Petroleum ISDS cases pose major threat to climate action

AFTINET | 23 April 2018

Petroleum ISDS cases pose major threat to climate action

ANU academic Dr Kyla Tienhaara has published research in the Journal Transnational Environmental Law showing that mining and energy industries are the most frequent users of Investor-State Dispute Settlement mechanisms heard by the International Centre for the Settlement of Investor Disputes (ICSID), one of the two main tribunal systems that hear ISDS disputes. This poses a threat to effective measures to rapidly reduce carbon emissions.

She found that, at present, there are no known cases where an investor has formally launched ISDS over the introduction of a carbon tax, emissions trading scheme or renewable energy incentive scheme. The latter have been challenged only when modified retrospectively. However, claims have certainly been contemplated, including against the Australian government’s proposed carbon pollution reduction scheme in 2009.

ISDS cases have arisen in response to:

  • A 2017 moratorium on oil and gas operations within 12 nautical miles of the Italian coastline;
  • restrictions placed on a coal-fired power station by the German city of Hamburg;
  • a ban by the Canadian Province of Quebec on hydraulic fracturing (‘fracking’, a process with potentially significant climate and groundwater impacts); and
  • the United States (US) Obama administration’s rejection of a proposal by TransCanada Corporation to build the Keystone XL pipeline to transport oil produced from Alberta’s tar sands to various refineries in the US.

The German case was settled and, at the time of writing, the case in Quebec had not concluded, whereas the Italian case was only in the very early stages. TransCanada withdrew its claim against the US following President Trump’s executive order allowing construction of the Keystone XL pipeline to move ahead. The article also provides evidence of “regulatory chill,” in which the threat of ISDS has discouraged governments from regulating.

Dr Tienhaara argues that, in trade and investment agreements like the proposed TPP-11, governments should not limit themselves to a narrow tobacco carve-out, (which is the only clear exclusion in the TPP-11) because Big Oil actually poses a greater threat to public policy than Big Tobacco. One option would be for negotiators to broaden the scope of the carve-out to cover all government measures taken in pursuit of international obligations, including those found in climate change treaties. A simpler option would be to exclude ISDS from trade agreements altogether.

source: AFTINET