Treaty offers cooperation framework

With new policy committed to by President Xi at the CPC's 19th National Congress, deeper involvement by China expected

The Energy Charter Process dates back to the early 1990s, following the fall of the former Soviet Union. At that time, many new phenomena in the energy world began to emerge. Disintegration of the Soviet Union created a new sense of a threat to energy security, because more than 30 percent of the natural gas provided to Europe by Russia had to transit through newly emerging countries.

European oil and gas companies were eyeing new business opportunities among Eurasian countries, while capital-deprived post-Soviet markets desperately needed investment and technology. Thus, a win-win energy cooperation was envisaged. Environmental concerns, energy efficiency and climate change became the center of global attention, with the UN Framework Convention on Climate Change opened for signatures at the Rio Earth Summit in 1992. In global trade, the Uruguay round of General Agreement on Tariffs and Trade negotiations ushered in the replacement of GATT by the World Trade Organization in 1994.

The first important step toward energy cooperation was the European Energy Charter, a political declaration signed in 1991. This emphasized the need for the establishment of an international legal framework for energy cooperation. Thus, after three years of negotiations, the Energy Charter Treaty was signed in 1994 among European and Eurasian countries, without China, and a new international energy organization was created.

Since the early 1990s, the ECT has been the only binding legal energy framework providing protection in energy investment, dispute resolution, trade and transit rules and recommendations for increased energy efficiency, but also other guidance on market competition, policy, finance, taxation, insurance, environmental protection, transfer of technology and policy transparency.

In practical terms, this means that we are dedicated to providing protection to investments in our member states, to promoting the trade of energy goods and services, to facilitating the unhindered flow of energy transit, to advocating strategies of energy efficiency and environmental protection and assisting states and investors to address their contradictions and disputes.

Overall conditions have changed significantly in the new century. The global energy environment of today faces challenges that were hardly known in the early 1990s. With the rise of new market economies, it becomes urgent for those countries to participate more in international energy issues, in particular regarding China. After 20 years of the treaty's implementation, it becomes clear that some governments, namely but not exclusively the Russian Federation, have not been satisfied about how its provisions worked out in real terms. All of this means that the charter process needs to be "modernized". China is now standing in the same shoes in which the Western European countries were in the early 1990s - exporting investments, building pipelines and gradually liberalizing its energy sector.

Another key element of modernization is focusing on expanding the membership to emerging countries. In order to engage countries in a dialogue and to take into account their concerns, a new political declaration, the International Energy Charter, was adopted and signed in 2015.

Most significantly, China was one of the signatories to the IEC in 2015. The IEC takes the Energy Charter from its original European background and brings it to a global level.

President Xi Jinping, at the opening session of the Communist Party of China's 19th National Congress in October, affirmed China's commitment to promoting green development and clean energy, in line with his idea of a "new model of modernization". Xi stressed that China must pursue a model of sustainable development, with an emphasis on green technology innovation, green finance, energy-saving and environmental protection. "We will promote a revolution in energy production and consumption, and build an energy sector that is clean, low-carbon, safe and efficient," he said.

Other than clean energy, he also placed greater emphasis on fighting pollution. He laid out plans to implement more regulations to protect the environment, and he promised to be actively involved in global environmental governance and to fulfill emissions reductions. "We encourage simple, moderate, green and low-carbon ways of life, and oppose extravagance and excessive consumption," he said.

China's energy policy is highly in line with the Energy Charter Treaty's principles. The ECT requires some specific actions from member states, relating to investment protection, international cooperation, the collection and sharing of information on environmental and efficient energy policies and technologies, promotion of environmental impact assessment, and research and development of technologies, including the transfer of technology.

The Protocol on Energy Efficiency and Related Environmental Aspects further promotes energy efficiency and environmental protection. It also aims to foster international cooperation between member states by providing a framework and an indicative list of areas for joint activities.

Moreover, under the Belt and Road Initiative, immense Chinese outbound investment has been poured into Central and South Asian, African and European countries. With all Central Asian states being members, the ECT could contribute to facilitating the flow of energy transit and protecting Chinese investment. The advantage of the ECT is clear when comparing it with bilateral investment treaties: The ECT is a comprehensive package deal that not only covers investment, but also trade, transit and energy efficiency.

The head of the National Energy Administration of China, Nur Bekri, when signing the International Energy Charter in May 2015, expressed a clear indication of China's intention to further deepen the relationship with the energy charter, and to continue to modernize the charter. By signing the IEC, China reconfirmed its observer status in the organization.

Actually, over the past decade, the Energy Charter Secretariat has pursued very close cooperation with China. Since 2011, the NEA has sent many officials to work at the secretariat as secondees, as part of a secondment program that aims to facilitate the improvement of relationships between the two sides and promote mutual exchanges of ideas. China was also among the first countries to participate in the negotiations of the IEC, and it submitted several constructive comments during the negotiations.

Within the energy charter process, China also takes part in the Task Force for Regional Energy Cooperation in Central Asia, which aims to promote market principles and energy cooperation, particularly in the field of electricity. In September, the International Energy Charter-China Electricity Council Joint Research Center was established in Beijing.

Furthermore, member states remain open to discussing initiatives coming from observers like China. We believe, with the new energy policy committed to by President Xi at the 19th National Congress, we will further deepen our cooperation with China, aiming toward the accession of China to the ECT in its current or modernized version in the future.

The author is secretary-general of the International Energy Charter in Brussels.

(China Daily European Weekly 12/08/2017 page10)