11:00 Chris Skidmore (Kingswood) (Con)

It is a pleasure to serve under your chairmanship, Mr Gray. I am grateful to the Minister responding today. I know he is currently very busy, preparing the finishing touches to the Government’s response to the net zero review, which I submitted as the review’s independent chair. I hope he will excuse me taking this chance to place on his ministerial desk another precious opportunity for the UK to demonstrate clear and decisive climate leadership.

I know that the Minister is all too aware of the opportunity that net zero and green growth present to the UK: new industries, new jobs and a wall of inward investment ready to be deployed into the UK if we are prepared to take the net zero pathway, rather than taking the risk of not zero and turning our backs on the economic opportunity of this decade, if not the century, that net zero provides.

The new economic narrative for net zero that the “Mission Zero” report outlines clearly demonstrates that the choices that the Minister and the Government will make this month—March 2023—over our future net zero investments and policy certainty will potentially define his place in climate and clean-energy history, if he acts now. The rest of the world is watching and waiting to see whether the UK will continue to show international leadership on climate policy.

I suggest that there is another opportunity to deliver international leadership on climate, which is achievable today, that the Minister and the Government can seize while the rest of the world watches and waits to see whether the UK will demonstrate international leadership. The UK Government can make a clear and public commitment to withdraw from the energy charter treaty. That treaty is an investment agreement dating back to the mid-1990s, when the focus was on access to oil and gas reserves in former Soviet countries, and when work to tackle climate change, and recognition of the opportunities of clean and renewable energy, was negligible. Today, the energy charter treaty acts as a millstone around the necks of all signatories who wish to take their climate obligations seriously.

If the hon. Gentleman looks at the details of the treaty, which I will come to, he will see that it does not create a level playing field for competition. It is weighted in favour of fossil fuel interests. He knows full well, given his interest in clean energy, how Northern Ireland could become a future green energy powerhouse. It wants to ensure that it can continue to build onshore wind turbines, with a huge opportunity for providing green hydrogen. The challenge the energy charter treaty provides to the UK, and Northern Ireland as a proud member of the UK, is that it takes those potential clean and renewable investments and weights them disproportionately against existing fossil fuel commitments that no other country wishes to make. That is a challenge that we need to deal with.

The charter is a relic from a bygone age, which should have long been recognised as serving an obsolete purpose that still places its dead hand across all states that signed it three decades ago, preventing climate investments and, worse, prioritising inexcusable investments in oil and gas, even when the countries themselves do not wish to make them. The energy charter treaty has effectively become a Magna Carta for fossil fuels, and it is being weaponised by fossil fuel companies to sue Governments for introducing climate policies.

Absolutely. The other risk, which I will come on to in a moment, is the chilling effect. We do not know, or are unable to quantify, the investments that could be coming to the UK but for the fear that the energy charter treaty will again place its dead hand on those investments. Withdrawal from the energy charter treaty provides the certainty, clarity, continuity and consistency—the four Cs—that the net zero review outlined as part of a mission-based approach to long-term certainty. We cannot have long-term certainty for investment in future renewable projects or take decisions potentially shutting our fossil fuel investments unless the energy charter treaty is removed. It is critical that we provide that future certainty if we want those additional investments and the opportunities offered by that inward wall of capital that is waiting to be spent. As the hon. Lady mentioned, an oil company winning £210 million from the Italian Government over their restriction on offshore oil drilling is a perfect example of the risk to which this outdated treaty now exposes the UK. She mentioned that the company won six times the amount it had ever spent on the project, and those winnings are now likely to be fed back into financing new oil exploration.

Most worrying are the continued binds that the energy charter treaty places on signatory countries to prioritise and protect private foreign investments ahead of the democratic rights of elected Governments. Through investor-state dispute settlements, Governments who wish to do the right thing by the citizens who elected them and to tackle climate change to meet their net zero commitments are having their hands shackled by the energy charter treaty, imprisoning what should be free nations and leaving them bound by undemocratic regulations that are fought over by fossil fuel lawyers in courts. At a time when the UK should be taking back its sovereignty, and when it is seeking to demonstrate its energy sovereignty, the energy charter treaty, with its use of these unacceptable ISDSs, should be a prime example of legislation that we must recognise as being at the top of any lists of Brexit freedoms. Surely the UK Government should, can and must take action now to restore our energy freedoms.

If the UK follows the International Energy Agency’s recommendation and cancels oil and gas projects, it could face legal claims under the ECT of up to £9.4 billion. The most recent Intergovernmental Panel on Climate Change report warns of the risk of regulatory chill—which the right hon. Member has mentioned—causing the UK to delay or to decide against climate action for fear of being sued by large fossil fuel companies using the ISDS mechanism.

I hope to see the same clarity from the new Department for Energy Security and Net Zero, as well as from the new, beefed-up Department for Business and Trade.

I thank my right hon. Friend for securing today’s debate on such an important topic. Does he agree that the creation of a new Department gives us the opportunity to expedite the decisions that we desperately need to take, particularly in the light of yesterday’s IPCC report and his own excellent report? We have to work towards net zero; otherwise, we will hit “not zero”.

Absolutely. The UK has demonstrated continued leadership time and again, and I was the first Energy Minister to sign net zero into law. We became the first G7 country to do so, beating France by one day. We must collaborate, and I am proud that we have now seen a huge number of countries commit to net zero. I think we are the first country globally to ensure that we have a Department for net zero, which must also be welcomed. I thank the Government for demonstrating leadership on this issue, but let us extend that leadership by not just changing the words on a plaque on a wall in a Department; let us ensure that the new Department can boldly show leadership by coming out and demonstrating to other countries that it is willing to act. Then others will follow.

There are now serious moves, both here in the UK and elsewhere across Europe, to leave the energy charter treaty as a matter of political priority. It is clear that any chance of reforming the treaty is over. The modernisation talks proposed last year have failed, because several European countries, including Germany, France, Spain and the Netherlands, have decided to leave the treaty due to reforms not going far enough to bring it in line with the Paris agreement. Even the European Commission, which previously led the modernisation process, has announced plans for a full EU withdrawal from the treaty.

In February, a group of experts wrote to the Energy and Net Zero Secretary, calling on the UK to quit the energy charter treaty. Today, 15 Members of Parliament from the all-party parliamentary group for the environment—I see a number of those colleagues in the room, representing four different parties—have written to the Minister for Energy Security and Net Zero, my right hon. Friend the Member for Beverley and Holderness (Graham Stuart), to make it clear that withdrawal from the ECT is now the best option for the UK in the future. The letter states that there is now an overwhelming case for taking action to leave the treaty unilaterally, especially given that many European countries have left and the EU as a bloc has publicly announced its withdrawal.

“The ECT is undermining efforts to achieve net zero due to costly legal action from fossil fuel companies, and the so-called “regulatory chill” effect, which causes governments to refrain from adopting climate policies. This view is supported by the Intergovernmental Panel on Climate Change”.

As the former Energy Minister who signed the UK’s legal commitment to achieve net zero by 2050 into law, I know too well the challenges that the Minister faces, having sat in his position in the past. Politics has always been about priorities, and no doubt he will be told that there are other priorities that the Government must face. Some will seek to delay; others will claim that it is just too difficult. It was no different when I was seeking to persuade other Departments to agree to net zero. History judges us all on the priorities that we make and the future that we seek to create. Sometimes that future is unknown and unknowable, but that should not prevent us from taking action now to achieve it.

If someone had told me back in 2019 that 90% of the world’s GDP would have signed up to a net zero target just three years on, I simply would not have believed it. Change comes at us fast sometimes, and there is no faster change than climate change. I know of no one serious about achieving net zero who would back the UK’s remaining in the energy charter treaty. Indeed, the reality is that continued membership of the ECT and continued commitment to net zero are not compatible. We face a choice between defending our fossil fuel commitments of the past or delivering our net zero commitments for the future. Our continued membership of the energy charter treaty is not only unsustainable, but simply indefensible. The time has come to pick a side. I urge the Minister to choose net zero and commit to the UK’s withdrawal from the energy charter treaty.

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11:18 Andrew Bowie (Conservative)

It is a pleasure to serve under your chairmanship, Mr Gray, and to respond to my right hon. Friend the Member for Kingswood (Chris Skidmore) on such an important and pertinent topic. Thanks to his work in passing net zero legislation into law, and through his work on the review, the UK is committed to tackling climate change at home and internationally through our ambitious net zero targets and our international climate agreements, including the Paris agreement. I want to assure him of my personal commitment to achieving those goals, which I hope he knows already.

We have spent two years negotiating to align the treaty with today’s changing energy priorities and investment treaty practices, as well as international climate commitments, such as the Paris agreement. We took a leading role in pushing for additional safeguards for the sovereign right to introduce measures such as net zero and a flexible mechanism to allow parties to phase out investment protection for fossil fuels. To be clear, there were challenges to overcome in the renegotiation. It is a multilateral treaty across more than 50 states, each with different priorities on energy and climate. The UK was able to secure coverage for modern technologies, and provisions to ensure a stronger environmental, labour and climate focus.

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