Renewable Energy Investment Incentives: The Approach of International Investment Agreements

Qian, Xuming; Akefi Ghaziani, Mohammad

doi:10.22091/ijicl.2024.9837.1074

Renewable Energy Investment Incentives: The Approach of International Investment Agreements

Document Type : Original Article

Authors

¹ Middle East Studies Institute, Shanghai International Studies University, Shanghai, 200083, China.

² Ph.D. in International Law

10.22091/ijicl.2024.9837.1074

Abstract

Today the world is tackling climate change and simultaneously needs to overcome growing energy security challenges. The transition to renewable energy is known as the key strategy for reducing carbon emissions and ensuring energy security. However, not all countries access the required finance and technologies to successfully and sustainably deploy renewable energy projects. Therefore, they seek 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. The 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 change or withdrawal of pro-foreign investment policies by the host States is a mere exercise of their sovereignty. As International Investment Agreements (IIAs) were primarily drafted to promote and protect cross-border investments against unfair and discriminatory treatments, it is interesting to know their current approach to investment incentives and assess 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 clauses in IIAs that can better contribute to the protection of renewable energy investors’ interests. Findings suggest that harmonizing investment incentives by including them in IIAs has not been on the agenda so far and IIAs seldom contain renewable energy-related incentive provisions. Therefore, this research points out the relevant provisions that can better accommodate the renewable energy investment needs.

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