Denmark seeks to exit Energy Charter Treaty due to energy transition concerns

The Danish government is working to withdraw from the Energy Charter Treaty (ECT) due to possible concerns and risks for the green transition, among other things.

The ECT is a trade and investment agreement that aims to create secure framework conditions and make it attractive for private investors to invest between the countries in the energy field. The agreement protects both green and fossil energy investments. 

According to the Danish Ministry of Climate, Energy and Supply, the protection of fossil investments has given rise to challenges and concerns in connection with the transition away from fossil energy, therefore, a number of EU countries have decided to withdraw from the ECT.

In recent years, negotiations took place on a possible modernization of the treaty, which countries that indicated they will opt out, such as Germany, France and the Netherlands, do not consider to be sufficient and it is now unknown whether the modernization can be carried out. 

“As politicians, we have an important task of setting the best possible framework for the green transition. As the Energy Charter Treaty now looks, it creates unnecessary uncertainty about the green transition,” said Denmark’s Climate, Energy, and Supply Minister Lars Aagaard.

“It has been a balancing act, because the treaty also includes green investments. However, we have frameworks in Danish legislation and in other international collaborations that ensure that investors can safely invest their money in green projects both in Denmark and in other countries. Overall, the Energy Charter Treaty creates greater uncertainty about investments than security.”

The Danish ministry stated that Denmark was working to ensure that a solution is found in the EU which allows the adoption of modernization, both for the sake of the countries that wish to remain in the treaty and to ensure the best possible conditions in the 20-year sunset period after withdrawal, where Denmark will continue to be covered by the terms of the treaty. 

Denmark’s government is also set to work for a coordinated withdrawal between the EU and the EU countries.

A final decision on Denmark’s withdrawal from the ECT requires consent from the parliament.

In terms of other recent news coming from Denmark, it is worth mentioning that the Danish Energy Agency earlier this week announced it had received two final offers related to the country’s first tender for the carbon capture, utilization and storage (CCUS) subsidy pool, with a contract expected in May.

The pool was established thanks to a political decision that was made due to insufficient financial incentives to capture and store CO2 in Denmark.