Investor protection treaties designed to shield foreign investors from regulatory losses are blocking fossil fuel phase-outs, academics told governments at the inaugural summit dedicated to eliminating coal, oil, and gas.
The Santa Marta process, launched this year as the first multilateral initiative focused on fossil fuel elimination, brought together policymakers and researchers to address structural barriers to the energy transition. Experts at the summit identified bilateral investment treaties and investor-state dispute settlement (ISDS) mechanisms as legal obstacles preventing rapid decarbonization.
These treaties allow fossil fuel companies and investors to sue governments for lost profits when nations tighten environmental regulations or ban new fossil fuel projects. The legal framework has cost governments billions in settlements. Philip Morris sued Uruguay over tobacco warnings. Energy companies have sued Canada over climate policies. Argentina faces claims from renewable energy developers after currency devaluations reduced their returns.
The Santa Marta process provides a platform to coordinate policy responses across countries. Academics argue governments can collectively renegotiate investment protections to exclude fossil fuels from ISDS coverage or carve out climate action from compensation claims. Some nations have already begun withdrawing from problematic bilateral treaties.
The timing reflects urgency. Global fossil fuel subsidies reached $7 trillion in 2022 when accounting for environmental costs, according to IMF analysis. Coal demand remains near record highs despite climate pledges. Oil and gas companies continue opening new fields and refineries.
The summit signals that policymakers increasingly view trade law as integral to climate policy. Governments cannot achieve net-zero targets if legal mechanisms allow corporations to extract rents from delay. The Santa Marta process offers a framework to address this disconnect between climate commitments and investment protections that reward carbon-intensive industries.
Experts stressed the need for coordinated action. Unilateral treaty withdrawal carries diplomatic costs. Collective renegotiation through the Santa