EU set to propose mass exit from Energy Charter Treaty

The European Commission is readying a proposal for EU countries to jointly quit an international energy treaty, after some governments already pledged to leave over climate concerns.

The 1998 Energy Charter Treaty, which has around 50 signatories including European Union countries, lets energy companies sue governments over policies that damage their investments – a system initially designed to support investments in the sector.

But in recent years it has been used to challenge policies that require fossil fuel plants to shut, raising concerns in some European capitals that it is an obstacle to addressing climate change.

A Commission spokesperson told Reuters it will make legal proposals for a coordinated EU exit “in the coming weeks”, after EU countries – some of which already plan to exit the treaty – could not agree to pass reforms to it which would have allowed government to phase out protection for fossil fuels.

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“As it stands, the treaty is not in line with the EU’s investment policy and law and with the EU’s energy and climate goals,” the spokesperson said.

Four sources familiar with the discussions told Reuters the EU executive will make the proposal next week. Three of the sources said Brussels had considered a partial exit that would let some countries stay in the treaty, but opted against it over legal concerns.

Pressure has mounted on Brussels to lead an EU-wide exit after Denmark, France, Germany, Luxembourg, the Netherlands, Poland and Spain announced they planned to quit the treaty. Italy left in 2016.

But the proposal is likely to be opposed by countries including Cyprus, Hungary and Slovakia, which have said they would prefer to stay in an updated version of the accord.

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Any proposal will need backing from a reinforced majority of member states and support from the European Parliament, which has publicly backed the idea.

“A coordinated withdrawal would remove one of the main obstacles to realising the EU’s binding climate targets,” said Lukas Schaugg, an analyst at the International Institute for Sustainable Development think tank.

Treaty signatories last year negotiated reforms designed to address some of the climate concerns, but which received a mixed reception from EU countries and criticism from campaigners. The reforms would struggle to pass without EU support.

The unreformed treaty has a “sunset clause” that would protect existing fossil fuel investments in Europe for 20 years even after the EU quit.

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Despite leaving in 2016, Italy was last year made to pay €190 million ($206 million) to a British oil company for restricting oil drilling.

European officials hope that they can arrange that the treaty is not enforced between EU member states, partly neutralising the sunset clause.

The reformed version would have let governments end investment protections for fossil fuels, a power the EU and UK planned to use to phase out protections in ten years.

Switzerland plans to remain in the treaty while the UK’s position is unclear. Other states in Central Asia and Japan have shown no interest in either reforming the treaty or leaving it.