Document Type

Working Paper

Publication Date

2011

Center/Program

Sabin Center for Climate Change Law

Abstract

This chapter responds to a chorus of commentary about the potential for conflict between the international investment law regime and an array of national and international actions being undertaken to mitigate and adapt to global climate change. Contrary to conventional wisdom, while some climate-friendly regulations may indeed be facially incompatible with the obligations imposed on states by typical international investment agreements (IIAs), many climate policies – especially those related to clean energy finance and technology transfer – involve principles common to foreign investment law and are largely compatible with that regime. Moreover, pending the unlikely negotiation of a single global agreement on climate change, states are initiating a host of national, bilateral and regional initiatives to encourage certain kinds of foreign direct investment (FDI) flows in the hope of catalyzing low-carbon growth. These sorts of strategies will benefit from a flexible and responsive set of rules governing climate-friendly FDI, something the international investment law regime is uniquely positioned to provide. Meanwhile, international investment law is itself undergoing a transformation of sorts, as more serious consideration is given to the environmental and social impacts of foreign investment and as global capital flows become increasingly multidirectional, calling into question longstanding distinctions between FDI host countries and the home countries of investors. Rather than signaling conflict, recent trends in climate change policy and international investment law indicate that both regimes may be entering a new phase characterized by coordination, harmonization, and mutual learning. This chapter maps this emerging territory and identifies key opportunities to shape the interaction between the two disciplines.

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