Renewable Energy Investment Incentives: The Approach of International Investment Agreements

Document Type : Original Article


1 Department of International Law, Faculty of Law, University of Qom, Iran.

2 Middle East Studies Institute, Shanghai International Studies University, Shanghai, 200083, China.



Today the world is tackling climate change and needs to overcome growing energy security challenges. The energy transition is the critical strategy for reducing carbon emissions and building energy security. However, not all States are availed of the required finance and technologies to successfully deploy renewable energies. Therefore they need to attract foreign investment and technology. A growing number of Governments are adopting incentives to compete in this field and create a more favorable investment atmosphere. However, granting of investment incentives lies within the realm of national legislation which is susceptible to revocation by the host States. This exposes foreign investors to several risks as no State is bound by its unilateral commitments and the changes or withdrawal of pro-foreign investment policies by the host State is a mere exercise of its sovereignty. As IIAs were primarily drafted to promote cross-border investments and protect them from unfair and discriminatory treatments it is interesting to know their current approach to investment incentives and its implications for renewable energy investments. Adopting a qualitative approach, this research aims to clarify this issue by defining investment incentives and shedding new light on the relevant IIA clauses that can better contribute to the protection of renewable energy investors’ interests. It finds that harmonizing investment incentives by including them in IIAs has not been on the agenda so far and IIAs seldom contain renewable energy-targeted incentive provisions. Therefore it points out the relevant clauses that can better meet the renewable energy investment needs.


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