Investor-State Treaties a Threat to Climate Protection

Climate Change Environment Financialization


            New Orleans     Domestic and global consensus, public opinion, scientific analysis, sober and serious politicians, and most of our children, all agree that we have to urgently take steps to deal with climate change.  We scratch out heads and tear our hair at the difficulties involved in getting action on these issues in the US Senate, where lobbyists for oil and coal manage to do just enough to prevent progress on green energy transitions.

Catching up on a recent issue of Science magazine, I was found myself flabbergasted, even though I really should not have been surprised, to find the way big money investors and supplicant nation state actors have set a trap in our way of progress.  This is Science magazine, so the report in their “policy forum” was understated and dense, but the headline and the subtitle screamed past the qualifiers, saying, “Investor-state disputes threaten the global green energy transition” with the subtitle delivering an even harder punch: “Global action on climate change could generate upward of $340 billion in legal claims from oil and gas investors.”  What the frick?  Are you kidding me!

Here’s the deal from the ace researchers from Queen’s University in Ontario and Boston University.  There are literally thousands of bilateral and multilateral treaties that have been negotiated and signed by nation states over the last many decades to act essentially as “risk insurance and were presented to governments in the Global South as a means to increase foreign investment flows.”  The authors aren’t even sure that such treaties in fact did increase foreign investment, but what else is new about neoliberalism?  These treaties, where they are still in force, allow foreign investors and companies to arbitrate their claims for compensation if public policy changes leave them short on their expected returns in a “process known as investor-state dispute settlement [ISDS].”  This is not make-believe or the earth-is-falling speculation.  The Canadian company that was thwarted by Biden’s rejection of the Keystone XL Pipeline is trying this tactic, as is a UK firm over Italy’s denial of a coastal drilling permit.

It all gets even more complicated from here.  Some countries are negotiating new clauses to offset this issue, as the US did in the treaty with Mexico and Canada, but many seem stuck with the language, which might trigger claims, if canceled after the first permit was issued.  Some of the treaties are just for energy, and a disproportionate number impact oil and gas speculation and financing.  The researchers found that there are “55,206 upstream oil and gas projects in 159 countries that are predicted to have a final investment decision made during 2022-2050” having already obtained “at least an exploration permit.”

If countries began to cancel these projects in line with their commitments at Paris to reduce global warming, the estimates of what they might have to pay in potential claims is startling, unless there is some work done quickly to prevent this before it snowballs.  That’s where the low-end estimate of $60 billion and high-end figure of $234 billion hit hard.  “The five countries with the greatest potential losses from ISDS are Mozambique ($7 – $31 billion), Guyana ($5-21 billion), Venezuela ($3-21 billion), Russia ($2-$16 billion), and the United Kingdom ($3-14 billion).”  Giving the devil his due, you have to hand it to these big money schemers; they know how to cover their asses!

We see this same problem as we look at the long-term contracts that coal and oil producers have with rural electric co-operative generating and transmission operations as they debate green energy transitions.  Trying to get out of these financing deals made in the past are being priced for these co-ops in the hundreds of millions.  Domestically, local and federal utility regulators are being pressed for change.

Globally, it’s a step up, but whether it’s rich countries in North America and Europe or international bodies like the United Nations and others, amending the language or exiting these treaties needs to be on the short list for urgent action and reform.  New Zealand, often a leader on progressive climate change, was forced to step back when threatened by big ticket claims from potential arbitration.  If they can be intimidated, what hope do poorer countries and their communities have?  Or, frankly, any of us, unless we are able to all act together to deal with this issue swiftly.