The Energy Charter Treaty (ECT) has been updated by the UK, keeping its current benefits while gaining new legal protections for investors and taxpayers.
By creating new protections for taxpayers and private sector investors and lowering the risk of potentially expensive legal challenges on the road to net zero by 2050, this successful outcome—the result of two years of international negotiations—supports the Prime Minister’s recent Energy Security Strategy.
The announcement made today marks the conclusion of two years of negotiations with 53 contractual parties to update the ECT.
The convention was developed and initially published in 1994, a time when fossil fuels predominated in the world and provided the framework for international trade and investment on energy issues.
A considerably greater emphasis will be placed on fostering clean, cheap energy in the updated treaty, which is scheduled to be ratified in November 2022.
It will defend the UK government’s sovereign right to alter its own energy infrastructure in order to meet the Paris Agreement’s emissions reduction commitments.
It will guarantee legislative protections for foreign investments into green technology including carbon capture, use, and storage and low-carbon hydrogen production in addition to other renewables for the first time.
As these technologies advance, this will contribute to increasing the confidence of private investors in them.
Energy Minister, Greg Hands, said:
“The UK cannot support an outdated treaty which holds back investment in clean energy and puts British taxpayers at increased risk from costly legal challenges.”
“Our success in negotiating a modernised treaty will boost our move to cheaper and cleaner energy by providing greater confidence to the private sector investors and risk takers we need for this transition.”
The decision was made at a time when several EU nations, including Italy, Poland, and Slovenia, are dealing with expensive legal battles over expanding their renewable industries and reducing their reliance on fossil fuels, which could cost their taxpayers billions of pounds.
The phase-out of coal in the Netherlands is currently in trouble and might cost its citizens $1.4 billion.
Compared to just 0.3 percent in 1994, when the treaty was being drafted, renewable energy sources today account for about 40 percent of the UK’s electricity production.
While petroleum prices have nearly quadrupled during that time, the cost of renewable energy has decreased dramatically, with the cost of wind power having decreased by 50% since 2012.
The UK will continue to defend investments in effective abatement gas power, or gas power plants with integrated carbon capture systems.
Other than that, from the time the modifications take effect, foreign investors in new North Sea oil and gas will not be able to sue the UK under the treaty.
The lone exception is coal, which will no longer be used in the UK for energy generation starting on October 1, 2024.
The UK government is still dedicated to promoting the North Sea since domestic oil and gas are crucial to the country’s energy security.
In order to assist industry in utilizing cutting-edge technologies like hydrogen production and Carbon Capture Usage and Storage, which gain new protections under the Energy Charter Treaty, and to help them cut production emissions by 50% by 2030, ministers are working closely with industry.
Through the North Sea Transition Deal, they have secured joint investment of up to £16 billion.
Director of Policy at the Association for Renewable Energy and Clean Technology, Frank Gordon, said:
“Any measure that encourages investment in renewable energy and supports the transition to net zero is a welcome development. We need to urgently move to clean, green energy, and renewables are the quickest and cheapest way to achieve this.”
“We hope this modernised treaty will help boost investment in the sector, both here in the UK and around the world.”
The treaty amendments support the UK’s goal of being net zero by 2050, helping to increase investment in domestic clean renewable energy sources and gradually phasing down protections for fossil fuels.
In order to power every home in the UK, this commitment calls for a five-fold increase in offshore wind capacity to up to 50GW by 2030, a doubling of the capacity for producing low-carbon hydrogen to up to 10GW, and a five-fold increase in solar capacity by 2035.