The Paris Agreement, Net Zero Energy Transition, and Investor-State Dispute Settlement: Aligning the Investment Treaty System with Climate Change Law & Policy
Published 31 January 2023
In order to meet the Paris Agreement's aspirational goal of limiting post-industrial global warming to 1.5 degrees Celsius, global greenhouse gas emissions must reach net zero by around mid-century. The International Energy Agency forecasts that this will require investment in the energy transition to more than double to over US$5 trillion annually. A well-designed system of foreign investment protection could play an important complementary role, encouraging global capital flows into the energy transition, by helping to de-risk clean energy projects and by providing guardrails for government regulation. Yet international investment law has remained mostly silent on climate change and the net zero energy transition. Part (1) of this article will examine the context for investment in the energy transition, highlighting the importance of private finance and of government policy. Part (2) will consider how changes to government policies concerning the energy transition, in particular the roll-back of support for renewable energy investments and the introduction of coal plant phase-out legislation, have been generating claims under investment treaties. Parts (3) and (4) will consider ways of aligning the investment treaty system with climate change law and policy, specifically through the decisions of arbitral tribunals and through renegotiation of investment agreements (focusing in this regard on the recently concluded negotiations to modernize the Energy Charter Treaty).
This paper will be part of the TDM Special Issue on "International Investment Arbitration - Environmental Protection and Climate Change Issues". More information here www.transnational-dispute-management.com/news.asp?key=1893