Thank you for contacting me about the Energy Charter Treaty (ECT).

For too long climate change has been viewed as tomorrow’s problem – an issue that will affect future generations. The urgency for change has become strikingly evident, in light of the recent extreme flooding across Europe and the extreme heat that has been experienced in Pakistan and Canada. I fear that without a substantial change to our attitudes towards fossil fuels, these events will become much more regular with increasingly disastrous consequences.

I appreciate the concerns you raise. I agree that it has become increasingly clear that the ECT – in its current form – has become a major barrier to effective international action to tackle the climate crisis, with energy companies using the treaty’s investor-state dispute settlement (ISDS) provisions to challenge plans to move to net zero.

In particular, where companies are able to claim their investments in fossil fuel extraction are being damaged by government intervention, they can use the ECT to sue for damages or use the threat of lawsuits to deter governments from acting. 

We see, for example, the cases of RWE and Uniper suing the Netherlands for €1.4 billion and up to €1 billion respectively over the phase-out of coal and of UK oil company Rockhopper, which is suing Italy over a ban on offshore.

I have therefore supported calls for the Government to back efforts to remove in full the ISDS protections fossil fuel companies enjoy in the ECT, so that the treaty puts our climate first.

As you will know, on 24 June 2022 members of the ECT reached agreement in principle – to be formally approved in November – for reforms to the treaty, including a “flexibility mechanism” allowing signatories to exclude fossil fuels from investment protection in their territories. Under the new deal, the EU and UK have opted to carve out fossil fuel-related investments from investment protection under the ECT, with new investments excluded from 15 August 2023 and existing investments excluded after ten years from the entry into force of the new provisions.

The Government says the reformed ECT will reduce the risk of costly legal challenges as we transition to net zero. However, I know that campaigners are concerned that the ten-year phase out for existing investments will protect projects that need to be cancelled and that since other countries can choose not to exclude fossil fuel investments from protection, UK fossil fuel companies can continue to sue other governments over their climate policies. I can therefore assure you that I will continue to monitor this issue, keeping in mind the important concerns you raise.

More widely, I can also assure you that I oppose any ISDS clauses in future trade deals that deter action to protect the environment.

Likewise there is no response to the climate crisis that does not confront the problem of fossil fuel supply head on. As things stand, the UN has warned that countries are on course to produce more than double the amount of fossil fuels by 2030 than would be consistent with limiting average global temperature increases to 1.5°C. And as you note, the International Energy Agency makes clear that the pathway the world needs to take to get to a net zero energy system by 2050 involves no new oil and gas fields being approved for development beyond projects already committed to as of this year.

I’m really proud the Labour Party has a policy for a Green Economic Recovery, with £30 billion in planned capital investment brought forward as part of a rapid stimulus package to support up to 400,000 new, clean jobs in manufacturing and other key sectors. This will work to accelerate investment in clean projects such as energy efficiency, flood prevention, offshore wind, cycling and walking infrastructure and the electric vehicle charging network would help to create secure, stable employment in every corner of the country right now. We have an opportunity to be the leading light on tackling climate change, by introducing bold and forward thinking green policies.

It is therefore vital that we reach an international agreement on a managed and fair phase out of fossil fuels across the globe. Unfortunately, I believe that plans such as the development of the Cambo oil field will instead undermine the effort to foster international action on this issue. Seeking to drill for more oil and gas simply sends the message that the Government does not take the climate emergency seriously and has not accepted the urgent need to phase out fossil fuel production.