Investor-state disputes threaten the global green energy transition
To limit global warming to below 1.5°C, governments will have to simultaneously curb demand for fossil fuels and limit supply. However, efforts to limit supply will affect asset holders, particularly in the upstream (exploration and production) and midstream (transportation and storage) portions of the supply chain. Demands for compensation will ensue, and when the companies involved are foreign, legal claims may be brought to international arbitration in a process known as investor-state dispute settlement (ISDS) (see the first figure). The Intergovernmental Panel on Climate Change (IPCC) has recently acknowledged that ISDS cases could lead to states refraining from, or delaying, measures to phase out fossil fuels.
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