On 4 February the German energy giant RWE announced it was suing the government of the Netherlands. The crime? Proposing to phase out coal from the country’s electricity mix. The company, which is Europe’s biggest emitter of carbon, is demanding €1.4bn in ‘compensation’ from the country for loss of potential earnings, because the Dutch government has banned the burning of coal for electricity from 2030.
If this sounds unreasonable, then you might be surprised to learn that this kind of legal action is perfectly normal – and likely to become far more commonplace in the coming years.
RWE is suing under the Energy Charter Treaty (ECT), a little-known international agreement signed without much public debate in 1994. The treaty binds more than 50 countries, and allows foreign investors in the energy sector to sue governments for decisions that might negatively impact their profits – including climate policies. Governments can be forced to pay huge sums in compensation if they lose an ECT case.
