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New Sierra Club report: Trading away our climate exposes how trade pacts undermine climate action

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Sierra Club | 29 May 2024

New Sierra Club report: Trading away our climate exposes how trade pacts undermine climate action

WASHINGTON, DC – A new report released today, Trading Away Our Climate: How Corporations Use Trade and Investment Agreements to Undermine Action on Climate Change, highlights how fossil fuel companies worldwide threaten climate progress through outdated trade agreements that favor corporate interests over the public good. The report scrutinizes trade and investment agreements containing investor-state dispute settlement (ISDS) provisions as significant obstacles to lowering emissions and achieving a just clean energy transition. It argues that eliminating ISDS is crucial to the global goal of limiting warming to well below 2°C, and preferably to 1.5°C, above pre-industrial levels. Leading Democratic lawmakers on the top Congressional trade panels – Senators Warren and Whitehouse and Congress Members Doggett and Sánchez – reaffirmed support to end these harmful pacts.

“While it has correctly rejected ISDS for future trade agreements, the Biden Administration has made no effort to remove these egregious provisions from existing agreements. Powerful multinational corporations continue abusing ISDS to intimidate countries from strengthening environmental and human rights protections,” said Representative Lloyd Doggett. “Nor is any country immune – from Próspera’s nearly $11 billion lawsuit against Honduras to TC Energy’s fossil-fuel claim against the United States. Recognizing that a corporate victory in any of these cases would place an outrageous burden on taxpayers, I will continue urging the Administration to eliminate ISDS.”

“The Sierra Club’s report clearly shows that corporations have abused ISDS provisions to block progress in fighting climate change,” said Representative Linda Sánchez. “While I’m pleased President Biden is keeping similar provisions out of future trade agreements, we must also work to reform ISDS mechanisms in some of our existing trade deals if we’re going to meet our global climate targets.”

Humanity faces unprecedented challenges as global ocean heat content soared to record levels, Antarctic sea ice coverage plunged to record lows, and global temperatures approached a perilous 1.4°C above pre-industrial levels in 2023. Fossil fuels are responsible for over 75% of greenhouse gas emissions and nearly 90% of all carbon dioxide emissions. Governments can take decisive action to avert catastrophic impacts on vulnerable ecosystems and societies by taking proactive steps in their trade policies to halt fossil fuel company abuse of the ISDS system.

“Many trade pacts provide corporations, including the fossil fuel industry, with extensive protections, enabling them to bypass domestic courts and sue governments. This threatens environmental and public health policies – including those that would reduce fossil fuel production,” said Iliana Paul, senior policy advisor on Sierra Club’s Industrial Transformation campaign. “Such actions pose a substantial financial risk to taxpayers and undermine efforts to combat climate change.”

Fossil fuel corporations are ardent users of ISDS provisions, with nearly 20% of the 1,206 known treaty-based ISDS arbitrations coming from fossil fuel companies. As a few notable examples, Canada-based TC Energy is suing the US for $15 billion over the United States government’s rejection of the Keystone XL pipeline and US-based Ruby River is using ISDS to challenge Canada’s rejection of a liquefied natural gas facility in Québec.

The report warns that ISDS challenges can deter governments from enacting policies in the public interest due to the threat of costly arbitrations. Defending against these cases requires millions of dollars and years of work, while settlements often lead to the weakening or rollback of essential policies.

"Giant corporations have and continue to weaponize ISDS – a secretive and rigged arbitration system that multinational companies use to bypass domestic courts and challenge protections for the environment, workers, and consumers around the world. It’s time to shut the door and eliminate ISDS from all existing trade agreements once and for all," said Senator Elizabeth Warren.

“ISDS mechanisms corruptly advance the power of big corporate polluters over the interests of the public and the planet. This new report from the Sierra Club makes it clear that ISDS’s time is up,” said Senator Whitehouse, Chairman of the Senate Budget Committee and a member of the Environment and Public Works and Finance Committees. “I’m glad the Biden administration remains committed to keeping ISDS out of future agreements, and I’m pushing the administration to remove these insidious provisions from agreements already on the books.”

Recognizing the broad dangers of ISDS beyond climate change, including impacts on public health, labor protections, and green jobs policies, the report advocates for the complete elimination of ISDS. It calls on the U.S. government to take the lead in this effort by:

  • Stopping the Expansion of ISDS: President Biden and future administrations must publicly oppose ISDS, commit to avoiding new agreements containing ISDS, and use diplomatic influence to discourage other countries from entering into such agreements.
  • Removing ISDS from Existing Agreements: The U.S. should terminate bilateral investment treaties (BITs) that include ISDS, neutralize sunset clauses that extend their effects, and renegotiate or withdraw consent to ISDS provisions in existing agreements.

As public and policy-maker sentiment against ISDS continues to rise, the report concludes that the only sensible path forward is to end the era of ISDS, ensuring the protection of our planet and its people from its extensive threats.

Read the full report (pdf)

 source: Sierra Club