We’re all pushing for the government to make big decisions that really get the ball rolling in the fight against climate change. Well… one of those decisions might just have happened. Last month, news broke that the UK has officially left a toxic energy treaty that allowed huge fossil fuel companies to sue governments for profits lost due to climate policies.
And whilst this is a huge win for the climate groups that have been campaigning for years, it’s also raised eyebrows as to why we’ve been part of such a controversial treaty for so long. But how did we get here, why didn’t we leave sooner, and what does this mean now? It’s time to DISH THE DIRT.
How did we get here?
Like all good villain origin stories, the Energy Charter Treaty was started with great intentions. In 1990 (after the Cold War) it was set up to help countries to work together to expand the energy industry. Think of it like this - if you set up an oil or gas company abroad, and that country brings in a law that would be bad news for you, you could get your lawyers involved (nifty).
But we’re living in a different world now. With renewable energy on the rise and energy production becoming more reliable, there’s been a shift in who this really benefits. Countries are aiming to reduce emissions, making laws that affect the big bad boys of the fossil fuel industry. This has led to some of these mammoth companies using the treaty to sue governments for hundreds of millions, rather than finding ways to evolve in changing times. The case that started to bring attention to this was in 2021, when two German energy companies sued the Netherlands for €2.4 billion - after they passed a law that planned to slowly phase out coal-fired power. Although exact figures are hard to find, member states have had to pay out at least 100 billion dollars so far. And here in the UK, the international oil and gas companies have £121 billion worth of infrastructure covered by the ECT - which, if they went after compensation, would cost each UK taxpayer £1800.
Why wasn’t this flagged sooner?
It isn’t new news that the Energy Charter Treaty isn’t perfect. Russia withdrew in 2009, Italy quit in 2015, and for years the EU has raised concerns about how secretive the results of the suing attempts were, as well as how hard it was to find out the real costs involved. But rather than making a mutual decision to scrap an outdated treaty, discussions began on how to improve it. And (much like a family debate over what to get for the Saturday night takeaway) after 15 long rounds of negotiations… nobody was happy. Some felt like the new proposal didn’t go far enough to meet climate goals. Some felt like it was opening doors for exploitation by other types of companies. Some probably just got bored after years of bickering. And in 2022, countries including Germany, France, and the Netherlands quit the club.
Over a year later the UK has finally decided that no good solution can be found… and have also taken the plunge.
So… are we in the clear now?
Let’s start with the not-so-great news. There’s something called a ‘sunset period’... which might sound like the perfect time to sit on a beach with a cocktail in hand, but isn’t quite as glam. For 20 years after quitting, companies can still theoretically still keep filing for compensation - so the risk isn’t over yet. There is absolutely good news though. This is a huge step in the right direction for the environment. The decision has also sparked conversation and brought these treaty exploitations into public view, which might reduce the risk of oil and gas companies attempting to sue the UK government (to save face). It could also trigger other countries to leave – and if the majority do, the sunset policy might be scrapped. And, potentially most importantly, it’s set the ball rolling. The UK has started taking a hard look at what other treaties we’re a part of, and whether they make sense in a climate-conscious world.
Big things are happening. Let’s keep dishing the Dirt.
