Tuesday, 18 May 2021
Nithe i dtosach suíonna - Commencement Matters
Only this morning, the International Energy Agency, IEA, released a report calling for radical change if we are to reach net zero emissions and stay within the 1.5°C target of the Paris Agreement. The IEA stated, "If we want to reach net zero by 2050 we do not need any more investments in new oil, gas and coal projects". If ever there was a clear signal that Ireland and the EU need to unshackle themselves from the Energy Charter Treaty, ECT, this is it.
The ECT, which was sneaked into Ireland without an Oireachtas debate, is an international treaty that gives investor protections to the energy sector, providing access to closed-door arbitration mechanisms for investors to sue states when they decide they do not like the policy changes those states are making because they might interfere with their profits or future profits. Investors are allowed to bypass domestic courts and sue EU member states for, in some cases, billions of euro in compensation. Compensation claims have been made against states for environmental rules and measures, including alleviating fuel poverty or cutting fossil fuel subsidies. These claims have had a chilling effect on governments.
I will outline a couple of examples of investor cases. In 2017, the French environment minister drafted a law intended to phase out fossil fuels by 2040. The Canadian company Vermilion threatened to sue the French Government. This worked, and the government revised its proposals and watered down its climate ambition, allowing for a renewal of oil permits beyond 2040. Rockhopper, a British oil and gas company, brought a claim against the Italian Government following its decision to ban an oil and gas exploration along the Italian coastline, while Uniper in 2019 started a challenge against the Dutch Government because it tried to phase out coal-powered electricity by 2030. It is seeking €1 billion in compensation. Much like the HSE hackers, Vermilion, Rockhopper and Uniper show there is no length to which these companies will not go to protect their interests, no matter the damage that does to the public good.
We know what needs to be done to avert climate change. Companies will have to leave fossil fuels unburned, and the public should not be left carrying the cost of their stranded assets.After all, the public is already paying the cost of the fossil fuel companies' lies about climate change over decades. The ECT prevents states from taking the necessary action to tackle climate change.
With Italy already having unilaterally pulled out of the ECT due to its nefarious influence, the French and Dutch are also considering pulling out of it and are calling for the EU as a bloc to consider leaving it. Ahead of the next round of negotiations on 1 to 4 June, where does Ireland stand? Does Ireland support the removal of investor-state dispute settlement, ISDS, chapters from the ECT? Does the State support the expansion of the ECT into the global south? Does the State support the French and Dutch positions that the ECT is likely irreformable and that the EU needs to leave it as a bloc?
The Irish public deserve to know, ahead of 1 June, where Ireland stands on the ECT. We sneaked it in without the Irish people knowing we were signing up to it. They now have a right to know where we stand in terms of its future.
I thank the Senator for the question and am delighted to answer it.
The ECT is a political declaration on international energy co-operation which was signed in 1994 and entered into force in 1998. Currently, there are 53 signatories and contracting parties to the treaty, including all EU member states, except Italy, the UK, Japan and many former Soviet states. The ECT provides a multilateral framework for energy co-operation that is unique under international law. It is designed to promote energy security through the operation of more open and competitive energy markets while respecting the principles of sustainable development and sovereignty over energy resources. The treaty also provides for dispute resolution procedures between states and between states and investors in other states who have made investments in the territory of said states.
More recently, in particular following policy actions taken by EU member states in pursuit of Paris Agreement objectives, a number of cases have been taken against member states by energy investors. In one notable case, a German energy company has filed an arbitration claim against the Netherlands seeking in excess of €1 billion in compensation for the Dutch decision to phase out electricity production from coal by 2030.
Use of the ECT provisions in this way has attracted international criticism and accelerated the process to modernise the treaty to accommodate the objectives of the Paris Agreement, while within this context the European Commission has proposed modernised and revised treaty provisions that could restrict energy investment protection only to those investments that comply with emissions thresholds, effectively ruling out protection for coal power and all but the most efficient gas power plants. The Commission also proposes to extend ECT protections to biomass and hydrogen infrastructure, including hydrogen generated using fossil fuels provided that the associated CO2 emissions generated are captured and stored.
The Commission's proposed reforms have split the ECT membership, many of whom do not share the same emissions reduction ambition, and the EU bloc itself, with an increasing number of member states calling for the EU to abandon the modernisation process and withdraw from the treaty altogether. Spain and France have threatened to leave the treaty following Italy's earlier departure in 2016. However, the effectiveness of such a step remains unclear given the continued applicability of the treaty after withdrawal under a 20-year sunset clause under article 47(3) which overlaps substantially with 2050 net zero goals.
The Department's position is to continue to support the efforts of the Commission to negotiate reform of the ECT in the first instance while reserving the option to withdraw from the treaty should these efforts fail and if it is considered the appropriate approach by Government to achieve our national renewable energy and climate ambition. The Department's view is, in a nutshell, in line with the Commission's approach of reform not withdrawal. The rounds of negotiations in 2021 are foreseen for 1 to 4 June, 6 to 9 July and during the weeks of 28 September and 9 November.
Separately, in late 2020 Belgium submitted a request to the Court of Justice of the European Union for an opinion on the compatibility of the future modernised ECT arbitration provisions within EU law. This follows from a recently established position that arbitration provisions in intra-EU bilateral investment treaties are incompatible with the EU law principle of autonomy. Therefore, from an EU law perspective Belgium's request may provide some clarity on the future relevance of ECT provisions for member states. A decision from the court is expected in the coming months.
I thank the Minister of State. He did not answer my question about the ISDS mechanism in the ECT. Does the Government support the removal of that system? Even if it excluded fossil fuels, is it right that investors have that power over states? We do not know what the future holds in terms of hydrogen or renewables. In fact, RWE, which is a renewable energy generator in Ireland, is riding two horses at the moment because it is one of the organisations taking a case against the Dutch.
It is also interesting the Minister of State mentioned the 20-year sunset clause when the Government is looking to sign us up to CETA which also comes with a 20-year sunset clause. These are nefarious aspects of trade agreements and I do not think the Irish public would like to know that we are signing ourselves up to things we cannot remove ourselves from for 20 years.
Regarding reform, the ECT is irreformable because it has a veto. The decisions taken to reform have to be unanimous. Japan has already ruled out any reform. Surely the Irish State should now join the French and Spanish and say that we need to pull out as a bloc.
The position of the Department is to attempt reform rather than to withdraw. If we cannot get what we want out of reform, we will withdraw. We are clear there is a division between member states. Outside of the EU there is a division between the different parties that have signed up and have different ambitions from us.
The treaty was formed at the end of the Cold War in a completely different world where the ambitions and long-term strategies of different countries were all about energy security and being in a chaotic world where things were at risk, and the idea of the goals were stability and energy security. Now, our long-term goal is emissions reduction. It is focused on the Paris Agreement, and we are moving away from trying to protect investors towards trying to protect our Earth and common atmosphere.