IDEAS home Printed from https://ideas.repec.org/a/spr/ieaple/v24y2024i1d10.1007_s10784-023-09622-w.html
   My bibliography  Save this article

Investment law v. supply-side climate policies: insights from Rockhopper v. Italy and Lone Pine v. Canada

Author

Listed:
  • Alessandra Arcuri

    (Erasmus University Rotterdam)

  • Kyla Tienhaara

    (Queen’s University)

  • Lorenzo Pellegrini

    (Erasmus University Rotterdam)

Abstract

New fossil fuel developments are inconsistent with keeping global warming below 1.5 °C, and while most climate policies focus on reducing demand for fossil fuels, an emerging transversal consensus promotes efforts to simultaneously reduce supply. In this article, we discuss the obstacles to effective supply-side climate policies posed by international investment treaties that protect corporations against state interventions through investor-state dispute settlement (ISDS). We focus on two recently concluded ISDS cases (Rockhopper v Italy and Lone Pine v Canada) that concern prohibitions on fossil fuel development in ecologically sensitive areas. Italy was ordered to pay a British firm approximately € 250 million in compensation for a ban on offshore oil developments along the coastline, whereas Canada successfully defended Québec’s ban on gas development in the St. Lawrence River. Arbitrators in both cases reasoned that investors should be compensated when oil and gas exploration permits are revoked (even if such a remedy is not available under domestic law) and expressed antipathy towards civic engagement in the policy process. As companies can seek lost future profits through ISDS, these cases show that the system can engender material costs for states enacting supply-side policies. The threat of ISDS can generate a chilling effect, limiting the potential for supply-side initiatives, particularly in the Global South. Initiators of global efforts to limit further fossil fuel developments must consider the obstacles posed by international investment treaties, support efforts to abolish ISDS, and as an interim measure, promote the interpretation of treaty protections in line with climate objectives.

Suggested Citation

  • Alessandra Arcuri & Kyla Tienhaara & Lorenzo Pellegrini, 2024. "Investment law v. supply-side climate policies: insights from Rockhopper v. Italy and Lone Pine v. Canada," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 24(1), pages 193-216, March.
    • Handle: RePEc:spr:ieaple:v:24:y:2024:i:1:d:10.1007_s10784-023-09622-w
    DOI: 10.1007/s10784-023-09622-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10784-023-09622-w
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10784-023-09622-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Josef C. Brada & Zdenek Drabek & Ichiro Iwasaki, 2021. "Does Investor Protection Increase Foreign Direct Investment? A Meta‐Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 35(1), pages 34-70, February.
    2. Sornarajah,M., 2017. "The International Law on Foreign Investment," Cambridge Books, Cambridge University Press, number 9781107133624, December.
    3. Dan Welsby & James Price & Steve Pye & Paul Ekins, 2021. "Unextractable fossil fuels in a 1.5 °C world," Nature, Nature, vol. 597(7875), pages 230-234, September.
    4. Steve Pye & Siân Bradley & Nick Hughes & James Price & Daniel Welsby & Paul Ekins, 2020. "An equitable redistribution of unburnable carbon," Nature Communications, Nature, vol. 11(1), pages 1-9, December.
    5. Sivan Kartha & Simon Caney & Navroz K. Dubash & Greg Muttitt, 2018. "Whose carbon is burnable? Equity considerations in the allocation of a “right to extract”," Climatic Change, Springer, vol. 150(1), pages 117-129, September.
    6. Pellegrini, Lorenzo & Tasciotti, Luca & Spartaco, Andrea, 2021. "A regional resource curse? A synthetic-control approach to oil extraction in Basilicata, Italy," Ecological Economics, Elsevier, vol. 185(C).
    7. Greg Muttitt & Sivan Kartha, 2020. "Equity, climate justice and fossil fuel extraction: principles for a managed phase out," Climate Policy, Taylor & Francis Journals, vol. 20(8), pages 1024-1042, September.
    8. Marti Orta-Martinez & Lorenzo Pellegrini & Murat Arsel & Carlos Mena & Gorka Munoa, 2022. "Unburnable Fossil Fuels and Climate Finance: Compensation for Rights Holders," Global Environmental Politics, MIT Press, vol. 22(4), pages 15-27, Autumn.
    9. Shawn Nichols, 2018. "Expanding property rights under investor-state dispute settlement (ISDS): class struggle in the era of transnational capital," Review of International Political Economy, Taylor & Francis Journals, vol. 25(2), pages 243-269, March.
    10. Joshua Paine & Elizabeth Sheargold, 2023. "A Climate Change Carve-Out for Investment Treaties," Journal of International Economic Law, Oxford University Press, vol. 26(2), pages 285-304.
    11. Lorenzo Pellegrini & Murat Arsel, 2022. "The Supply Side of Climate Policies: Keeping Unburnable Fossil Fuels in the Ground," Global Environmental Politics, MIT Press, vol. 22(4), pages 1-14, Autumn.
    12. Harro van Asselt & Peter Newell, 2022. "Pathways to an International Agreement to Leave Fossil Fuels in the Ground," Global Environmental Politics, MIT Press, vol. 22(4), pages 28-47, Autumn.
    13. Michael Jakob & Jérôme Hilaire, 2015. "Unburnable fossil-fuel reserves," Nature, Nature, vol. 517(7533), pages 150-151, January.
    14. Sornarajah,M., 2017. "The International Law on Foreign Investment," Cambridge Books, Cambridge University Press, number 9781107590144, December.
    15. Gregor Semieniuk & Philip B. Holden & Jean-Francois Mercure & Pablo Salas & Hector Pollitt & Katharine Jobson & Pim Vercoulen & Unnada Chewpreecha & Neil R. Edwards & Jorge E. Viñuales, 2022. "Stranded fossil-fuel assets translate to major losses for investors in advanced economies," Nature Climate Change, Nature, vol. 12(6), pages 532-538, June.
    16. Ryan Rafaty & Sugandha Srivastav & Björn Hoops, 2020. "Revoking coal mining permits: an economic and legal analysis," Climate Policy, Taylor & Francis Journals, vol. 20(8), pages 980-996, September.
    17. Anatole Boute, 2023. "Investor compensation for oil and gas phase out decisions: aligning valuation methods to decarbonization," Climate Policy, Taylor & Francis Journals, vol. 23(9), pages 1087-1100, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lorenzo Pellegrini & Murat Arsel & Gorka Muñoa & Guillem Rius-Taberner & Carlos Mena & Martí Orta-Martínez, 2024. "The atlas of unburnable oil for supply-side climate policies," Nature Communications, Nature, vol. 15(1), pages 1-13, December.
    2. Augusto Heras, 2024. "Supply-side climate policy and fossil fuels in developing countries: a neo-Gramscian perspective," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 24(1), pages 49-74, March.
    3. Ploy Achakulwisut & Peter Erickson & Céline Guivarch & Roberto Schaeffer & Elina Brutschin & Steve Pye, 2023. "Global fossil fuel reduction pathways under different climate mitigation strategies and ambitions," Nature Communications, Nature, vol. 14(1), pages 1-15, December.
    4. Draeger, Rebecca & Cunha, Bruno S.L. & Müller-Casseres, Eduardo & Rochedo, Pedro R.R. & Szklo, Alexandre & Schaeffer, Roberto, 2022. "Stranded crude oil resources and just transition: Why do crude oil quality, climate ambitions and land-use emissions matter," Energy, Elsevier, vol. 255(C).
    5. Mehling, M. A., 2023. "Supply-Side Crediting to Manage Climate Policy Spillover Effects," Cambridge Working Papers in Economics 2345, Faculty of Economics, University of Cambridge.
    6. Harro Asselt & Panagiotis Fragkos & Lauri Peterson & Kostas Fragkiadakis, 2024. "The environmental and economic effects of international cooperation on restricting fossil fuel supply," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 24(1), pages 141-166, March.
    7. Weth, Mark A. & Baltzer, Markus & Bertram, Christoph & Hilaire, Jérôme & Johnston, Craig, 2024. "The scenario-based equity price impact induced by greenhouse gas emissions," Discussion Papers 30/2024, Deutsche Bundesbank.
    8. Paola Andrea Yanguas Parra, 2023. "Closing the supply-side gap: using a novel vulnerability index to identify the right policy mix for coal producing countries," Sustainability Nexus Forum, Springer, vol. 31(1), pages 3-24, December.
    9. Leslie Johns & Calvin Thrall & Rachel L. Wellhausen, 2020. "Judicial economy and moving bars in international investment arbitration," The Review of International Organizations, Springer, vol. 15(4), pages 923-945, October.
    10. Khan, Zeeshan & Hossain, Mohammad Razib & Badeeb, Ramez Abubakr & Zhang, Changyong, 2023. "Aggregate and disaggregate impact of natural resources on economic performance: Role of green growth and human capital," Resources Policy, Elsevier, vol. 80(C).
    11. Shuk Ying Chan, 2021. "On the international investment regime: A critique from equality," Politics, Philosophy & Economics, , vol. 20(2), pages 202-226, May.
    12. Abdul Halim Barkatullah & Djumadi, 2018. "The urgency of harmonization between investment law in Indonesia and international law in capital investment disputes resolution," Journal of Advances in Humanities and Social Sciences, Dr. Yi-Hsing Hsieh, vol. 4(3), pages 154-160.
    13. Joyeeta Gupta & Yang Chen & David I. Armstrong Mckay & Paola Fezzigna & Giuliana Gentile & Aljoscha Karg & Luc Vliet & Steven J. Lade & Lisa Jacobson, 2024. "Applying earth system justice to phase out fossil fuels: learning from the injustice of adopting 1.5 °C over 1 °C," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 24(1), pages 233-255, March.
    14. Kühne, Kjell & Bartsch, Nils & Tate, Ryan Driskell & Higson, Julia & Habet, André, 2022. "“Carbon Bombs” - Mapping key fossil fuel projects," Energy Policy, Elsevier, vol. 166(C).
    15. Peter Newell & Angela Carter, 2024. "Understanding supply-side climate policies: towards an interdisciplinary framework," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 24(1), pages 7-26, March.
    16. Vivien Foster & Philipp A. Trotter & Sven Werner & Melin Niedermayer & Yacob Mulugetta & Ploy Achakulwisut & Aoife Brophy & Navroz K. Dubash & Sam Fankhauser & Adam Hawkes & Stephanie Hirmer & Stuart , 2024. "Development transitions for fossil fuel-producing low and lower–middle income countries in a carbon-constrained world," Nature Energy, Nature, vol. 9(3), pages 242-250, March.
    17. Mohammadi Fereshteh Molla, 2018. "Assessment of Factors Affecting the Foreign Investment Attraction in Iran," Baltic Journal of Real Estate Economics and Construction Management, Sciendo, vol. 6(1), pages 193-200, November.
    18. J. Rickman & M. Falkenberg & S. Kothari & F. Larosa & M. Grubb & N. Ameli, 2024. "The challenge of phasing-out fossil fuel finance in the banking sector," Nature Communications, Nature, vol. 15(1), pages 1-12, December.
    19. Clara McDonnell, 2024. "Pension funds and fossil fuel phase-out: historical developments and limitations of pension climate strategies," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 24(1), pages 169-191, March.
    20. Pellegrini, Lorenzo & Arsel, Murat & Orta-Martínez, Martí & Mena, Carlos F. & Muñoa, Gorka, 2021. "Institutional mechanisms to keep unburnable fossil fuel reserves in the soil," Energy Policy, Elsevier, vol. 149(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:ieaple:v:24:y:2024:i:1:d:10.1007_s10784-023-09622-w. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.