of talks on modernizing the treaty.
Signed in 1994, the treaty aimed to protect Western companies investing in oil and gas-rich countries of the former Soviet Union. Only foreign investors, rather than domestic ones, can use the system, sparking long-standing complaints about privileged access. Activists now fear that this could hamper the green transition.
“We obviously need to get out of the fossil realm fairly quickly and the Energy Charter Treaty is an obstacle because it protects fossil fuels,” said Cornelia Maarfield, senior trade and investment policy coordinator at the Climate Action Network. Europe. “Our main concern is that once governments start making decisions to phase out coal, gas and oil, they will encounter difficulties with the investment protection chapter of this agreement.”
German RWE sues the Netherlands for € 1.4 billion after the Dutch government decided to shut down all coal-fired power plants by 2030, including RWE’s Eemshaven plant, which started operating in 2015 with an expected lifespan 40 years old. RWE said it supports the energy transition in the Netherlands, and “the only problem therefore is the fact that the coal ban law does not provide for adequate compensation”.
Another German utility, Uniper, is said to be asking between 850 and 1 billion euros for the early shutdown of its coal-fired plant in Maasvlakte near Rotterdam, which opened in 2016. The company has refused to confirm damages. she demanded, stating: “Uniper is convinced that shutting down our power plant in Maasvlakte after only 15 years of operation would be illegal without adequate compensation. “
London-listed Rockhopper is suing Italy after MPs in 2016 reintroduced restrictions on oil and gas drilling within 12 nautical miles of the coast. Rockhopper, who has never disclosed the amount of his claim, said in September he was suing for “very large pecuniary damages on the basis of lost profits” after the Italian government dismissed its oil exploration plans on the Ombrina Mare project in the Adriatic Sea.
Rockhopper said: “The Italian government has issued licenses and encouraged significant investment in oil and gas exploration on the basis of this platform. It is clear that it is not fair to change the rules halfway. It is also important to note that Italy continues to produce significant amounts of oil and gas within 12 miles of the coast. “
We know that investors have filed 142 cases against governments since the entry into force of the TEC in 1998. But these are only the known cases. Even the Brussels-based TCE secretariat admits that it does not have the full picture, as investors are not required to disclose a lawsuit under the TCE.
Urban Rusnák, the secretary general of the Energy Charter Secretariat, rejected the idea that the treaty would prevent governments from moving away from fossil fuels, saying it did not ban energy policy. “The treaty does not prohibit governments [from stopping fossil fuels] There is nothing like automatic punishment.
He suggested that governments could ditch fossil fuels without disputes under the ECT if they took a smart approach. “If the government is smart enough and cares about its investment climate, it can manage,” he said.
Rusnák, who grew up in communist Czechoslovakia, stressed the importance of the TEC in respecting the rule of law. “Some recent demands by climate activists to ban all fossil fuels without any compensation come very close to what happened in Czechoslovakia … when the regime decided in 1948 to expropriate all industries for good. because of social justice, ”he said. “My point here is not about individual cases. This is the system. Either we, as a western civilization, really believe in what we have agreed upon: we have to honor our agreements, and if the terms change, we have to sit down and negotiate how we will get out of them. “
He also disagreed with an NGO proposal that EU governments should quit the TEC en masse. “It is legally possible but the consequences are dire,” he said, referring to a 20-year sunset clause that meant the signatories remained bound for two decades. “Please be serious about the reform… otherwise you will be locked in a treaty you dislike for 20 years. “
Saheb argues that the treaty is beyond reform because Central Asian member states will veto any weakening of fossil fuel protection. “The EU countries should all pull out together,” she said. “If we pull out completely, we could agree to waive this clause and then we could move on to our energy transition.”