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Hydrogen is playing an increasingly important role in China's energy and climate policy, with significant implications for the development of a global hydrogen industry. However, China's approach to the regulation of hydrogen, and, in particular, the role of local authorities in promoting hydrogen refuelling stations and fuel cell vehicles, has so far received limited scholarly attention. This article aims to contribute to the literature on hydrogen regulation and to the transnational environmental law scholarship on decentralization by examining how China promotes hydrogen at the national and local levels. The case of China shows how, in jurisdictions with a sufficient degree of decentralization, local initiatives can play a key role in driving the development of hydrogen. By testing different approaches to hydrogen regulation, local experimentation helps to manage the uncertainties associated with this new energy source. At the same time, China's experience confirms the 'environmental federalism' theory on the importance of regulatory harmonization to reduce transaction costs and local protectionism. As the Chinese government develops its national regulatory approach on hydrogen, it has the opportunity to take into account both local and international experience and engage with other major economies in an effort to promote an internationally harmonized regulatory landscape. [ABSTRACT FROM AUTHOR]

In response to the 2022 energy crisis, caused by the disruption of Russian gas supplies to Europe, the European Union (EU) emphasized the importance of accelerating the deployment of renewable energy to ensure supply security and lower energy prices. Paradoxically, renewable energy investments were also one of the main targets of the EU efforts to contain the hardship of the crisis. Based on the reasoning that investors in wind and solar energy received profits that by far exceeded pre-crisis levels, the EU capped their 'surplus revenues' and initially proposed to decouple electricity from gas prices. These initiatives were justified based on considerations of distributive energy justice. Yet, by interfering with revenues and the electricity market structure, the EU signalled to renewable energy investors the risk of regulatory intervention with the market basis governing their investments. Building on the arbitral practice on renewable energy and electricity regulation, this article examines the international protection of market-based renewable energy investments and critically reflects on how investment protection affects states' right to ensure energy justice in times of crisis. [ABSTRACT FROM AUTHOR]

Decisions by states to cancel oil and gas licenses in the transition to net-zero emissions can trigger investment arbitration claims. Given the massive damages that arbitration tribunals can award to investors, investment arbitration is increasingly being criticized as an obstacle to climate change mitigation and the just energy transition. Under the Discounted Cash Flow (DCF) method, tribunals have based their valuation on the expected production volumes during the remaining lifetime of oilfields and forecasts of international oil prices, essentially requiring states to compensate companies at market conditions for all energy left underground. With an increasing number of carbon neutrality pledges at the global level and states' due diligence obligation to reduce emissions, this article argues that tribunals can no longer ignore decarbonization considerations in the application of the DCF method. Damages decisions must instead account for the price, production cost and risk expectations under net-zero pathways. Significant downward adjustments to the estimated future income of hydrocarbon assets can be achieved by using the lower oil price forecasts in net-zero emissions scenarios, instead of current market conditions. Adjusting future cash flow projections and the discount rate to reflect carbon pricing and other climate policy risks can significantly lower the present value of hydrocarbon assets. As arbitration tribunals have so far ignored decarbonization in their oil damages calculations, legal reforms are needed to require the alignment of investor compensation to decarbonization and ensure a just energy transition. [ABSTRACT FROM AUTHOR]

The common characterisation of European Union (EU) and Russian external energy relations as liberal versus realist does not do justice to the efforts of both entities to shape energy market regulation in their shared neighbourhood. This article aims to contribute to the understanding of energy regulation as a tool of strategic influence by examining from a geopolitical perspective how the EU, Russia and, to a lesser extent, China attempt to shape gas pricing and pipeline access regimes in the post-Soviet Eurasian space. A geopolitical analysis of regulatory convergence in the region helps understand how liberal concepts of energy regulation acquire a strategic function when exported to contested spheres of influence, with important consequences for the legitimacy and acceptability of these regulatory models. The EU, Russia and China recognise common principles of gas market regulation at the domestic level, but geopolitical considerations, exacerbated by the war in Ukraine, prevent the implementation of these principles at the regional level, hindering the transition of this contested neighbourhood towards more efficient energy systems and reduced dependence on Russian supplies. [ABSTRACT FROM AUTHOR]

Concerns over the weaponization of energy during the war in Ukraine have revived state anxieties about overreliance on certain foreign energy sources. This Essay argues that instruments of energy trade and investment protection have helped to lock states into dangerous dependencies. Trade and investment law can inhibit energy security strategies designed to diversify away from unreliable sources and to block suspicious investors. With energy used as a weapon, reform of the liberal energy regime is needed to allow states to prevent the creation of dependencies and protect their energy security in the new geopolitical reality. [ABSTRACT FROM AUTHOR]

Appropriate investment protection clauses integrated in the climate regulations at international, European and national levels, it is argued, can ensure that climate change and guaranteeing security of electric supply work together in a mutually beneficial way. In the absence of such regulatory intervention, some reflections are presented on the interpretation and application of the existing investment provisions.

Energy geopolitics has received limited attention in the climate law scholarship, despite the importance of the energy sector for climate change and the impact of energy crises on the effectiveness of decarbonisation mechanisms. The shock caused by the current war in Ukraine shows that, in a geopolitical world, geopolitical analysis must be integrated into climate, and more generally environmental, law analysis. [ABSTRACT FROM AUTHOR]

Chinese foreign energy investments are facing increasing opposition based on concerns that they are made with an ulterior strategic motive. Some states have been seeking to block the access of Chinese companies to their market and, for existing investments, to international arbitration, by portraying them as instruments of the government. It is important for China's participation in the international economic system that its energy companies are not automatically excluded because of suspicion of China's motives, but are subject to a nuanced assessment in which national and international economic law has a role to play. To distinguish strategic from commercial projects, this article analyses the Chinese regulation of outbound energy investments based on international principles of economic governance. The objective is to identify channels of political interference with investment decisions, by focusing on regulatory approval, state guidance and corporate governance. [ABSTRACT FROM AUTHOR]

This article examines whether the collapse of fossil energy markets and the introduction of decarbonisation regulation can trigger force majeure relief from fossil energy contracts. A critique of force majeure clauses from an environmental perspective will help to clarify how energy contracts lock buyers and suppliers into a carbon-intensive path. By not relieving buyers from their purchase obligations, even after respective market meltdowns and the disappearance of demand, force majeure, as defined in most energy contracts, can incentivise irrational energy use and waste, and is thus incompatible with a low-carbon transition. Climate regulation preventing a party from using fossil fuels can excuse performance of the obligation to purchase fossil energy, but the affected party can be required to challenge these decarbonisation measures and thus oppose the low-carbon transition. To avoid these perverse effects and align energy contracts to the reality of decarbonisation, economic hardship and environmental regulation should be explicitly included in force majeure clauses. [ABSTRACT FROM AUTHOR]

Following the experience of high price instability and unpredictability in the European Emissions Trading Scheme (ETS), the management of carbon prices is a key concern for Chinese authorities. The objective is to avoid excessive price volatility in daily trading and stabilize the intrinsic price trend. Building on environmental economics and financial market theories, this study reviews the design of carbon price stabilization mechanisms in China's seven pilot ETSs and assesses their performance. The pilot ETSs have incorporated most price stabilization mechanisms recommended in the literature, including price ceiling–floor, intensity-based allocation, ex-post adjustment of allowances, intertemporal flexibility, and daily trading risk management. By examining this wide range of mechanisms, our analysis helps understand the different design options available to stabilize carbon prices. Furthermore, by decomposing carbon price data in the different pilot ETSs, our analysis helps evaluate the effectiveness of these mechanisms. Price ceiling–floor and intertemporal flexibility (update of ETS cap) are the most effective mechanisms for stabilizing the intrinsic price trend. Daily trading risk management mechanisms help control price volatility but have little impact on the intrinsic price trend. However, we are cautious about the desirability of regulatory intervention for influencing carbon market prices. Depending on the institutional context and their design, price stabilization mechanisms can cause regulatory uncertainty. The Chinese pilot ETSs provide unique input for understanding ETS regulations concerning price stabilization mechanisms and their effectiveness in achieving price stability. The details and sophistication of carbon price stabilization mechanisms can influence the performance of ETSs. Cap updates and price ceiling–floor mechanisms most significantly impact intrinsic price trends. To ensure the effectiveness of price stabilization mechanisms, it is important to separate mechanisms aimed at intrinsic price trends and at daily volatility. Excessive and unexpected regulatory intervention to stabilize prices may disturb market expectations and create uncertainty for investors. [ABSTRACT FROM AUTHOR]

In theory, by establishing a price for greenhouse gas (GHG) emissions, an Emissions Trading System (ETS) promises to encourage a shift away from carbon-intensive electricity supply. It is generally assumed that this decarbonization effect requires the liberalization of electricity markets. However, amongst the more than 40 jurisdictions throughout the world that are now implementing, planning or considering an ETS to decarbonize electricity supply, few have adopted the electricity market liberalization textbook model. Economic agents are constrained in how they can respond to an ETS through various forms of electricity market regulation but, given the political sensitivity of electricity market reform and the urgency to decarbonize the electricity sector, it is unrealistic to advocate liberalization as a prerequisite to the introduction of an ETS. Building from regulatory theory on the design of electricity and environmental markets, we develop a conceptual framework to understand the interaction between ETS and electricity market regulation under different regulatory settings. Our analysis challenges the general assumption that the introduction of an ETS depends on electricity market liberalization. We argue that the ETS can be adjusted to the electricity market reality of many jurisdictions where governments limit price discovery, restrict price pass-through or place constraints on investment decisions, and discuss regulatory alternatives to address the efficiency losses that may emerge from specific forms of power sector regulation. Key policy insights Although an ETS will be most effective when it is implemented within a liberalized and competitive electricity market, it can also be introduced in a regulated electricity market environment, albeit with some efficiency losses. Where an ETS is implemented under power sector regulation, it is important to understand where barriers to mitigation exist, how much mitigation potential will be lost, and which other policies can target these areas of the economy. A proportion of the efficiency loss might be restored through innovative emissions trading policy design that overcomes the barriers to mitigation put in place through power sector regulation. This is a topic that deserves more academic research. [ABSTRACT FROM AUTHOR]

This paper critically questions the legal and economic foundation of price regulation in environmental markets, with a focus on the European Union (EU) and Chinese Emissions Trading Schemes (ETSs). In 2018, the EU adopted a structural reform of its own ETS with the objective of increasing and stabilising carbon prices. This reform raises fundamental questions concerning the free market nature of the ETS and its function as a driver of low‐carbon investments. On the one hand, regulatory adjustments are necessary to address the large surplus of allowances that can result from exogenous shocks (e.g. economic downturn). On the other hand, the risk of regulatory intervention in the market undermines investor certainty. In China, limited regulatory independence and more stringent government control over the market exacerbates the threat posed by price control measures to the integrity of China's ETS and its role as a driver of investments in environmental protection. [ABSTRACT FROM AUTHOR]

As the world's largest energy consumer, China's energy security policies have significant implications for global, regional and national energy governance. However, the legal dimension of China's external energy security remains understudied, with most attention in the energy law literature focused on EU and US energy security. This Special Issue studies the legal aspects of Chinese external energy cooperation by focusing on energy trade and investment under the 'Belt and Road Initiative' – the Chinese foreign policy concept aiming to promote regional and global economic integration through infrastructure interconnectivity. Three research questions govern the Special Issue. How does China's external energy policy rely on, and impact on, regional and global energy market governance? How does China seek to protect its foreign energy investments? How does China's external energy policy impact on host countries' energy and investment laws? [ABSTRACT FROM AUTHOR]

According to economic statecraft theory, states use investments by state-owned enterprises ("SOEs") to achieve geopolitical objectives, such as securing control over resources or exercising influence in zones of special strategic interest. There is increasing interest about the geopolitics of foreign investments under the Chinese and Russian infrastructure diplomacy. Geopolitical investments pose a challenge to investment arbitration-a mechanism created to depoliticize the resolution of investor-state disputes. This article argues that, in the context of growing economic power of SOEs and increasing geopolitical tensions, geopolitics cannot and should not be excluded from the investment arbitration process. At the jurisdictional stage, it makes sense to focus on the commercial nature of investments in strategic sectors, given the difficulty of establishing the real motivation of foreign investors on the basis of objective criteria. However, on the merits, geopolitical arguments are often the only basis on which host states can substantiate their security concerns regarding foreign control over strategic assets. Excluding geopolitical analysis from investment arbitration would negatively affect host states' defense of regulatory interference with strategic investments. [ABSTRACT FROM AUTHOR]

Although the Ukraine conflict and the resulting political hostility between Russia and the West have put a stop to the 2000 EU-Russia Energy Dialogue, the mutual benefits of energy cooperation and cross-border energy investments are undeniable. Taking these mutual benefits into account, energy would be a logical area of focus if the EU and Russia were to decide to re-initiate their strategic partnership in the event of a normalization of the situation in Ukraine. Although this scenario still is highly hypothetical and a further deterioration of EU-Russian relations is possible, it is important to reflect on the creation of institutional structures that would enable the EU and Russia to rebuild trust by working together in a field of common strategic interest. In this context, this article examines the possibility of establishing an EU-Russian energy agreement to overcome the current misunderstandings that exist between the EU and Russia in respect of the interpretation and application of the main concepts of energy law. The legal certainty resulting from such an energy-specific agreement could contribute to improving the investment climate for cross-border EU-Russian energy investments and possibly, through closer investment ties, enhancing trust between the EU and Russia. [ABSTRACT FROM AUTHOR]

Russia’s decision not to ratify the Energy Charter Treaty (‘ECT’) can, to a great extent, be explained by Russia’s perception of this treaty as a legal instrument primarily directed at guaranteeing the security of Europe’s energy supply. As illustrated by the 2012 Arbitral Decision in Electrabel SA v Hungary, Russia’s concerns regarding how centered the ECT is on the European Union (‘EU’) seem to be largely well founded. In the event that Russia ratifies the ECT, the special nature of EU law under that Treaty represents a potential limit to the protection that the ECT could provide to Russian investors in the EU energy market. The objective of the present article is to contribute to the debate on Russia’s possible (but highly hypothetical) ratification of the ECT in the context of the modernization of the Energy Charter process. Mainly focusing on jurisdictional questions, this article aims to evaluate the benefits that ratifying the ECT would represent for the protection of Russian investors abroad. Given the obstacles to arbitration found in many Russian bilateral investment treaties and given the lack of protection that the provisional application of the ECT offers to existing Russian investors in the EU, it is argued that Russia's ratification of the ECT is necessary to enable Russian investors to sue the EU or its Member States. By ratifying the ECT, Russia would open up the possibility for its investors of launching arbitration proceedings against the Third Energy Package on the basis of the rights that these investors benefited from before Russia terminated its provisional application. However, Russia’s ratification of the ECT would only make sense if Russia’s concerns regarding the EU-centered nature of the Treaty are addressed. The modernization of the ECT process offers a unique opportunity to address these concerns and create a balanced playing field for energy producers and consumers. [ABSTRACT FROM AUTHOR]

The article discusses a court case concerning Slovakia's violation of the European Union (EU) law obligation of non-discriminatory third party access to the network. According to the Court's ruling, priority access of Slovakia was protected under the principle of the Treaty on the Functioning of the European Union (TFEU) despite committing itself towards the foreign investor before its accession to the EU. The conflict between the rights of foreign investors and the EU law is discussed.

The article analyzes the new legislative basis that the 2010 Federal Heat Law, together with the Federal Energy Efficiency Law creates for the regulation of tariffs in the heating sector in Russia. It outlines the state and structure of the Russian district heating sector. It highlights investment challenges facing the Russian heating sector by focusing on the necessity for improvement in energy efficiency and the need to exploit the potential for renewable energy sources, in particular biomass and geothermal energy. It analyzes the specific case of combined heat and power (CHP) installations, particularly the issue of cost allocation between the heat and electricity output of these installations.

The article focuses on investment arbitration and its impact on the mitigation of climate change. Topics include the regulation of climate change mitigation policies, the transition to a low-carbon economy, and the financial viability of low-carbon investments. Information is provided on the capping of greenhouse gas (GHG) emissions.

Russia possesses enormous potential for the development of renewable energy sources. Given the necessity to modernize the economy and stimulate innovation, the exploitation of this potential is increasingly recognized as a national political priority. Replacing traditional fossil energy sources with renewable energy in the Russian fuel mix will also have a positive impact on European energy security and climate policy. The European partners thus have an interest in stimulating this development. Sharing with Russia the lessons learned from the European experience in the field of renewable energy policy could be a way to assist Russia in its efforts to develop adequate regulatory mechanisms to stimulate renewable energy investments. This contribution argues that this attempt can only be successful if the European and Russian partners ‘speak the same language’ in terms of renewable energy policy. It therefore proposes to compare the support mechanisms developed by EU Member States with the Russian scheme in order to highlight potential misunderstandings in the concepts and instruments used. Moreover, this contribution argues that the European Union will only be convincing in its approach towards Russia if it avoids a ‘normative hegemonic’ behaviour. Rather than presenting its rules as ‘best practice’, the European Union should highlight what went wrong with its approach so as to avoid repeating the same mistakes in Russia. It appears from the European experience that regulatory instability constitutes the most important obstacle to a successful renewable energy policy. The readiness of the Russian authorities to meet investors’ concern of stability will therefore determine Russia's ability to attract private investments in the development of its enormous renewable energy potential. [ABSTRACT FROM AUTHOR]

The architecture of the Kyoto Protocol gives the private sector a central role to play. It will most probably continue to occupy an important place in the post-2012 climate regime. However one essential aspect for private investors is often overlooked during the ongoing climate talks: the protection of low- carbon investments against regulatory changes by host countries. Investors' perception that the `rules of the game' governing their investment could change may make it more difficult and more expensive to attract low-carbon investments thereby compromising the goal of emission reductions. This article identifies risks of regulatory changes that are inherent to the regulations designed to promote renewable energy sources and energy efficiency, as well as to implement the flexible mechanisms of the Kyoto Protocol. It analyses the extent to which the protection standards of international investment law offer adequate protection against these changes but also questions if these same standards represent a threat to the implementation of national climate policies. [ABSTRACT FROM AUTHOR]

This article is a sequel to 'Improving the Climate for European Investments in the Russian Electricity Production Sector: (I) the Role of Investment Protection Law', which appeared in the previous issue of the Journal. It examines whether convergence of the regulatory frameworks governing the European and Russian electricity markets could improve the predictability of investment conditions in the Russian electricity production sector. Could the creation of an EU--Russian level playing field in the electricity sector answer the legal uncertainties faced by European investors in Russia? This question is analysed in the broader context of the EU--Russian energy relationship. The article first examines the notion of regulatory convergence and its conceptual evolution in the context of the increasing strategic importance of Russia for the European energy market. Thereafter the potential success of this approach is assessed in light of comparative law, especially legal transplant theory. [ABSTRACT FROM AUTHOR]

Large investments are needed to modernise the Russian electricity production sector. To finance these investments, Russia is liberalising its electricity market. Moreover, it has recently established regulatory frameworks to promote alternative modes of electricity production. European energy concerns are expected to play an important role in this modernisation process by transferring capital and energy efficient technologies. The readiness of these companies to invest will, however, depend on the predictability and credibility of the investment climate. This article identifies potential sources of uncertainty and regulatory changes that may affect investments in electricity production in Russia. It focuses in particular on electricity reform, climate policy and so-called 'first-generation' reforms. It then examines the extent to which international investment law, especially the investment regime of the Energy Charter Treaty, offers adequate protection against the risks of regulatory change. [ABSTRACT FROM AUTHOR]

The article focuses on the role of investment protection law in combating climate change and in securing the supply of electricity in Europe. It talks about investment protection law as a mechanism to realize the potential of future electricity investments. The role of investors in jeopardizing climate protection policy, with their claim that it violates property rights and constitutes environmental expropriation, is analyzed. This article also examines the extent to which investment protection law could secure climate protection investments from the effects of regulatory change.

The use of environmental agreements by companies as a tool to improve environmental protection can be hindered by a strict interpretation of competition rules. This article analyses how the European Commission attempts to reconcile the requirement of environmental protection with anti-trust law, by examining the principles that the Commission has defined in its assessment of packaging waste management systems. Although the Commission has considered that some agreements concluded under these schemes were restrictive of competition, it decided not to prohibit them. This article argues that, although attention is given to environmental considerations, the arguments invoked to justify the exemption of these agreements do not allow for integration of environmental protection, as such, in European competition policy. An alternative would be to apply standards of assessment comparable to those used to justify exceptions to the free movement of goods. [ABSTRACT FROM AUTHOR]