The Energy Charter Treaty (ECT) allows investors in the energy sector based in one member state to sue the government of another current or former member over almost any decisions and policies that might harm their profits. For example, energy giants RWE and Uniper are using the ECT to claim billions of Euros in compensation for alleged losses due to the Dutch coal phase-out. It is a deeply undemocratic treaty giving far-reaching rights to investors which undermines meaningful climate action, environmental and public health protections and social and environmental justice.
Attempts to reform the ECT are ongoing as the treaty is widely considered an obstacle for countries to pursue Paris-compatible energy policies. This statement is to speak out against an aspect of said reform, which is often overlooked, namely the expansion of the scope of the treaty to biomass, one of several economic activities in the energy sector currently not covered by the ECT which could soon be included in it.
Including biomass within the scope of the ECT, as proposed by the EU, would harm efforts to protect forests, climate and communities by locking in existing harmful bioenergy policies.
ECT members must therefore reject proposals to broaden the scope of the ECT. We fully support existing civil society calls for ECT members to withdraw their membership. While the current members of the ECT are mainly countries in Europe, Central Asia and Japan, several states in Africa, Latin America and Asia are currently in the process of applying for membership in the ECT. We urge countries that are considering joining the Treaty to refrain from doing so.
Reasons not to expand the ECT’s investment protection to biomass :
- Most large-scale biomass investments involve burning wood, a large share of which comes directly from forests and tree plantations. As 500 scientists warned earlier this year: “this burning of wood will increase warming for decades or centuries. That is true even when the wood replaces coal, oil or natural gas”. Large-scale energy from forest wood is resulting in forest degradation and loss across Europe and elsewhere, causing habitat and therefore biodiversity loss. And it is often associated with environmental injustice and harm to communities, as well as contributing to air pollution, undermining public health. European Union is therefore looking into reviewing the role of bioenergy within its Renewable Energy Directive, given the mounting evidence that renewable energy subsidies are going towards energy derived from burning whole trees, including from clearcut highly biodiverse forests in countries such as Estonia, the United States or Canada. It may also be necessary to ensure emissions from biomass are adequately priced in through the EU’s CO2 accounting framework or through taxation measures.
Any such measure that could make an investment inoperable or lower its expected profit could in the future allow the investor to claim massive amounts of compensation under the ECT.
- EU member states and the UK are paying out over €6.5 billion in subsidies per year to biomass burning facilities. Changes to these subsidy schemes could also potentially trigger arbitration claims under the ECT.
- The ECT’s investment protection standards are particularly dangerous and outdated, making it very contradictory to suggest expanding investment protection further. Any reform of the Investor State Dispute Settlement (ISDS) provisions as part of the ECT modernisation is very unlikely to happen despite the repeated attempts by the EU to put ISDS reform onto the agenda, which has been opposed by Japan from the beginning.