Climate policies for investment treaties (Track 1)

Track 1 is considering how investment treaties could facilitate and increase climate-friendly investment including through improved and maintained market access for green investment, provisions on investment facilitation, and incorporation of new types of provisions seeking to encourage sustainable investment through the broader policy framework. Track 1 participants are exploring how these provisions in investment treaties could complement other treaty provisions in view of Paris alignment, whether they can go further by including or strengthening climate considerations, and how they can be implemented in domestic law and practice.  As in other Track 1 work, evaluation of the current or likely effectiveness of existing and proposed provisions and policies in achieving climate goals is a key consideration.

Potential damages liability for governments under investment treaties can affect their climate policy decisions on issues such the use of renewables or fossil fuels -- making it essential to align policy space with the Paris Agreement goals.  Investor–State Dispute Settlement (ISDS) arbitration claims challenging government measures to address climate change have emerged in recent years. Claims under investment treaties for billions of dollars have been brought following the denial of permits for new fossil fuel exploration, extraction, infrastructure or power plants. The accelerated phase-out of existing coal-based electricity generation has drawn similar claims. Governments and others have expressed concern about disincentives for climate change measures including due to uncertain interpretations of treaty provisions. They have renegotiated some treaties and terminated others.  Governments are discussing and evaluating the effectiveness of a range of existing policies and potential adjustments to investment treaties and treaty policies to avoid dissuading climate measures and ideally to encourage them.