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An obscure treaty could hinder Central Asia’s decarbonisation

(The Third Pole, 23 Jun 2022) The Energy Charter Treaty, with members across Europe and Asia, is being wielded by fossil fuel investors to obstruct moves away from fossil fuels. Central Asian countries should take note.

The Energy Charter Treaty (ECT) is a little-known but controversial trade agreement that potentially stands as an obstacle against the decarbonisation of Central Asia’s energy systems.

Signed in the 1990s, the Energy Charter Treaty aimed to create a more attractive investment environment for European energy companies by protecting investors against the prospect of expropriation and nationalisation, particularly in former Soviet states. Membership of the Energy Charter Treaty has since broadened and it now binds more than 50 countries, including almost all of Europe and the Central Asian countries of Afghanistan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, as well as Mongolia and Japan.

The Energy Charter Treaty grants sweeping rights to foreign fossil fuel investors, including requiring all investors to be treated as favourably as those from a country’s closest trading partners, and barring domestic companies from receiving preferential treatment. One mechanism in particular, called investor-state dispute settlement (ISDS), has caused much controversy. ISDS allows foreign companies to sue a national government for virtually any action that damages their profits.

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The Third Pole, 23 Jun 2022: An obscure treaty could hinder Central Asia’s decarbonisation