FUTURE TRENDS IN ENERGY

TRADE LAW:
A N T I C I PAT I N G C H A L L E N G E S I N E ME R G I N G E N E RG Y
MA R K E T S .

Helen Mary Varghese

LL.M Ph. D
22005
 INTRODUCTION

• Energy – fundamental for modern living - transportation,

• The world's annual CO2 emissions from
manufacturing, heating homes, and providing healthcare
fossil fuel combustion exceed thirty billion
• Economic productivity and social well-being – higher
tons
standards of living and better quality of life
• To reduce traditional fuel use and CO2
• ENERGY CRISIS
emissions, the International Energy Agency
- due to a high demand for energy,
(IEA) recommends increasing energy
- Global demand for crude oil
efficiency and conservation, advancing
- dependence on fossil fuels, and alternative energy technologies, and
- increasing population controlling future energy demand .
 FUTURE TRENDS IN ENERGY TRADE LAW

1. RENEWABLE ENERGY

2. ENERGY SECURITY

3. DECARBONISATION

4. ARBITRATION OF DISPUTES RELATING TO ENERGY SECTOR

1. ENERGY SECURITY

Energy security refers to the continuous availability of energy in varied forms, in

sufficient quantities, and at reasonable prices. It means limited vulnerability to transient

or longer disruptions of imported supplies. It also means the availability of local and

imported resources to meet growing demand over time and at reasonable prices.
• Regional shortages UTILISATION PATTERN:
• Environmental challenges
• Crude oil and its products: most versatile, capable of meeting every
• Energy insecurity and shortages affect countries in two
ways: requirement for energy use and services, particularly in transport.

- handicap productive activities, and

• Coal and natural gas: increasingly used for electricity production –
- undermine consumer welfare
However, they require expensive infrastructure and special treatment for
• Energy security needs to be investigated at several levels:
liquefaction.
1. Globally: to ensure adequacy of resources;
• Hydropower, newer renewable resources such as wind and
2. regionally: to ensure that networking and trade can
photovoltaics, and nuclear energy have limited use beyond electricity
take place;
production.
3. National: to ensure national security of supply;
4. Consumer level: to ensure that consumer demand can • Given the versatility of crude oil and its products and the limitations of

be satisfied. other energy sources, energy security depends more than anything else
projections, plans, and supply arrangements should look
on the availability of crude oil in the required amounts (by ship or
beyond short-term requirements to medium- and long-
pipeline) to any importing country in the world.
 • NATIONAL ENERGY POLICY
• Shortages of electric power and supply
• All the Census villages to be electrified by 2019,
interruptions occur for two main reasons:
• universal electrification is to be achieved, with 24x7 electricity by 2022.
a) System inadequacy—inadequate number of
• The Intended Nationally Determined Contributions (INDCs) target a
generating facilities capable of meeting
reduction of emissions intensity by 33%-35% by 2030,
peak demand and limitations in the
• achieving a 175 GW renewable energy capacity by 2022,
transmission and distribution system,
• 4 objectives:
particularly to rural areas. – requires
a) Access at affordable prices,
investment
b) Improved energy security and Independence
b) Supply insecurity—unreliability of supply c) Greater Sustainability, and
due to non-availability of generating plants d) Economic Growth.
or breakdowns in the transmission and

distribution system. • Energy security may be enhanced through both diversification of the
sources of imports and increased domestic production and reduced
• From April 2016 to January 2017, a total of 1038.422

billion Units (BUs) of electricity were generated in the • Solar parks of aggregate capacity of 20,000 MW

country, including from various renewable energy have been sanctioned for 21 states.

sources. • INR 356.63 crores has been released to Solar

• Revised target of renewable energy capacity to 175 GW Energy Corporation of India for the projects.

(Gigawatt), making it the largest expansion in the world • 31,472 solar water pumps were installed in 2015-
and providing plenty of opportunities for investors - 16;
highest ever-solar power and wind power capacity
• 501 MW grid connected solar rooftop projects
addition since April 2014.
have been installed in the country.
• The world's largest 648-MW solar power plant
• Highest ever wind power capacity addition of
commissioned in Tamil Nadu on September 21, 2016.
3300 MW was commissioned in 2015-16
This is expected to facilitate a 157% increase in solar

power capacity addition

2. RENEWABLE ENERGY
• Pandemic, Russia’s invasion of Ukraine, • The International Renewable Energy Agency (IRENA)
Natural gas prices reaching record high, defines renewable energy to include all forms of energy
high electricity prices, produced from renewable sources in a sustainable
manner, including bioenergy, geothermal energy,
• One of the three objectives of the UN
hydropower, ocean energy, solar energy and wind energy.
Secretary-General under the Sustainable
Energy for All (SE4ALL) initiative is to • IEA : “electricity and heat derived from solar, wind,
double the share of renewable energy ocean, hydropower, biomass, geothermal resources, and
in the global energy mix by 2030, with biofuels and hydrogen derived from renewable resources”
an emphasis on promoting sustainable
forms of renewable energy
• ADVANTAGES: • GROWTH OF RENEWABLE ENERGY MARKETS:

• contribute to the overall sustainable • RE contributed 5.4 % to the Total Final Energy
development, environmental, economic, and Consumption (TFEC) in 2010. About 97% by United
social States, Europe, Japan, Brazil, China, and India
• reducing greenhouse gas emissions and local
• Global renewable capacity additions are set to soar by 107
environmental impacts, enhancing energy
gigawatts (GW),
security, stimulating economic and industrial
development, and increasing access to reliable, -expanding policy support,
affordable, and clean modern energy services.
-growing energy security concerns and
• improve the security of supply in a variety of
-improving competitiveness against fossil fuel
ways, including reducing dependence on
alternatives
imported fuels, contributing to technological
and fuel diversification, hedging against fuel
price volatility, and enhancing national trade
and fiscal balances.
• Projected increase by 2/3 of Solar PV capacity, • TECHNICAL POTENTIAL:

including both large utility-scale and small • Technical potential highest for solar energy

distributed systems • Perovskite cells, flexible solar cells, smart flower solar

• Onshore wind capacity additions to rebound by etc.

70% in 2023 to 107 GW, an all-time record • the challenge will be to capture and utilize a sizable share

amount. of this vast global technical potential in a cost-effective

and environmentally and socially sound manner
• Biofuels avoided the consumption of 2 million

barrels of oil equivalent per day in 2022 -

• POLICY INITIATIVES:
equivalent to 4% of global transport sector oil

demand. Argentina, India, and Indonesia all • Carbon-pricing

accelerated biofuel use in 2022. • Feed-in-tariffs

3. DECARBONIZATION
 • Industrial sector (manufacturing, mining, and construction)
• Stabilizing climate change -
was responsible for nearly one-quarter of direct CO2
reducing net emissions of carbon
emissions in 2017 and 40% of indirect emissions
dioxide (CO2) to zero.
• Heavy industry (steel, cement and chemicals) also responsible
• IPCC : decarbonize the economy
for almost 40% of emissions
by 2050 or face a world above
- shared challenges of process emissions of carbon dioxide, the
1.5°C of average warming with
need for high heat, and use or potential use of hydrogen - Carbon
regards to pre-industrial
dioxide capture and utilization or storage (CCUS)
temperatures.
 3 PRINCIPLES: (World Bank)

1. Plan ahead with an eye on the end goal. Adopt a long-term

say for 2050—that is consistent with decarbonization as well
as short-term, sector-specific plans adapted to the country’s
wealth, endowments, and capacity.

2. Go beyond prices with a policy package that triggers

DECARBONIZE
changes in investment patterns, technologies, and
DEVELOPMENT
behaviours. Carbon pricing, measures such as targeted
investment subsidies, performance standards, mandates, or
communication campaigns that trigger the required changes in
the pursuit of a low-carbon
investment patterns, behaviours, and technologies
transition must be integrated into
the overall development agenda: 3. Mind the political economy and smooth the transition for
the goal is not just to decarbonize those who stand to be most affected. A climate policy
but to decarbonize development.
package must be attractive to a majority of voters and avoid
impacts that appear unfair or that are concentrated in a region,
sector, or community.
• EARLY ACTION
• POLICIES
• Is cost-effective - allows countries to take advantage
of natural opportunities to green their capital as it is • Carbon pricing

retired or as it is first built. • reforming fossil-fuel subsidies—which reached about $548

• What exactly does early action entail? And how billion in 2013, according to the IEA
should policymakers make decisions in situations of
• OECD estimates that its member countries spent $55–$90
uncertainty, multiple worldviews, and competing
billion a year in the 2005–11 period
objectives? - Green Growth: The Pathway to
Sustainable Development (World Bank 2012) • Reforming other environmentally harmful subsidies such as

- Synergy agricultural subsidies, subsidies for pesticides, etc

- Urgency • Performance-based payment - to create incentives to preserve

or increase carbon sinks, such as forests and soil.

 ARBITRATION OF DISPUTES
RELATING TO ENERGY SECTOR
• El Paso Energy International Company v. The Argentine • Total SA v Argentine Republic: (Discrimination)
Republic: (Arbitrariness)

• El Paso argued that a no. of measures (export withholdings on • Total argued that its investment (shareholdings) in Argentina’s
crude oil, foreign exchange controls, and a specification policy) electricity sector had suffered discrimination.
taken by Argentina during its financial crisis rendered its
• Total asserted that certain measures taken by Argentina during
investments worthless and breached undertakings assumed by
Argentina when its investments were originally made. its economic crisis severely restricted the price of electricity in
order to subsidize other sectors of the economy, including the
• El Paso asserted numerous violations of the US-Argentina BIT,
export industry, to the detriment of investors in Argentina’s
including the prohibition against arbitrariness and the FET
standard. energy sector.

• The Tribunal disagreed. Argentina’s response to its economic • The Tribunal rejected these arguments, finding that “such a
situation beginning in 2001 was reasonable and emanated from policy would not per se represent a breach of the non-
the police powers regularly exercised by governments. discrimination standard. This standard requires, as a rule, a
• The Tribunal did, however, find Argentina in violation of the comparison between the treatment of different investments,
FET standard under the US-Argentina BIT usually within a given sector, of different national origin or
ownership.”
• Occidental Petroleum Corporation, Occidental Exploration
• The claimants argued that the annulment of the PSA
and Production Company v. The Republic of Ecuador
was both a breach of FET and an unlawful

• The claimants had previously entered into a farmout expropriation.

agreement with a subsidiary of the Alberta Energy Company
• The Tribunal found that OEPC had breached both the
(AEC), which involved payments contributing to capital
terms of its PSA with Ecuador and the terms of the
investments and operating costs in an Ecuadorian oil field.
hydrocarbons law when it entered into the farm-out
However, this agreement and significant internal political
agreement without obtaining the prior approval of the
pressure led to Ecuador’s Minister of Energy and Mines
Minister of Energy; the Tribunal nonetheless
cancelling the PSA. The cancellation was on the grounds that
determined that Ecuador had acted inequitably and
the farmout agreement constituted an unauthorized transfer or
had unfairly.
assignment and an unauthorized consortium, as well as several
technical infractions committed by the claimants.