The Energy Charter Treaty (ECT), born out of the post-Cold War era with the aim of fostering international energy cooperation, stands at a crossroads. As the global energy landscape undergoes profound transformations, the Treaty’s relevance and effectiveness are questioned, and an EU withdrawal seems to be a tempting path.
Since its inception in the early 1990s, the Energy Charter Treaty (ECT) has stood as a cornerstone of international cooperation in the energy sector. Designed to integrate the energy structures of the former Soviet Union and Eastern European countries into the broader European and international energy landscape, the treaty aimed to enhance energy security while fostering liberalization and cooperation. However, as the global energy landscape has evolved, so too have the challenges facing the ECT, leading to a period of intense scrutiny and debate over its future.
The initial impetus behind the Energy Charter was to create a framework for international energy cooperation that would facilitate investment, trade, and the transfer of technology. At its core was the principle of national sovereignty over energy resources and policy.
Over the years, however, the energy landscape has shifted dramatically. The rise of renewable energy sources, coupled with growing concerns over climate change, has prompted a reevaluation of energy policies and priorities (e.g. Green Deal). In the absence of a substantial update of the ECT since the 1990s, the ECT has become increasingly outdated, while the EU has significantly developed standards for both investment and climate protection.
Recognizing the need for reform, the EU and its Member States initiated a process to amend the Energy Charter Treaty in 2018. Negotiations ensued over several years, culminating in a proposed update that sought to address key concerns such as investment protection, sustainable development, and the transition to clean energy. However, despite extensive efforts, the proposed update faced significant hurdles, ultimately failing to secure approval at the Energy Charter Conference in November 2022.
The failure to update the ECT has left the EU in a precarious position, with the dilemma between the outdated treaty’s conflicts and the withdrawal’s set of challenges. In response to this dilemma, the Commission has proposed three alternatives: a) coordinated withdrawal from the ECT (withdrawal of the EU/Euratom and the Member States), b) EU/Euratom withdrawal with prior approval for some Member States to remain in an updated treaty, and c) approval of the update followed by coordinated withdrawal. The first option was strongly supported by the Commission, however the Member State were split between options b and c.
During the Swedish and Spanish presidencies, attempts were made to broker agreements within the Council regarding the EU’s approach to the ECT. However, the Commission refused to endorse the Council’s consensus. The compromising proposals of both the Swedish and Spanish Presidencies of the Council were widely accepted by the Member States, who expressed their dissatisfaction with the Commission’s refusal to cooperate.
WHY IS THE ISSUE MOVING FORWARD NOW?
The Belgian presidency sought to address the issue against the backdrop of impending European elections. With the potential for significant shifts in the composition of the European Parliament, as well as within key committees such as the Industry, Research, and Energy Committee (ITRE), the presidency faced pressure to navigate the evolving political landscape while advancing a coherent EU position on the ECT.
In the meantime, Italy (2015-16), France, Germany and Poland (December 2023) have already withdrawn from the ECT and Luxembourg and Poland will also leave within 2024. Those withdrawals added another layer of complexity, as in the upcoming Conference of the ECT in November 2024, if the other Contracting Parties wish to include the ECT update in the Agenda, the EU will not be able to prevent it, as it will no longer have a majority. This fear highlighted the need for decisive action to safeguard EU interests in the evolving international energy landscape.
RECENT PROGRESS AND THE BELGIAN ROADMAP
The current Belgian Presidency has taken a proactive approach to resolving the issue, recognizing the urgency of the situation. With the upcoming EU elections and the next Energy Charter Conference looming, the Presidency has sought to find a compromise that balances the interests of all parties involved. This compromise involves coordinated withdrawal from the ECT while allowing Member States wishing to remain in an updated treaty to do so.
The Belgian Presidency presented a mainly accepted solution recognizing the need for flexibility and providing a compromising pathway. The Belgian roadmap consists of two pillars: the first is the withdrawal of the EU/Euratom from the ECT and the second is the possibility for those MS that wish to do so to remain in an updated ECT. Both the MS and the Presidency stressed and underlined the need and the intention for the two pillars to proceed simultaneously.
Recent developments, including the European Parliament’s initial approval for EU/Euratom withdrawal from the ECT and the plenary session in 22-25 April, indicate momentum towards a resolution. In particular, on 9th April, the European Parliament gave its first approval for the EU/Euratom’s exit from the ECT, by a large majority (European Parliament’s ITRE): 58 votes in favor, eight against and two abstentions. On Wednesday 24 April, during the plenary in Strasbourg, the EP approved the EU/Euratom’s withdrawal, by 560 votes in favor and 43 against. This means that the 1st pillar has no more obstacles. Still, the process is not supposed to come to an end until both pillars are approved.
WHAT COMES NEXT
Mainly, the approval of the second pillar: the ability of the Member States to remain parties to the ECT without hindering its modernization.
Looking ahead, the challenges facing the ECT are complex and multifaceted. From the need to modernize energy infrastructure to the imperative of addressing climate change, the stakes could not be higher. However, there is hope that a solution can be found—one that ensures energy security, sustainable development and international cooperation.
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