Climate Change and International Investment Agreements

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Climate Change and International Investment Agreements Aaron Cosbey Second Annual Forum of Developing Country Investment Negotiators Marrakech, November 3-4, 2008

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Climate Change and International Investment Agreements. Aaron Cosbey Second Annual Forum of Developing Country Investment Negotiators Marrakech, November 3-4, 2008. Outline. The need for climate-related investment The types of policies that might be used - PowerPoint PPT Presentation

Transcript of Climate Change and International Investment Agreements

Page 1: Climate Change and International Investment Agreements

Climate Change and International Investment AgreementsAaron Cosbey

Second Annual Forum of Developing Country Investment NegotiatorsMarrakech, November 3-4, 2008

Page 2: Climate Change and International Investment Agreements

Outline• The need for climate-related

investment• The types of policies that might be

used• Potential conflicts with standard

investment law provisions

Page 3: Climate Change and International Investment Agreements

The Need for Clean Energy Investment• Development perspective:

• 2.4 billion still using traditional biomass

• 1.6 billion no grid electricity• Environmental perspective:

• IEA estimates need for $27 trillion in incremental investment in developing countries by 2050 to reach IPCC targets

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What types of policies might be needed?• Regulation of existing power

suppliers, high-energy use facilities• Outright closures• Demand for significant retrofit

investment• Discrimination in favour of clean

new technologies• Adaptation-related policies

• Water rationing, reallocation• Requirements for energy access

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Regulation of existing facilities• Assume significant impacts from

regulation• First requirement: no

discrimination (national treatment)

• But even if no discrimination, outcome uncertain. Which legal interpretation of expropriation do we use? Police powers carve-out, or sole effects doctrine?

• Is there a stabilization clause? If so, regulation might be seen as a breach of contract. Or a breach of F&E treatment.

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Discrimination in favour of clean energy• First question: are there pre-

establishment rights? If so, NT is important. No infant industry development.

• Next: are clean and dirty energy providers in like circumstances? Probably, but not certain.

• Are different types of clean energy providers (e.g., solar vs. wind) in like circumstances? Probably, but not certain.

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Adaptation-related policies• The need for such policies in

future is clear, but the specifics are hazy

• IPCC: African agriculture “severely affected” by changing weather patterns. In some countries 50% of rainfed ag gone by 2020.

• IPCC: Himalayan glacial retreat to affect 1.3 billion people. Indus, Ganges, Brahmaputra to become seasonal by 2035. Mekong, Yangzi, Yellow rivers also affected.

• IPCC: Sea level rise to create 35m refugees in Bangladesh delta by 2050.

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Adaptation-related policies• It’s not clear what types of policies

will be needed. Among them might be:• Water rationing or reallocation:

expropriation concerns, fair and equitable treatment.

• Energy access requirements: performance requirement restrictions.

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Conclusions• Climate change will dictate the

need for policies with significant economic impacts.

• IIAs have the potential to restrict some of the policies governments might want to take.

• Conflict is not necessary, with proper foresight and knowledge.

• Central message: IIAs do matter.

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Thank you

Aaron [email protected]