Energy Charter Treaty: London also considers withdrawal

The UK is considering withdrawing from the Energy Charter Treaty due to disagreements over modernization, leading to the withdrawal of several EU member states, while Europe faces costly litigation over fossil fuel investments.

Share:

The United Kingdom announced on Friday that it was considering withdrawing from the Energy Charter, pointing to a “deadlock” following the announcement by several EU member states of their withdrawal from this international treaty deemed too protective of investment in fossil fuels.

London considers withdrawing from the Energy Charter Treaty: Crucial modernization at stake by November

“The UK Government confirms that it will review its membership of the Energy Charter Treaty and consider withdrawing from it if a vital upgrade is not agreed” by November this year, the executive announced in a statement.

The UK explains that it supported an improved version of the text, more focused on promoting “clean and affordable energy”, but “several EU member states have decided to leave the treaty, leading to an impasse over its modernization”, the government points out in its statement. At the beginning of July, the European Commission proposed a coordinated withdrawal of the EU and its members from this treaty, which several countries, including France, have already announced their intention to leave.

The Twenty-Seven must vote by qualified majority on this proposal. The signatories concluded the Energy Charter Treaty (ECT) in 1994, at the end of the Cold War, with the aim of guaranteeing investors in the countries of Eastern Europe and the former USSR. Bringing together the EU and some fifty other countries, it enables companies to claim compensation from a state before a private arbitration tribunal, where the state’s decisions and regulatory environment affect the profitability of their investments – even where pro-climate policies are involved.

Costly disputes: Europe faces billions of euros in claims, leading several countries to withdraw from the treaty

Emblematic case: in 2022, Italy was ordered to pay compensation of around 200 million euros to the British oil company Rockhopper for having refused an offshore drilling permit. For its part, German energy company RWE is claiming 1.4 billion euros from The Hague to compensate for its losses on a thermal power plant affected by Dutch anti-coal regulations.

Faced with a growing number of disputes, the Europeans first tried to modernize the text to prevent opportunistic claims and gradually exclude investments in fossil fuels, but failed last autumn to agree on a compromise. After Italy in 2015, several EU countries decided to withdraw from the treaty at the end of 2022 (France, Spain, Netherlands, Germany, Luxembourg, Poland, etc.).

However, they are still covered by the ECT’s “survival clause”, which protects fossil fuel plants covered by the treaty for a further 20 years after a signatory country withdraws. Legal experts and NGOs believe that a coordinated withdrawal by the Europeans would partly neutralize this clause within the EU.

Nearly USD92bn will be invested by major American and international groups in new data centres and energy infrastructure, responding to the surge in electricity demand linked to the rise of artificial intelligence.
Nouakchott has endured lengthy power interruptions for several weeks, highlighting the financial and technical limits of the Mauritanian Electricity Company as Mauritania aims to widen access and green its mix by 2030.
Between 2015 and 2024, four multilateral climate funds committed nearly eight bn USD to clean energy, attracting private capital through concessional terms while Africa and Asia absorbed more than half of the volume.
The Global Energy Policies Hub shows that strategic reserves, gas obligations, cybersecurity and critical-mineral policies are expanding rapidly, lifting oil coverage to 98 % of world imports.
According to a report by Ember, the Chinese government’s appliance trade-in campaign could double residential air-conditioner efficiency gains in 2025 and trim up to USD943mn from household electricity spending this year.
Washington is examining sectoral taxes on polysilicon and drones, two supply chains dominated by China, after triggering Section 232 to measure industrial dependency risks.
The 2025-2034 development plan presented by Terna includes strengthening Sicily’s grid, new interconnections, and major projects to support the region’s growing renewable energy capacity.
Terna and NPC Ukrenergo have concluded a three-year partnership in Rome aimed at strengthening the integration of the Ukrainian grid into the pan-European system, with an in-depth exchange of technological and regulatory expertise.
GE Vernova has secured a major contract to modernise the Kühmoos substation in Germany, enhancing grid reliability and integration capacity for power flows between Germany, France and Switzerland.
The National Energy System Operator forecasts electricity demand to rise to 785 TWh by 2050, underlining the need to modernise grids and integrate more clean energy to support the UK’s energy transition.
Terna has signed a guarantee agreement with SACE and the European Investment Bank to finance the Adriatic Link project, totalling approximately €1bn ($1.08bn) and validated as a major transaction under Italian regulations.
India unveils a series of reforms on oil and gas contracts, introducing a fiscal stability clause to enhance the sector’s attractiveness for foreign companies and boost its growth ambitions in upstream energy.
The European Commission is launching a special fund of EUR2.3bn ($2.5bn) to boost Ukraine’s reconstruction and attract private capital to the energy and infrastructure sectors.
Asia dominated global new renewable energy capacity in 2024 with 71% of installations, while Africa recorded limited growth of only 7.2%, according to the latest annual report from IRENA.
US President Donald Trump's One Big Beautiful Bill Act dramatically changes energy investment rules, imposing restrictions on renewables while favouring hydrocarbons, according to a recent report by consultancy firm Wood Mackenzie.
On July 8, 2025, the Senate validated the Gremillet bill, aimed at structuring France's energy transition with clear objectives for nuclear power, renewable energies, and energy renovation.
Brazil, Mexico, Argentina, Colombia, Chile, and Peru significantly increase renewable electricity production, reaching nearly 70% of the regional electricity mix, according to a recent Wood Mackenzie study on Latin America's energy sector.
The Canadian government announces an investment of more than $40mn to fund 13 energy projects led by Indigenous communities across the country, aiming to improve energy efficiency and increase local renewable energy use.
The German Ministry of Economy plans to significantly expand aid aimed at reducing industrial electricity costs, increasing eligible companies from 350 to 2,200, at an estimated cost of €4bn ($4.7bn).
A major electricity blackout paralyzed large parts of the Czech Republic, interrupting transport and essential networks, raising immediate economic concerns, and highlighting the vulnerability of energy infrastructures to unforeseen technical incidents.