CYIL vol. 12 (2021)

Monika Feigerlová CYIL 12 (2021) Unilateral withdrawal is, however, problematic due to the existence of a sunset clause in Article 47 of the ECT which guarantees protection over already made investments for the next 20 years from the date when the contracting party’s withdrawal takes effect. At the beginning of February 2021, Luxembourg’s energy minister thus suggested further negotiations over the revision of the ECT, 36 however, required an immediate termination of the investment protection in fossil fuels and a change in the definition of ‘ economic activities in the energy sector’ , respectively of ‘ energy materials and products ’ in the reformed ECT. According to the Luxembourg minister, any attempt to slow down the process of phasing out fossil fuel investments protected under the ECT limits the EU governments from making decisions towards the energy transition. 37 The European Commission has so far preferred a revision of the text of the ECT over its termination. For the first time, in December 2020, it admitted the possibility of a unilateral withdrawal from the ECT unless the modernization, respecting core EU objectives, including the alignment with the Paris Agreement and the Green Deal, is attained within ‘a reasonable timeframe’. 38 In the context of the above developments, in March 2021, during the forth negotiation round, the EU presented an additional amendment proposal to phase out the investment protection of fossil fuels from the ECT (EU Phase-out Proposal). 39 The proposal includes a requirement of a ten-year phase out from fossil fuels, at the latest by 2040, and of a transition period during which new investments to gas would be protected provided that certain conditions, including emission limits, are met. 40 New investments into coal, oil, and energy produced from fossil sources would no longer be protected starting from the amendment of the ECT. The EU underlines 41 that, in line with the Paris Agreement and EU’s long term decarbonisation and energy transition policies, it is bound to discourage all further fossil fuel investments, unless they are consistent with a clearly defined pathway towards climate neutrality in accordance with the long-term objectives of the Paris Agreement and the best available science. Such compromises do not fully eliminate potential investors’ claims from already made investments into fossil fuels for the near future when the decarbonisation actions shall take place. At least it marks the dividing line. Any amendment to the ECT, however, requires 36 The minister stressed out that the EU represents a major force with 27 EU countries among 54 contracting states, making 65% of the ECT Secretariat budget and early termination of the talks would be seen as a major EU diplomatic failure and a step back in the climate ambition. Letter of Minister of Energy. Energy Charter Treaty Modernization Process: Definition of Economic Activities to Terminate Investment Protection n Fossil Fuels. 5 February 2021. [online]. Available at: . Visited on 1 June 2021. 37 Ibid. 38 Answer given by Executive Vice-President Dombrovskis on behalf of the European Commission to a parliamentary question date 2 December 2020. [online]. Available at: < https://www.europarl.europa.eu/doceo/document/P- 9-2020-005555-ASW_EN.pdf>. Visited on 1 June 2021. 39 EU additional submission to its text proposal for the modernisation of the Energy Charter Treaty. [online] Available at:< https://trade.ec.europa.eu/doclib/docs/2021/february/tradoc_159436.pdf>. Visited on 1 June 2021. 40 See EU Commission. 25 January 2021. European Union text proposal for the modernisation of the Energy Charter Treaty. [online]. Available at: . Visited on 1 June 2021. 41 Ibid.

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