The decision came a week after Spain, following Poland’s steps, announced that it would withdraw from the contentious Energy Charter Treaty, which gave investors the power to sue governments if they felt that policy changes and legislation would threaten their assets. 

Following Spain and Poland, the Netherlands became the third EU country to announce plans to withdraw from the Energy Charter Treaty (ECT). The plan hinders progress in the climate fight and is not aligned with the 2015 Paris Agreement goal of limiting global warming well below 2C since pre-industrial times, said the Dutch government on Tuesday,

The controversial treaty – an international agreement signed by 50 countries, including all EU members, in 1991 – was initially established to integrate the energy sectors of the Soviet Union into the broader European and global market following the end of the Cold World. It did so by instituting a multilateral framework for cross-border cooperation and investments in the energy industry, particularly the fossil fuel industry.

However, controversies began as investors started suing governments for their climate policies. In recent months, several energy groups filed lawsuits against three European governments. The Netherlands in particular was targeted by the German RWE and Uniper for its 2019 law mandating the phase-out of coal-fired power plants by 2030. 

The announcement came after the European Commission presented a deal in June to modernise the treaty, acknowledging that it had become “obsolete” and needed to be reformed. The new text, however, would still protect coal, oil, and gas investments in the EU and UK for 10 years after coming into force as well as all investments in new fossil fuel projects made before August 2023.

“The mandate for the European Commission was to bring the ECT in line with the Paris climate agreement.” – said Dutch energy minister Rob Jetten. “Despite many of the modernisations that are now in the negotiation outcome, we do not see how the ECT has been sufficiently aligned with the Paris Agreement.” 

While the Netherlands, Spain, and Poland have announced plans to withdraw, the only EU member state to have done so already is Italy, which officially withdrew from the Energy Charter Treaty in 2016. The country lost a case over banning oil and gas project explorations in the Adriatic Sea that UK’s Rockhopper had filed against it earlier this year. Indeed, the treaty protects existing investments for decades and thus, despite withdrawing six years ago, Italy remains subject to its rules for a further 20 years. 

“This decision to exit the ECT will create shockwaves through the whole system,” said Green MEP Anna Cavazzini. “The message is clear: The world has changed. States cannot accept a blanket protection of dirty investments anymore.”

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