ExxonMobil is challenging a European Union climate regulation centered on carbon capture and storage, a technology the oil giant has actively promoted as a solution to global warming.
According to Investment Arbitration Reporter, the company’s affiliates have filed a notice of dispute under the Energy Charter Treaty. This 1990s-era investment agreement allows corporations to sue governments if they believe new policies threaten their profits.
The investor-state dispute settlement (ISDS) process has sparked debate about its impact on governments’ ability to address climate change and implement environmental and public health protections.
Exxon’s challenge targets the European Union’s 2024 Net-Zero Industry Act, which aims to inject carbon dioxide underground to mitigate climate change. Exxon affiliates are among the companies required to help sequester 50 million metric tons of CO2 annually by 2030.
Exxon did not comment to Inside Climate News but told IAReporter that the carbon capture rule exemplifies the European Commission acting on “ideology instead of logic,” claiming the rule would disadvantage businesses.
The company stated, “This dispute is as much about saving Europe from itself as it is about the oil and gas industry opposing another irrational Brussels law.”
The claim emerges as wildfires devastate France and Spain, forcing evacuations and demonstrating how climate change worsens fire conditions.
A spokesperson for the European Commission confirmed receiving a notice of dispute from energy companies in Belgium, Luxembourg, and the UK, where Exxon has affiliates.
“We are confident that EU measures comply with the Energy Charter Treaty and international law,” said the spokesperson.
Fossil fuel companies have used ISDS to contest climate policies before. The U.S. narrowly avoided a $15 billion claim over a canceled oil pipeline, and Exxon, alongside Shell, filed claims against the Netherlands over a closed gas field.
Exxon’s action follows the EU’s decision to withdraw from the Energy Charter Treaty, citing ISDS as a hindrance to climate policies. Despite this, the treaty’s “sunset clause” allows claims for years after withdrawal.
At least 10 countries have left the Energy Charter Treaty, often citing its divergence from climate objectives. Courts globally have recognized governments’ obligations to tackle climate issues.
Publicly available ISDS case analyses reveal fossil fuel firms have secured at least $82.8 billion in awards from governments, though this figure likely underestimates the reality due to confidential cases.
The specifics of Exxon’s notice of dispute against the EU remain undisclosed, including filing date and potential compensation sought.
The Energy Charter Treaty mandates a notice of dispute trigger a three-month negotiation period before arbitration.
Human rights and environmental advocates criticize the Energy Charter Treaty and ISDS for potentially deterring environmental and public health safeguards and enabling corporations to secure awards despite environmental or human rights violations.
Wall Street firms have begun funding claims in exchange for a portion of awards. An investigation by Inside Climate News revealed that investors profit from a system favoring corporations and potentially increasing claim numbers.
ISDS supporters argue it encourages foreign investment, although evidence supporting this is minimal. They also claim it shields investors from unfair judicial systems.
However, while ISDS allows corporations to bypass national courts, affected communities must rely on the very courts deemed unreliable by the companies. This imbalance intensifies the power disparity between foreign corporations and local communities.
Lukas Schaugg, a policy advisor at the International Institute for Sustainable Development, described the carbon capture rule in Exxon’s notice as a “modest” requirement.
This isn’t the first time European Union climate policies have faced challenges. Schaugg noted the bloc’s 2022 windfall tax on fossil fuel producers prompted an ISDS claim from an oil refiner, which remains unresolved. Exxon also contested the tax in a European court.
“The message to governments is that no climate obligation on this industry survives contact with investment arbitration,” Schaugg stated.
Original Story at insideclimatenews.org