Fossil fuel subsidies prohibitions in the 2024 agreement on climate change, trade and sustainability (ACCTS): an international investment law perspective

The article then analyses possible legal tensions between FFS reforms and existing IIL obligations of States (fair and equitable treatment, indirect expropriation, national treatment, and most-favored-nation), and examines the potential for investor–state dispute settlement (ISDS) proceedings to arise out of FFS reform efforts. The analysis uses two strands of ISDS jurisprudence, the first involving the fossil fuel industry, and the second concerning subsidy-related disputes, to highlight the potential for IIL to constrain States’ regulatory autonomy concerning FFS reform.

The research finds that the four ACCTS Members face limited exposure due to limited investment treaty networks and low levels of subsidization, but also that broader international reform efforts may significantly increase the likelihood of ISDS challenges. Although IIL creates risks for climate action, many States refrain from paradigm-shifting policymaking, and the regime remains firmly established. Therefore, the article proposes a roadmap for States seeking to implement FFS reforms while mitigating exposure to investment disputes.

This includes ensuring that domestic reforms do not conflict with international legal obligations, expressly incorporating the right to regulate within new-generation treaties, and modernizing old-generation treaties. While the ACCTS constitutes an interesting step towards aligning trade and climate objectives, its transformative potential remains constrained by entrenched neoliberal international economic law frameworks including the IIL regime.

Ultimately, genuine progress towards reform in line with climate change imperatives and meaningful sustainability transitions requires efforts beyond piecemeal adjustments to existing legal frameworks in order to confront deeper structural tensions between international economic law and planetary boundaries.</p> <p></p><p>FFS reform efforts must align with existing international legal frameworks to avoid costly disputes that may deter reform.</p><p>The impact of ACCTS reforms will remain marginal until States with more significant FFS practices either join, or engage in similar approaches.</p><p>ACCTS FFS prohibitions are unlikely to conflict with IIL obligations of current Member States; however, the risk may be amplified should additional States engage in similar efforts.</p><p>Holistic reform must consider States’ international legal obligations, and for States who do not engage in more paradigm-shifting reforms, new-generation treaties must ensure the right to regulate, and old-generation treaties must be similarly modernized.</p><p>Meaningful transformation must confront deeper structural tensions between international economic law, neoliberal approaches, and planetary boundaries.</p><p></p> <p>FFS reform efforts must align with existing international legal frameworks to avoid costly disputes that may deter reform.</p> <p>The impact of ACCTS reforms will remain marginal until States with more significant FFS practices either join, or engage in similar approaches.</p> <p>ACCTS FFS prohibitions are unlikely to conflict with IIL obligations of current Member States; however, the risk may be amplified should additional States engage in similar efforts.</p> <p>Holistic reform must consider States’ international legal obligations, and for States who do not engage in more paradigm-shifting reforms, new-generation treaties must ensure the right to regulate, and old-generation treaties must be similarly modernized.</p> <p>Meaningful transformation must confront deeper structural tensions between international economic law, neoliberal approaches, and planetary boundaries.</p>