The new terms concludes two years of international negotiations between 53 contracting parties and support the Prime Minister’s recent Energy Security Strategy by establishing new protection for taxpayers and private sector investors, and reducing the risk of potential costly legal challenges on the road to net zero by 2050.

The treaty provides the framework for international trade and investment on energy matters but was drafted and first published in 1994, in a world when fossil fuels dominated power generation.

The modernised treaty, which is due to be signed in November 2022, will have a much stronger focus on promoting clean, affordable energy. It will protect the UK government’s sovereign right to change its own energy systems to reach emissions reductions targets in line with the Paris Agreement.

For the first time, it will ensure legal protections for overseas investments into the UK in green technologies, such as carbon capture, utilisation and storage (CCUS) and low carbon hydrogen production, alongside other renewables. This will help give private investors in these types of technologies increased confidence as the technologies develop.

The move comes as several EU countries, including Italy, Poland and Slovenia face costly legal challenges over reducing reliance on fossil fuels and growing their renewable industries, which could cost their taxpayers billions of pounds. The Netherlands is currently facing a challenge over its phase-out of coal, which could cost its citizens $1.4bn, reports the UK government.

Renewables now generate around 40% of the UK’s electricity, compared to just 0.3% when the treaty was drafted in 1994. During that time the cost of renewables have dropped significantly, with wind power halving in cost since 2012, while gas prices have increased almost four-fold.

‘The UK will continue to protect investments in efficient abated gas power – gas power stations with carbon capture technologies attached to them. Other than that, overseas investors in new North Sea oil and gas will not be able to make legal claims against the UK under the treaty from the point that the changes come into effect,’ says the government.

Coal is the only exception, which will lose protections from 1 October 2024 – the date when coal’s role in energy generation in the UK will cease.

The UK government reports that it ‘remains committed to supporting the North Sea, with homegrown oil and gas playing a key role in the UK’s energy security’. It adds: ’Ministers are working closely with industry and have secured joint investment of up to £16bn through the North Sea Transition Deal to support it in exploiting new technologies like hydrogen production and carbon capture, usage and storage, which gain new protections under the Energy Charter Treaty – helping them cut production emissions by 50% by 2030.’

The changes to the treaty align with the UK’s commitment to reach net zero by 2050, helping step up investment in homegrown clean renewables and gradually phasing out protections for fossil fuels. This includes a pledge to a five-fold increase in offshore wind capacity to up to 50 GW by 2030 – enough to power every UK home – along with a doubling of up to 10 GW of low carbon hydrogen production capacity to help power industry and transport, and a five-fold increase in solar capacity by 2035.