The Commission’s plan becomes reality: no more Energy Charter Treaty

The Energy Charter Treaty has been in a period of stall. With the Energy Council’s final decision to approve the withdrawal from the Energy Charter Treaty, they have established a brand new period for the EU: remodernizing the Energy Treaty to follow current trends.

It all started in 2023. Back then, the Commission submitted a proposal for the Council to withdraw the Union from the Energy Charter Treaty, along with a similar proposal for Euratom. The Commission considered the treaty no longer compatible with the EU’s climate goals under the European Green Deal and the Paris Agreement, primarily due to concerns over continued fossil fuel investments.

And here we are, almost a year later: as of May 30th, the European Union and Euratom will exit the Energy Charter Treaty, while member states will have the option to support its modernization at the upcoming Energy Charter Conference. These decisions constitute the two pillars of a political compromise known as the Belgian roadmap on the Energy Charter Treaty.

The Energy Charter Treaty (ECT) includes provisions for investment protection and trade in the energy sector. Since the treaty no longer aligns with the Paris Agreement and the EU’s energy transition goals, a modernization process began in 2018.

Member states wishing to remain part of the treaty after the EU’s and Euratom’s withdrawal can vote at the upcoming Energy Charter Conference, expected by the end of 2024, to approve or not oppose the adoption of a modernized agreement.

By resolving the impasse within the EU, the Belgian roadmap has also facilitated the modernization process of the Energy Charter Treaty for its non-EU contracting parties.

The Energy Charter Treaty in a nutshell

The Energy Charter originated from a political initiative in Europe in the early 1990s, specifically in 1998, following the end of the Cold War. This period presented a unique chance to bridge the economic divide among nations.

The energy sector emerged as the most promising area for mutually beneficial cooperation, given Europe’s increasing energy demands and the abundant resources in the post-Soviet states. Furthermore, there was a recognized need to create a universally accepted framework for energy collaboration among the Eurasian countries. Thus, the Energy Charter process was initiated.

The original European Energy Charter declaration was signed in The Hague on 17 December 1991. It was a political declaration of principles for international energy cooperation in trade, transit, and investment, along with the intention to negotiate a legally binding treaty, setting the beginning of the development of the Energy Charter Treaty. One of the final hurdles was finding language to ensure national sovereignty over natural resources while enshrining the principle of international cooperation to allow outside access to those resources.

The final withdrawal will be effective starting next year, but as the Belgian Minister for Energy, Tinne Van der Straeten, said during the press conference, “This adoption represents the final milestone in the Belgian roadmap we crafted for the Energy Charter Treaty. Building on the groundwork laid by our Swedish predecessors, the Belgian presidency has worked tirelessly to break this complex deadlock and found a balance acceptable and useful to all.”