Raising the cost of climate action?


This report from UK think tank the IIED looks at investor-state dispute settlement and compensation for stranded fossil fuel assets.

Global efforts to combat climate change will require a transition to renewable energy and government action to reduce reliance on fossil fuels such as coal, oil and gas. If followed through, such action will create stranded assets – in other words, economic assets affected by premature write-downs or downward revaluations, or converted to liabilities. To protect their assets from measures to phase out fossil fuels, foreign investors may resort to investor-state dispute settlement (ISDS), which allows them to bring disputes to an international tribunal and sue states over conduct they believe breaches investment protection rules, and to obtain compensation if the claim is successful. This report develops a framework for assessing the extent to which energy transition measures could result in ISDS claims; explores the extent to which treaties with ISDS protect foreign-owned coal plants worldwide; and provides policy recommendations to help states preserve their ability to facilitate the low-carbon energy transition.

 

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