UK withdraws from investment treaty that put net zero under threat

Efforts between the UK and the EU to reform the treaty so it could be used for investment in green energy have not come to fruition.

The treaty could have led to legal claims of up to £11 billion from oil and gas companies over the UK’s net zero policies, according to a 2022 analysis from the Boston University Global Development Policy Center.

In 2022, the British oil firm Rockhopper won a £210 million payout from the Italian government after it was banned from conducting offshore drilling.

There are fears that leaving the treaty could threaten fossil fuel investment in the UK, which relies on oil and gas for its energy needs, as well as new renewables.

James Rogers, from the law firm Jenner & Block, said: “Withdrawing from the treaty may not bring the benefits that the Government hopes and may actually make the UK a less attractive option for international investment in our renewable energy sector, as well as jeopardising UK investments abroad.”

He added: “With £30 billion invested in the energy sector just since September, we continue to lead the world in cutting emissions, attracting international investment and providing the strongest legal protections for those who invest here.”

The move was welcomed by climate change activists, who have long called for the UK to exit the treaty.

Dozens of countries remain in the treaty, including Japan, Turkey and Belgium, although the European Parliament has also proposed the bloc exits the agreement.

‘Outdated and not fit for purpose’

Shaun Spiers, the executive director of environmental think tank Green Alliance, said: “Civil society organisations and parliamentarians from all political parties have been clear that the Energy Charter Treaty is an out-of-date agreement and undermines our efforts to tackle climate change.

“We welcome the UK’s decision to leave, which will strengthen global efforts to roll out cheap, clean renewable energy.”

Kerry McCarthy, the shadow climate minister, said: “We are in an urgent global fight against the climate emergency. We cannot allow fossil fuel companies to stop democratically elected governments from taking strong climate action.

“Labour has long argued that the Energy Charter Treaty is clearly outdated and not fit for purpose – it is good that the Government has finally taken the step to leave it.”

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