OPINION: Fossil fuel companies have access to an obscure legal tool that could jeopardize world-wide efforts to protect the climate, and they’re starting to use it. The result could cost countries that press ahead with those efforts billions of dollars.
Fossil fuel companies have access to an obscure legal tool that could jeopardize world-wide efforts to protect the climate, and they’re starting to use it. The result could cost countries that press ahead with those efforts billions of dollars.
For example, TC Energy TRP, +1.60%, a Canadian company, is currently seeking more than $15 billion over U.S. President Joe Biden’s cancellation of the Keystone XL Pipeline. That number could be much higher. We could only identify the headquarters of project owners, not the overall corporate structures of the investments, due to limited data. We also know that law firms are advising clients in the industry to structure investments to ensure access to ISDS, through processes such as using subsidiaries in countries with treaty protections.
Canceling approved projects could prove exceptionally risky for countries like Kazakhstan, which could lose $6 billion to $18 billion, and Indonesia, with $3 billion to $4 billion at risk. New Zealand banned all new offshore-oil exploration in 2018 but did not cancel any existing contracts. The climate minister acknowledged that a more aggressive plan “would have run afoul of investor-state settlements.”
A straightforward approach would be for countries to terminate or withdraw from these treaties. Some officials have expressed concern about unforeseen impacts of unilaterally terminating investment treaties, but other countries have already done so, with few or no real economic consequences.
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