THE WARREN REPORT
harmful environmental impacts arising from energy use”. Some 30 years on, I think I should
acknowledge that Jones did informally approach me then to see if I would get involved with administering the protocol. It was an offer of full time employment I declined, I hope gracefully. Subsequently I did became very active on an external advisory basis . The PEEREA legally defines
Is the Energy Charter Treaty a sinking ship?
Andrew Warren looks at the evolution of the international Energy Charter Treaty and why the UK government has decided to withdraw from its obligations
L
ater this month, the UK will officially leave the “outdated” Energy Charter Treaty (ECT), having concluded it
would “stymie efforts” to achieve net-zero by 2050. The Treaty allows energy companies to sue governments over policies that damage their investment, and has been used in recent years to challenge policies that require fossil fuel plants to shut. Since 2001, nearly 160 legal actions based on the ECT have been brought by investors claiming their investments had been damaged by green policies, seeking compensation from governments. The UK’s exit from the Treaty
underscores years of wrangling to try to modernise it for an era in which Europe’s biggest economies have put the green transition at the centre of their energy policy. It comes well after many other countries have withdrawn membership for similar reasons, beginning with Italy in 2016, followed by Spain, the Netherlands, Poland, Germany, France and Belgium in 2022, and Denmark and Slovenia in 2023. The beginnings of the Energy
Charter date back to a political initiative launched by the European Union in the early 1990s. The end of the Cold War offered an
EIBI | MARCH 2024
unprecedented opportunity to overcome previous economic divisions between nations. The brightest prospect for mutually co- dependent beneficial cooperation was felt to be the energy sector. Officials at the European Commission saw this as a way of encouraging former COMECON countries to want to join the European Union – an astute bet, as within 12 years no less than nine of them had done so. One of the key areas identified as likely to be both least controversial and of greatest value to such governments was assistance with implementing the “rational use of energy”, as the EC then labelled energy efficiency.
Efficiency obligations The guiding figure on this was a Welshman called Clive Jones, then no2 at the energy directorate (then called DGXVII), who became the Charter’s first secretary general up to the time when the formal Treaty was signed in Lisbon in 1994. Deliberately highlighted within that Treaty’s Article 19 was a “protocol; on energy efficiency and related environmental aspects” (PEEREA). This required each government to “strive to minimise in an economically efficient manner,
improving energy efficiency to be “acting to maintain the same unit of output (of a good or service) without reducing the quality or performance of the output, but while reducing the amount of energy required to produce that output.” It remains an absolutely accurate and unusually precise definition. Signatory governments were
required to “have particular regard to improving energy efficiency… by employing techniques and technological means that reduce pollution”. They were to promote amongst governments “information on environmentally sound and economically energy efficient policies and cost-effective practices”. They were also obliged to ”promote public awareness of the environmental impact of energy systems, and the scope for prevention and abatement of their adverse environmental
impacts”. And finally “to promote and co-operate in the research, development and application of energy efficient technologies.”
Binding commitments work As one who was heavily involved in all such activity in the ensuing years, I really do believe that it can be genuinely claimed that having these binding commitments did facilitate considerable progress. It meant that, particularly prior to becoming full EU members, many eastern European governments were introduced to energy saving policies and programmes (the relevant “acquis”) that they would need to comply with when they became full Member States. It is noticeable that subsequently, several ceased being laggards, and are now genuine exemplars. Such was the perceived value of
The UK's exit from the Treaty underscores years of wrangling
the Energy Charter that membership extended way beyond the European Union, and became the International Energy Charter, signed in 2015 by 72 countries as a nonbinding political declaration, underpinning key principles for international energy trade co-operation. Whilst the secretariat remains in Brussels, the presidency has recently transferred from Jordan to Mongolia, clear evidence that it is no longer a European organisation. So much so that in 2021 the Treaty was struck down for intra-European government disputes by the European Court of Justice . The ECT has long come under heavy criticism for being an obstacle to the transition to a greener future. Transnational corporations that have invested in fossil fuel production or nuclear power have been suing national governments for loss of profit on their investments as a consequence of the transition. Critics have long argued that the Energy Charter Treaty has a chilling effect upon energy-related legislation. My conclusion is that, certainly so
far as much of Europe is concerned, the Energy Charter Treaty is now a sinking ship, of which the UK is but the latest of the original signatory rats to abandon. But before doing so, we should acknowledge the amount of good it certainly achieved during its initial incarnation. ■
Andrew Warren
Chairs the British Energy Efficiency Federation
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