Stable investment or stable climate? Would New Zealand be in breach of its investment treat obligations if it phased out fossil fuel extraction?

Abstract

This paper considers the possibility of phasing out fossil fuel extraction in New Zealand. It examines New Zealand’s current relationship with fossil fuels and its legal framework relating to fossil fuel extraction before assessing the remedies available to domestic and foreign investors should fossil fuel extraction be phased out, thereby removing their current rights to extract fossil fuels. The paper concludes that there would no remedy available to domestic investors but there is a possibility that foreign investors could claim compensation pursuant to an investment treaty such as Chapter 9 of Trans-Pacific Partnership Agreement. It was also argued that New Zealand would have arguments to make that it should not have to compensate those investors, including an argument based on a duty under the United Nations Framework Convention on Climate Change for New Zealand to protect its fossil fuel reserves.