*[Enwl-eng] How oil firms are torpedoing climate action
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Thu May 25 01:59:19 MSK 2023
+ getting out of climate-busting treaties
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Halting global heating at 1.5°C and averting catastrophic climate
change will require sacrifices. Specifically, it will require fossil fuel
companies sacrificing potential revenue to preserve a liveable planet.
Instead of being dug up and sold, 90% of the world's remaining coal
and 60% of its oil and gas will need to stay underground by 2050, according
to a study published in 2021. But with so much money on the line, the fossil
fuel industry is digging in for a long fight.
You're reading the Imagine newsletter – a weekly synthesis of academic
insight on solutions to climate change, brought to you by The Conversation.
I'm Jack Marley, energy and environment editor. This week we're looking at
how legal compensation for investors in coal, oil and gas is blocking
climate action.
"US$20 billion: That’s how much American investors think Canadian
taxpayers should fork over to compensate them for their failed bid to
develop a liquefied natural gas (LNG) facility in Québec," says Kyla
Tienhaara, Canada Research Chair in Economy and Environment at Queen's
University, Ontario.
"That’s almost a fifth of the province’s total budget for this year."
The Québec government had rejected plans to build a port in which
large ships load and unload LNG, a fossil fuel, on the basis that it would
increase emissions of the greenhouse gases driving climate change, Tienhaara
explains.
"Canada faces a no-win situation — a catch-22. If the government does
not rapidly phase out fossil fuels, it will fail to meet its commitments
under the Paris Agreement to address the climate crisis," she says.
"But when it takes steps to do so, foreign investors invoke
international trade and investment agreements like NAFTA and threaten to
drain public coffers."
'Lost future profits'
Canada's dilemma will be familiar to countries around the world. For
example, the International Monetary Fund offered Pakistan a loan of US$6
billion in 2019 on the condition that then-prime minister, Imran Khan,
implemented austerity. Nationwide strikes followed, and less than two weeks
later, a World Bank tribunal ordered the south Asian country to pay a mining
company US$5.8 billion dollars, which would all but eclipse the (ultimately
ruinous) loan.
The bills issued to Québec and Pakistan are both the result of
investor-state dispute settlements, or ISDS. These are legal cases
arbitrated by the World Bank Group between foreign companies and states.
ISDS hearings are conducted in private but they allow corporations to
challenge government measures designed to protect public health or the
environment.
How do they do this? By arguing that states owe them damages for
cancelling or curtailing projects they have invested in – even if those
projects, like a coal mine or a gas terminal, threaten to blow the country's
remaining carbon budget for staying within a habitable climate.
"One might argue that a fair outcome, if the government was solely to
blame, would be for the award to cover these sunk costs," Tienhaara says.
"Instead [in Pakistan's case] it was more than 25 times that amount. That is
because the tribunal chose to award the company 'lost future profits' from
the project."
Of course, companies cannot say with certainty how profitable the
commodities they are being denied will remain during the decades they had
expected to produce them. But that doesn't matter, Tienhaara says.
"When it comes to the calculation of damages, there are very few
constraints on arbitrators. As noted in one award, a tribunal generally has
the freedom to 'arrive at a figure with which it is comfortable in all the
circumstances of the case'."
Paying the polluters
The energy charter treaty (ECT) effectively enshrines the right of
private companies to seek damages from governments taking action against
climate change in 53 Asian and European countries. Since coming into force
in 1998, the treaty has proved to be a boon for investors says Leïla
Choukroune, a professor of international law at the University of
Portsmouth:
"The ECT has allowed energy and fossil fuel investors to receive vast
sums of compensation. In 2021, Russia was ordered to pay US$20.5 million
(£17.4 million) in compensation to Yukos Capital, an oil company, for
expropriation ... Spain has been subject to 45 disputes under the ECT and
has paid more than €800 million (£673 million) in claims."
"While investment protection agreements allow investors to sue
sovereign states, the reverse is not possible," Choukroune adds.
The strength of fossil fuel companies and their investors in these
disputes is aided by the fact that independent experts called upon to
arbitrate are often anything but, Choukroune argues.
"Few of the arbitrators who sit in ECT hearings are public
international law experts ... Investors have in some cases appointed
arbitrators who have acted as legal advisers for them previously. This
raises the question of whether arbitrators can separate these roles and act
impartially."
The treaty was devised to prevent former Soviet states from taking
energy firms or their infrastructure into public ownership, but it will
continue to obstruct governments well into the future because of a clause
which binds former members for 20 years after they leave.
Some countries are still considering an early exit, while others,
including the UK, place their trust in reforms to "modernise" the treaty by
exempting fossil fuels from legal protection, Choukroune says.
But given the in-built advantages for corporations in the ECT and
other investor-state disputes, more than 100 academics wrote to the UK
government in March arguing that continued membership puts climate targets
in peril.
Chamu Kuppuswamy, a senior lecturer in law at the University of
Hertfordshire, describes a possible course of action:
"One way to address this problem is for parties contracted to the
energy charter treaty to withdraw from it en masse, and so escape the sunset
clause which holds them liable two decades after leaving. These countries
could also enter into a separate agreement to exclude investor-state dispute
cases against each other.
"Sustained public pressure ... could encourage enough governments to
act decisively, fatally weakening the treaty and its grip on international
climate action."
- Jack Marley, Environment commissioning editor
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Imagine.
Catch-22: Canada’s attempts to phase out fossil fuel might result in
it paying the polluters
To address the climate crisis, governments need to limit new fossil
fuel developments. But foreign investors are often protected under trade and
investment agreements.
Read more
Climate change: ditch 90% of world’s coal and 60% of oil and gas to
limit warming to 1.5°C – experts
Our new study reveals how tight the world's remaining carbon budget
is.
Read more
World Bank ruling against Pakistan shows global economic governance
is broken
Abolishing the secretive World Bank Tribunal known as the ISDS won't
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good place to start.
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The Energy Charter Treaty lets fossil fuel firms sue governments –
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The Energy Charter Treaty allows fossil fuel investors to sue
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Read more
Energy charter treaty makes climate action nearly illegal in 52
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A case brought to the European Court of Human Rights could pressure
countries to leave.
Read more
A secretive legal system lets fossil fuel investors sue countries
over policies to keep oil and gas in the ground – podcast
Experts are concerned that a legal mechanism called investor-state
dispute settlement could affect countries' moves to cut fossil fuel
emissions. Listen to The Conversation Weekly.
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Sent: Wednesday, May 24, 2023 8:17 PM
Subject: How oil firms are torpedoing climate action
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