{"id":50016,"date":"2024-02-20T15:56:38","date_gmt":"2024-02-20T15:56:38","guid":{"rendered":"https:\/\/www.climatechangenews.com\/?p=50016"},"modified":"2024-03-11T17:39:06","modified_gmt":"2024-03-11T17:39:06","slug":"oil-drilling-while-in-the-energy-charter-treaty-is-economically-reckless","status":"publish","type":"post","link":"https:\/\/www.climatechangenews.com\/2024\/02\/20\/oil-drilling-while-in-the-energy-charter-treaty-is-economically-reckless\/","title":{"rendered":"Oil drilling while in the Energy Charter Treaty is economically reckless"},"content":{"rendered":"<p><em><strong>Editor&#8217;s note:<\/strong> On February 22, the UK government announced it would follow some other European states in <a href=\"https:\/\/www.reuters.com\/world\/uk\/britain-exit-energy-charter-treaty-over-failure-align-with-net-zero-2024-02-22\/\">leaving the Energy Charter Treaty<\/a> due to members&#8217; failure to agree reforms in line with net-zero emissions goals. Countries that withdraw from the pact can still be sued by energy firms under a 20-year sunset clause.<\/em><\/p>\n<p><strong>The UK is considering a new law which would invite applications for new oil and gas production licenses in the North Sea every year.<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">This Offshore Petroleum Licensing Bill will not help with the UK\u2019s energy security, reduce bills or serve anything but fossil fuel giants&#8217; short-term profits.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On top of this, if it passes into law, the UK faces the grave risk of economy-wrecking lawsuits.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is because the UK is a member of the Energy Charter Treaty (ECT) &#8211; a multilateral investment pact which allows investors in energy to sue governments over policies that affect their investments in over 50 countries across Europe and Asia.<\/span><\/p>\n<h3><b>Investors weapon<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The ECT is the <\/span><a href=\"https:\/\/policy.trade.ec.europa.eu\/news\/agreement-principle-reached-modernised-energy-charter-treaty-2022-06-24_en\"><span style=\"font-weight: 400;\">most litigated<\/span><\/a><span style=\"font-weight: 400;\"> investment agreement in the world. It contains Investor-State Dispute Settlement (ISDS) provisions which are used by fossil fuel companies to deter, delay or raise the cost of climate policies.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">ISDS enables them to sue governments for billion-dollar payouts over their climate policies, in secretive tribunals outside of national legal systems.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Weak attempts at reforming the Energy Charter Treaty <\/span><a href=\"https:\/\/www.globaljustice.org.uk\/news\/energy-charter-treaty-plans-for-expansion-revealed-in-recently-posted-notes\/\"><span style=\"font-weight: 400;\">have failed<\/span><\/a><span style=\"font-weight: 400;\"> numerous times over the years, and thus many European countries including Germany, France and the Netherlands have decided to exit over the risks to their climate action.\u00a0<\/span><\/p>\n<blockquote><p><a href=\"https:\/\/www.climatechangenews.com\/2024\/02\/16\/loss-and-damage-must-be-a-focus-of-ipccs-next-reports\/\" target=\"_blank\" rel=\"noopener\"><strong>Loss and damage<\/strong> must be a focus of IPCC\u2019s next reports<\/a><\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">The UK government <\/span><a href=\"https:\/\/www.gov.uk\/government\/news\/uk-reviewing-membership-of-energy-treaty\"><span style=\"font-weight: 400;\">launched a review<\/span><\/a><span style=\"font-weight: 400;\"> of its membership last year and is overdue announcing its outcome.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Recent <\/span><a href=\"https:\/\/www.energymonitor.ai\/sectors\/industry\/weekly-data-at-least-40-of-north-sea-oil-and-gas-licences-owned-by-foreign-investors-new-research\/\"><span style=\"font-weight: 400;\">research by CommonWealth<\/span><\/a><span style=\"font-weight: 400;\"> found that at least 40% of the UK\u2019s North Sea oil and gas licenses are owned by foreign investors, many headquartered in ECT member countries like France or Spain.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If the UK government fails to leave the ECT, foreign investment into North Sea oil and gas means not only a headlong sprint in the wrong energy policy direction, but invites a huge bill even if a future government changes course.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Labour Party, which is far ahead in the polls, says it will stop new oil production. An election will be held this year.<\/span><\/p>\n<h3>Coming clash<\/h3>\n<p><span style=\"font-weight: 400;\">Carbon Tracker recently <\/span><a href=\"https:\/\/carbontracker.org\/private-equity-may-see-cash-flow-from-north-sea-assets-fall-60-in-moderate-energy-transition\/\"><span style=\"font-weight: 400;\">showed<\/span><\/a><span style=\"font-weight: 400;\"> that North Sea oil and gas companies are financially planning for far slower energy transition scenarios than governments are working to.\u00a0<\/span><\/p>\n<blockquote><p><a href=\"https:\/\/www.climatechangenews.com\/2024\/02\/15\/switzerland-proposes-first-un-expert-group-on-solar-geoengineering\/\" target=\"_blank\" rel=\"noopener\"><strong>Switzerland proposes<\/strong> first UN expert group on solar geoengineering<\/a><\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">As a result, they are setting up a clash between climate policies and their financial expectations, raising the risk of ISDS claims.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Producing the first oil and gas from a field can take more than 18 years. By then, the climate policy landscape will be vastly different.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The 1.5 C warming limit is likely to be <\/span><a href=\"https:\/\/www.carbonbrief.org\/in-depth-qa-the-ipccs-sixth-assessment-report-on-climate-science\/#onefive\"><span style=\"font-weight: 400;\">passed<\/span><\/a><span style=\"font-weight: 400;\"> within the next decade or two, so the imperative to reduce fossil fuel use will be even greater.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The dearth of long-term thinking in Westminster means policymakers are ignoring the risk of leaving the fossil fuel industry with such a powerful weapon.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">An investor using ISDS can claim not only for costs sunk by a government policy but for any future lost profit it expected to earn over a project\u2019s lifetime.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These companies can decry far bigger losses than is reasonable given the fast-moving renewables revolution, and ISDS tribunals are rigged to back them up.<\/span><\/p>\n<blockquote><p><a href=\"https:\/\/www.climatechangenews.com\/2024\/02\/14\/problems-mount-for-sahara-gas-pipeline-leaving-nigerian-taxpayers-at-risk\/\" target=\"_blank\" rel=\"noopener\"><strong>Problems mount<\/strong> for Sahara gas pipeline, leaving Nigerian taxpayers at risk<\/a><\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">Facing an ECT claim, any reasonable argument the UK may have developed about the environmental, social &#8211; even economic &#8211; imperative to phase out fossil fuels will have to be left at the door: it signed up to the fossil fuel giants\u2019 charter, failed to leave it when it had the chance, and breached it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So much for the polluter pays: the UK taxpayer will have to bail them out.<\/span><\/p>\n<h3>Failed reforms<\/h3>\n<p><span style=\"font-weight: 400;\">There\u2019s no reforming the deadly oil and gas bill, in or out of the ECT. But remaining a member of the treaty adds an incredulous new dimension of fiscal irresponsibility.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The European Commission is proposing a mass withdrawal to neutralise the Energy Charter Treaty\u2019s sunset clause \u2013 which extends the right to ISDS claims for 20 years even after countries leave \u2013 among exiting parties.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If the countries leaving together agree to cancel the sunset clause between themselves, then the benefits of exit are magnified.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Given how many ECT-covered investors in 1.5C-incompatible projects on British soil are European, the UK joining this coordinated withdrawal <a href=\"https:\/\/www.tandfonline.com\/doi\/epdf\/10.1080\/14693062.2022.2153102?needAccess=true&amp;role=button&amp;mc_cid=abb35c767b&amp;mc_eid=a2d859960f\" target=\"_blank\" rel=\"noopener\">would eliminate<\/a> 99% of the ISDS risk &#8211; leaving little logical argument to remain bedfellows with climate laggards in a collapsing treaty.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It\u2019s time to rip up the get-out-of-jail-free card that dirty North Sea projects, fast becoming obsolete, have up their sleeve.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">At stake is a chill on policies to address the biggest crisis facing humanity, and an unjust transition that would be billed to the UK public.\u00a0<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">Cleodie Rickard is trade campaign manager at Global Justice Now.<\/span><\/i><\/p>\n","protected":false},"excerpt":{"rendered":"The UK is opening itself up to repeated lawsuits from foreign oil and gas firms if it passes the Offshore Petroleum Licensing Bill","protected":false},"author":197,"featured_media":48995,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3861,82],"tags":[4541,303],"coauthors":[5146],"class_list":["post-50016","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-comment","category-eu","tag-energy-charter-treaty","tag-uk","type-comment"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>UK&#039;s oil drilling while in the ECT is economically reckless<\/title>\n<meta name=\"description\" content=\"UK&#039;s oil drilling projects open the door to lawsuits from foreign oil and gas firms if it passes the Offshore Petroleum Licensing Bill\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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