Written by 5:45 pm EU Investment

France withdraws from Energy Charter Treaty

France has become the latest country to announce plans to withdraw from an investment treaty in a sign of growing rebellion in the EU over an accord that activists say deters tougher action to address climate change.

President Emmanuel Macron said on Friday that France had decided to withdraw from the Energy Charter Treaty, an accord crafted after the Cold War that protects energy investments, including fossil fuel projects, by foreign companies or individuals. Climate campaigners say it dissuades governments from phasing out fossil fuels for fear of legal action.

“This is coherent with our European climate strategy,” said Macron. “To that end, I want to announce clearly that France has decided to withdraw from the treaty, which was an important step demanded by many and that we have been working towards.”

Remaining part of the treaty was incompatible with “cutting carbon emissions through 2030 as called for in the Paris accords”, said an independent French climate advisory body that recommended the withdrawal. Macron has put opening new nuclear plants and building more renewable energy capacity at the centre of his energy strategy.

Amandine Van den Berghe, trade and environment lawyer at ClientEarth, said France’s exit was “another blow to the ECT and really it shows how difficult it will be for the EU itself as a party to stay in the treaty.”

She said that the treaty brought “too much risk” to governments trying to pursue climate-friendly policies and there was “no evidence that this treaty has attracted beneficial investment flows”.

Moves by the EU and UK to modernise the treaty have met opposition from lawmakers in many European states, who argue the revised treaty does not go far enough in phasing out protections for fossil fuels.

France’s decision followed recent announcements by the Netherlands, Spain and Poland of plans to withdraw from the treaty.

Investors may sue states that are signatories of the pact, which covers more than 50 countries as well as the EU, if they believe their assets are under threat from legislative or policy changes. Three energy groups, including Germany’s RWE, are in the process of suing three European governments in relation to fossil fuel investments.

Italy withdrew from the pact in 2016, but remains bound by a 20-year sunset clause. Germany is also considering plans to exit the treaty.

The EU and UK have pushed for the treaty to be “modernised”, and an agreement in principle on a revised version of the text was agreed in June. However, the updated text, which is yet to be ratified, would continue to protect coal, oil and gas investments in the EU and UK for 10 years after it comes into force. It would also protect new fossil fuel investments made before August 2023.

The revised text must be approved by all signatories. The growing number of EU countries that have objected to the updated text has put Brussels in an awkward position, since some member states such as Austria and Luxembourg remain supportive of it.

The EU this month moved to bar the treaty from being used within the bloc, arguing that it was incompatible with the single market. The proposal must be approved by a majority of the bloc’s 27 member states and has not prevented the European Commission pushing ahead with efforts to revamp the pact.

Sabine Weyand, head of the commission’s trade directorate, tweeted on Thursday that “EU member states are better off in all respects under the reformed treaty than if they withdraw from the current one”, arguing that it was “the only treaty of its kind to provide protection for renewable energy investments”.

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