You may not have heard of the Energy Charter Treaty – but it allows oil companies to do as they please

The treaty disastrously allows corporations to sue governments if new climate regulations impact on their future profits, writes Donnachadh McCarthy

A section of the BP Eastern Trough Area Project oil platform in the North Sea (REUTERS)

With apologies to the hit movie Don’t Look Up, imagine if there were a planet-destroying, diamond-enriched comet hurtling towards Earth – one that was owned by global diamond corporations. Then imagine you found out that global governments could be sued for hundreds of billions of dollars in lost profits if they acted and destroyed the comet.

This is exactly what the obscure, but notorious, Energy Charter Treaty does for oil corporations and the climate emergency. Signed in 1994, the treaty was thought up by international oil corporations to protect their fossil fuel investments from being nationalised by governments in foreign countries.

While it is understandable that they would want to do this, the treaty is an astonishing attack on the sovereignty of nations. It allows oil corporations to sue governments but there is no reciprocal provision to allow governments to sue oil corporations for the trillions of dollars in damages they are knowingly inflicting on humanity.

Drafted before there was much public awareness of the existential threat posed by carbon emissions, the treaty disastrously also allows corporations to sue governments if new climate regulations impact on their future profits. This threatens endless multi-billion dollar claims against governments seeking to act on the International Energy Agency’s warning that we need to end all new fossil fuel investments immediately if we are to have any hope of reaching net zero even by 2050.

Even more malign is the devastating “sunset clause”, which allows oil corporations to sue governments for up to 20 years after a government has left the treaty. Italy left the treaty in 2016 but was sued for $275m in lost profits when Italy tried to protect its beautiful shorelines by banning oil and gas exploration near its coast.

And then there is the ultimate triple lock protecting the oil corporations from the treaty being changed. In a mirror image of the disastrous requirement for UN Cop treaties to have unanimous agreement from all participating nations to agree new restrictions on carbon emissions, the Energy Charter allows a single state to veto any changes to the charter that would allow countries to act on climate.

I first became aware of this monstrous treaty when the prominent climate protector George Monbiot spoke about it passionately at last autumn’s Extinction Rebellion protest at the Business Department. I since found out that many charter member countries, including the EU, understand the obstacle the treaty poses and are seeking to “modernise” it. However, because of the requirement for unanimity, the negotiations have been grinding on without success for years, with the latest round finishing last week with no clear agreement.

When we approached the UK government for a statement on the threat the treaty posed to government restrictions on new UK oil and gas fields, they admitted there was a problem, stating: “We are engaged in the process of modernising the Energy Charter Treaty to ensure it aligns with our objective to advance the global energy transition.

“The modernised Treaty must ensure states can regulate emission reductions and have stronger focus on climate change. We are negotiating to ensure it is aligned with the take up of green technologies such as carbon capture and low-carbon hydrogen production.”

Labour’s shadow secretary of state for climate change, Ed Miliband, told this column: “We are in an urgent global fight against the climate emergency. We cannot allow fossil fuel companies to stop democratically elected governments from taking strong climate action.

“The charter is clearly outdated and not fit for purpose – which is why so many countries are rightly saying that it needs to be comprehensively overhauled to meet the climate challenge.

“Labour has called on the government to show some climate leadership in the remainder of our Cop presidency. Anything less is more hot air and climate delay.”

As the latest round of charter negotiations were taking place online last week, the UN secretary-general, Antonio Guterres, was warning the UN General Assembly that: “We must go into emergency mode. In 2020, climate shocks forced 30 million people to flee their homes – three times more than those displaced by war and violence. Poor and vulnerable people everywhere are one shock away from doomsday. According to present commitments, global emissions are set to increase by almost 14 per cent over the current decade. That spells catastrophe.”

When we approached the UN for a comment on whether they support the Cop27 in Egypt addressing the threat posed by the charter to global climate action, we were told a response could not be given within our deadline.

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The response from the UK president of Cop26, Alok Sharma, was to refer us to the statement by the government’s spokesperson.

This clearly is not good enough from the world’s top two official leaders of the UN Framework Convention on Climate Change process.

It is challenging enough for governments to act fast enough to save humanity from civilisational collapse, in the face of corporate media propaganda opposing it. But if you add governmental treasury-busting threats of hundreds of billions of dollars in charter compensation from the climatically genocidal oil-corporations, then we face an existential paralysis as the climate comet hurtles towards us and explodes.

We urgently need Guterres and Sharma to now stand up and provide real leadership on this devastating threat to climate action.