COMPLEXITIES OF DECARBONISATION: ANTICIPATING AND EMBRACING CLIMATE CHANGE DISPUTES AND CONSIDERING METHODS OF RESOLUTION
Decarbonisation – the reduction or elimination of carbon dioxide from manufacturing or energy production – is one of the most significant industrial and commercial challenges facing corporates. States around the world are under pressure to enforce regulatory changes in line with their obligations under the Paris Agreement. This has prompted the introduction of regulations and policies, both at domestic and international levels, which have an impact on corporates. Regulatory and policy changes inevitably introduce uncertainties, which lead to an increased number and more varied types of disputes.
In the energy sector, shifts in government support, tariffs or environmental policies may impact a company’s supply chain by influencing investment decisions and project timelines, thereby causing delays to contractual deadlines. The increased demand for the new technology needed to implement decarbonisation, such as solar panels and wind turbines, can strain supply chains dependent on critical materials such as lithium and cobalt. This creates additional vulnerabilities in the supply chain.
The International Chamber of Commerce (ICC) report, ‘Resolving Climate Change Related Disputes through Arbitration and ADR’, identifies three broad categories of potential climate change related disputes, as outlined below.
Specific transition, adaptation or mitigation contracts. This relates to disputes concerning contracts entered into by investors, funders, industry bodies, state or state entities, in accordance with or in order to meet Paris Agreement commitments. This might involve implementing energy or other systems transition, mitigation or adaptation.
Apr-Jun 2024 issue
Stewarts