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From polluters to protectors: when energy firms support climate regulations

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From polluters to protectors: when energy firms support climate regulations

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Content From Polluters to Protectors:
When Energy Firms Support Climate Regulations
by
Benjamin Blum
3 April 2023
Directed Research in International Relations
University of Southern California
Professor Wayne Sandholtz

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Table of Contents
Abstract ......................................................................................................................................3
Chapter 1: Introduction ...............................................................................................................4
Chapter 2: Literature Review.......................................................................................................8
Chapter 2.1: “Strategic Accommodation” – An Olsonian Perspective......................................8
Chapter 2.2: “Economic Opportunism” – The Stiglerian Response ........................................12
Chapter 3: Hypotheses ..............................................................................................................15
Chapter 4: Research Design ......................................................................................................20
Chapter 5: Analyzing Lobbying Records Data...........................................................................21
Chapter 5.1: Methodology.....................................................................................................23
Chapter 5.2 (a): Results from First Set of Lobbying Data ......................................................30
Chapter 5.2 (b): Results from Second Set of Lobbying Data ..................................................39
Chapter 5.3: Conclusion ........................................................................................................47
Chapter 6: Case Study...............................................................................................................50
Chapter 6.1: Case Selection...................................................................................................52
Chapter 6.2: Analysis of RWE vs. Netherlands ......................................................................54
Chapter 6.3: Case Study Conclusions ....................................................................................59
Chapter 7: Conclusion...............................................................................................................62
Works Cited..............................................................................................................................66
Appendix ..................................................................................................................................70

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Abstract
In 2020, the European oil refining industry publicly supported the European Climate Law,
which aimed to achieve net zero greenhouse gas emissions by 2050. This behavior seems
counterintuitive as the new climate regulations would heavily affect the industry's daily operations
and bottom line.
The existing literature on corporate political power offers two explanations for why firms
support costly regulations: either firms fear that even harsher regulations will arise if they withhold
support, or they anticipate direct or hidden financial gains. However, little attention has been given
to international investment treaties – legal documents that grant foreign investors the right to sue
host states if their investments are impaired.
Drawing on an analysis of corporate lobbying data and case law from investor-state dispute
settlement (ISDS) arbitration, this thesis argues that firms feign support for climate regulations
because they believe they can recuperate damages caused by the regulations by suing host states
under international treaties. Specifically, it examines the proceedings of the Energy Charter Treaty
(ECT), the most active and developed investment agreement in the energy sector. It finds that
while firms may not explicitly cite investment treaties in public statements, these agreements allow
energy firms to overstate their support for climate regulations. A tacit understanding of this issue
has emerged between firms and regulators following several high-profile ECT arbitration cases.
Findings from this research could be applied by states to understand the potential roadblocks that
exist in legislating climate action.

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Chapter 1: Introduction
As the European Parliament debated the European Climate Law (European Green Deal) in
2020, the European oil refining industry issued a curious statement in favor of the pending
legislation. “From the beginning, we’ve supported the Paris Agreement and Europe's climate
neutrality goal,” declared John Cooper, director of FuelsEurope, continuing: “With a clear societal
and scientific case for far-reaching climate action… we respect that there will be no return to
business as usual for the fuels industries.” In Strasbourg, European policymakers proposed
legislation to reach net zero greenhouse gas (GHG) emissions across the continent by 2050. Why
would an oil and gas interest group whose members include heavy-emitting firms like BP,
ExxonMobile, Shell, and Valero, publicly support legislation requiring them to radically alter how
they conduct their businesses? Scholars of corporate political power have introduced several
competing theories to make sense of this unexpected behavior, ranging from economic
explanations to greenwashing. However, the existing literature fails to comment on what could be
a significant factor in understanding why firms support climate regulators: the dispute settlement
mechanisms built into international investment agreements. This research paper explores the
impact of these mechanisms on corporate political power, arguing that the robust framework of
legal protections granted to firms by bilateral investment treaties has allowed firms to overstate
their support of new climate regulations.
The conditions under which firms may support new environmental regulations is an
enduring debate in the corporate political power literature. The existing discussion is generally
bifurcated into two competing theories (Vormedal et al. 2020). The first argues that when
confronted with the possibility of significant government regulation, firm executives mask their
opposition by bluffing support even though it goes against their financial interests because they

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fear that even more radical regulation might be proposed instead. This “strategic accommodation”
position was first proposed by Hacker and Pierson (2002) and traces back to Mancur Olson’s
(1965) view that regulation places concentrated burdens on organizable groups in society such that
diffused benefits for the public at large will emerge. The second perspective stems from economist
George Stigler (1971), who theorized that well-connected industry groups seek government
regulation because they anticipate direct or hidden financial gains from the regulation. These
economic benefits typically come from direct subsidies to industry, tax breaks, favorable price
controls, or adverse regulations to competitors.
Just as there are differences between these competing theories, it is important to note that
the purpose and format of regulations are often varied as well. Certain types of regulation lend
themselves to the Stiglerian “economic opportunism” viewpoint, while others are better
understood by Olson’s “strategic accommodation” perspective. The discourse largely eschews the
Stiglerian perspective in favor of the Olsonian view to describe environmental regulations such as
the European Green Deal, as these public-interest regulations often impose concentrated costs
across a narrow set of businesses to achieve diffuse benefits for the public at large. Indeed, the
European Green Deal certainly comes with a significant price tag for polluters. Arguably the
world’s most sophisticated climate regulation, the legislation makes clear that the only way
forward for high GHG emitters will be to replace their infrastructure with greener alternatives. The
European Commission estimates that reaching their climate targets will cost 260 billion euros
annually (Usman et al. 2021).
Despite the extensive academic debate on regulations, the literature has not discussed what
could be a significant source of corporate support for emerging regulations: international
investment law. This legal regime allows foreign investors to sue host states if they allege a breach

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in the standard of treatment such as if they suffer discrimination, expropriation, or nationalization
of their assets. Over 3,000 bilateral investment treaties have been ratified since 1960, making
international investment law one of the fastest-growing areas of international law.
Not only are international investment treaties among the fastest-growing areas of
international law, but they are also among the most controversial (Echandi 2019). Increased public
and scholarly attention on the international investment law regime has sparked an intense debate
on whether these legal instruments stand in the way of allowing governments to act on climate
change. If states enact climate legislation to pivot away from gas and coal, some scholars claim
that foreign investors in these heavy-polluting industries could use investor-state dispute
settlement to seek compensation for the loss of profits resulting in companies with new
environmental regulations.
At the heart of this discontent in Europe lies the Energy Charter Treaty (ECT): a 1991
multilateral investment agreement that allows fossil fuel investors to seek compensation from host
states. Fossil fuel investors have filed 150 arbitration cases under the ECT since 1991. This makes
the ECT the most frequently invoked international investment agreement (Di Salvatore 2021).
Fifty-one countries have ratified the treaty, including all members of the EU. Arbitrators typically
award investors millions of dollars in ECT cases, but payouts can soar much higher. In the 2014
Yukos v Russia case, arbitrators awarded $50 billion to the investor. Indeed, the ECT is a proven
tool that investors can use to protect their assets against host country encroachment.
Though the literature on investor-state dispute settlement is rich, scholars largely avoid
discussing the relationship between international investment agreements such as the ECT and
corporate support of public-interest regulations. Instead, scholars have primarily been focused on
examining this question from the opposite perspective. Extensive research has been published on

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how international investment agreements (IIAs) suppress the creation of new climate regulations
by host countries. Scholars posit that states are afraid to impose stricter regulations because they
may end up “on the hook” to pay investors compensation through IIA awards (Neumayer 2001;
Tienhaara 2011). While this “regulatory chill” concept may clarify some situations, it does not
help understand the counterintuitive behavior of European energy firms for several reasons. First,
heavy-polluting industries overwhelmingly supported the European Green Deal legislation. It is
also important to note that the legislation was not merely a “write-off” to the oil and gas industry
– environmentalists and other business interest groups also largely supported the regulations.
Second, and more importantly, the European Parliament was not dissuaded by the threat of investor
arbitration in passing its strict climate laws. Not only did the EU pass new climate legislation, but
the legislation constituted a major reform of the European environmental regulatory framework.
This unique set of circumstances surrounding the passage of the European Climate Law does not
align with the regulatory chill theory.
This thesis draws on the distinct literature of corporate political power and international
investment law to explain European firms’ counterintuitive behavior in supporting climate
regulations. In doing so, I aim to fill a notable gap in both literatures: how might international law
explain why firms support radical changes in regulations affecting their industry?
Not only does this research discuss an important question in the literature that has so far
remained unanswered, but it also helps address an urgent policy concern: how can states galvanize
private sector support for policies addressing climate change? Most states now recognize the
urgency to act on climate change. Between the 2015 Paris Climate Accords, the United Nations
Framework Convention on Climate Change, and annual climate conferences, states are moving
towards a consensus on implementing wide-reaching climate legislation. However, states cannot

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reach their climate goals on their own. Without support from the private sector, it is unlikely that
states will be able to close this funding gap. A more comprehensive understanding of the factors
that induce a firm to support radical climate regulations despite going against short-term business
interests could yield important insights into how states can best leverage the private sector to help
achieve national climate goals.
Chapter 2: Literature Review
The literature review will proceed as follows. I will first examine the literature on corporate
political power, specifically the two competing theories of why businesses support regulations. I
will begin by evaluating the Olsonian view of regulations before shifting to the Stiglerain
perspective. Following this discussion, I will summarize the hypotheses which emerge from these
competing theories before introducing a final hypothesis related to investor-state dispute
settlement.
Chapter 2.1: “Strategic Accommodation” – An Olsonian Perspective
In his study of collective action, economist Mancur Olson posits that regulation imposes
concentrated costs on small, organizable groups in society to obtain diffused benefits for the public
at large (1965). He explored why actors form interest groups and the conditions under which these
groups are created. The prevailing explanation at the time was that forming groups is human
nature, and this hard-wired instinct is the primary reason why actors from interest groups.
However, Olson ultimately rejects this view. He postulates that actors create interest groups to
reduce individual costs of lobbying, trying to maximize the benefits they receive at the lowest

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individual cost possible. Essentially, actors who form interest groups to achieve common interests
will be incentivized to “free-ride” on the effort and money contributed by other actors.
While Olson’s discovery of the free-rider problem has had wide-reaching impacts on social
sciences, what is most relevant to this thesis is the adversarial relationship Olson defines between
governments who implement public-benefit regulations and the economic interests of businesses.
From this Olsonian view of regulations emerges the “strategic accommodation” perspective, first
proposed by Hacker and Pierson. In their analysis of the American welfare state, the scholars
observe that American business executives opposed the creation of the Social Security
Administration in their private correspondence despite supporting the legislation publicly. Hacker
and Pierson conclude that while the emerging labor regulations may not have been the business
leaders’ preferred outcome, their acquiescence reflects what they calculate to be the best outcome
given the grim circumstances they found themselves in (Hacker and Pierson 2002). Ultimately,
Hacker and Pierson posit that business leaders support emerging regulations because they fear
even harsher regulations could emerge if the current legislation is nixed.
Hacker and Pierson call this distinction between preference and strategy “the problem of
preferences.” This concept has been influential in the literature on Olsonian regulations. In his
response to Hacker and Pierson, Broockman agrees that corporate support for regulations does not
necessarily imply that the firm would have supported these regulations over the status quo (2012,
2019). He extends Hacker and Pierson’s argument by evaluating several additional scenarios under
which firms may misrepresent their perspectives. First, firms overstate their support for regulations
when they realize their actual preferences are politically infeasible, when they hope to gain a seat
at the negotiating table, or when they anticipate even more significant downstream political
consequences. Additionally, Broockman finds that firms might overstate their opposition to a

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likely outcome in hopes of “watering down” the legislation to a more favorable scenario for
themselves. Broockman ultimately posits that scholars should focus on how firms’ expressed
policy preferences change across strategic contexts to understand their true policy preferences
more accurately, keeping in mind the several potential reasons he analyzes that firm executives
may misrepresent their true intentions.
Like Hacker and Pierson, Broockman uses the passage of mid-20th century American
welfare and labor regulations as a case study to argue that business stakeholders might overstate
their support of emerging regulation in hopes of favorably shaping inevitable legislation. Yet other
scholars have applied this theory of corporate political power to other cases, namely in the
literature on corporate support of environmental legislation (Levy and Newell 2005, Grumbach
2015). For example, Grumbach finds that Big Oil industry leaders feigned support of cap-andtrade legislation to gain a seat at the negotiating table and favorably shape the inevitable
regulations (2015) in his study on European carbon cap-and-trade programs. Grumbach posits that
corporate executives of heavy-polluting firms were compelled to support the proposed regulations
because they thought there was no way around them – they perceived that policymakers would
enact the legislation no matter what. Grumbach also observes that Big Oil firms appeared to have
supported environmental regulations while providing resources to lobby against the legislation’s
passage. He ultimately concludes that large energy firms may simultaneously lobby against new
regulations while supporting industry interest groups working to create favorable regulations as a
“protective measure” in case their first-choice preference falls through.
This behavior of corporations appearing more environmentally friendly without
implementing specific pro-environmental policies is referred to as “greenwashing,” and offers a
slightly different explanation of why firms might strategically support climate regulation (Delmas

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and Burbano 2011). Heavy-polluting industries are often under increased pressure from
shareholders, customers, and activists to support climate regulations (Gupta et al. 2020). Yet these
regulations pose an existential threat to firms with assets, infrastructure, and products firmly
entrenched in the fossil fuel industry. This conundrum, which scholars call the “decarbonization
dilemma,” forces firms to choose between immediate external pressure and their long-term bottom
line (Green et al. 2021). By feigning support for climate regulations publicly while resisting change
internally, greenwashing can be a risky solution for businesses to mitigate the decarbonization
dilemma. This behavior offers an alternate explanation of why firms may “support” costly climate
regulations in public discourse.
Though much of the literature on greenwashing and strategic accommodation focuses on
American business support of American environmental regulations, a significant subset explores
European business support of European Union regulations. This tranche of literature focuses on
how the European oil industry came to endorse the Kyoto Protocol in the 1990s after years of
determined opposition to climate regulation (Vormedal et al. 2020; Levy and Egan 1998). Kolk
and Levy observe that European oil giants British Petroleum and Royal Dutch Shell were early
movers in supporting GHG emissions reductions, while American firms Texaco and ExxonMobil
lagged behind (2001). The authors credit European firms’ early action to their location, market
position, and internal organizational structure. Since American firms only began supporting
climate legislation once the domestic political conditions made the proposed regulations a political
inevitability, Kolk and Levy conclude that firms’ support can only be attributed to Olson's strategic
accommodation perspective.
In sum, the strategic accommodation view asserts that polluting firms support climate
regulations to prevent policymakers from implementing even more radical regulations in the future

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or for other strategic reasons. Though they would prefer the status quo over new regulations, firms
are compelled to act in hopes of shaping the legislation to their benefit.
Chapter 2.2: “Economic Opportunism” – The Stiglerian Response
Environmental regulations are often considered Olsonian: they impose high costs on
specific, heavy-polluting industries to achieve diffused benefits for society at large (Wilson 1984).
Such regulations are typically viewed as “bad for business” given their steep compliance costs.
However, not all scholars agree with this position, as not all environmental regulations necessarily
impose costs on firms. In the “economic opportunism” view, politically connected firms and
interest groups support regulations because they anticipate financial gains from future legislation
(Vormedal et al. 2020).
This perspective stems from George Stigler’s “economic theory” of regulation. As opposed
to the Olsonian view that regulations emerge to offer diffuse benefits to society at large following
public disapproval of industry practices, Stigler maintains that “as a rule, regulation is acquired by
[an] industry and is designed and operated primarily for its benefit.” (Stigler 1984). These
economic benefits can be direct or hidden. For instance, firms can seek subsidies, tax write-offs,
price controls, or other indirect rents from regulators. The Stiglerian perspective, a more
pessimistic view of corporate behavior than Olson’s model, claims that regulations provide direct
benefits to the few while diffusing costs across the many (Oye and Maxwell 1994).
The discourse on corporate support of Stiglerian regulations is rich: scholars have
discussed numerous scenarios where firms support regulations due to economic interests. Swenson
directly responds to Hacker and Pierson’s “problem of preferences” model in his article on the
American welfare state. Though Swenson concedes that the strategic accommodation claim is
hypothetically plausible, he argues the theory cannot be used to describe all cases without

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extensive research because it overlooks the possibility of silence, passivity, or camouflaged
opposition to regulations (Swenson 2004, 2018). He argues that “above all, facts about economic
interests are needed to help sort out the tricky inferential problems involved in preference
attribution.” (Swenson 2018). Swenson examines anonymous surveys to substantiate his claim that
firms did not feign support for welfare regulations, but rather genuinely supported them because
of the potential economic rewards they would get out of the deal. In a further critique of Hacker
and Pierson’s, Swenson notes that firms often publicly supported the pending regulations before
they became a political inevitability.
Though Swenson is focused on welfare regulations, the Stiglerian discourse also examines
environmental regulations. Irja Vormedal introduces a “tipping point” model to understand why
firms may support climate regulations. She argues that when businesses initially oppose climate
regulations, this opposition may fade into support if three market conditions are met: if uneven
playing fields emerge which burden some industries more than others; if regulatory threats and
uncertainties increase, causing the perceived cost of inaction to exceed the cost of compliance, or
if new market opportunities emerge in clean technology which impels frontrunners to pursue
regulatory support (Vormedal 2011). Vormedal goes on to claim that a great number of businesses
will flip their position on climate regulations from opposition to support as these three conditions
gradually develop until a critical mass of companies push for climate regulations. This triggers a
“tipping point” in corporate support for climate regulation. She investigates American climate
policy from 1990 to 2010 to validate her claim, finding that a tipping point of corporate support
for climate regulations emerged after major oil companies formed a pro-climate interest group to
advocate for cap-and-trade legislation.

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While Voremedal’s tipping point model has been influential in understanding the economic
factors which induce firms to support climate regulations, other scholars have come to different
conclusions. For instance, Oye and Maxwell find that regulation tends to provide better
compensation to the industry when environmentalists and businesses are united. However, the two
also find that environmental regulations are most effective when they “confer tangible benefits on
the regulated.” (Oye and Maxwell 1998). They posit that these benefits lend themselves to
Stiglerian regulatory situations. They further posit that Stiglerian environmental regulations are
typically more stable than Olsonian cases because of this dynamic. yet the authors also highlight
a shortcoming of Stiglerian environmental regulations: the potential for issues of equality between
firms and “the erosion of general economic welfare.” They find that large firms typically receive
the largest rents from Stiglerian environmental regulations. These regulations disproportionately
burden smaller, less advanced firms. While this is an important observation, this thesis will focus
on large firms due to the large share of global GHG emissions they constitute.
More recently, scholars have proposed more generalized and systematic theories on the
economics behind corporate support of climate regulations. Amanda Kennard posits that
heterogeneous adjustment costs incentivize businesses with low transition costs to support climate
regulations (Kennard 2020). While policies like the European Climate Law imposes costs on all
industries, these costs are varied between and even within industries. Kennard ultimately
concludes that firms facing lower adjustment costs are motivated to support climate regulation to
gain an advantage over competitors with higher adjustment costs.
In sum, the economic opportunism view posits that firms support climate regulations to
take advantage of direct or hidden financial benefits. The theory traces back to George Stigler’s
view of regulations as providing direct or hidden benefits to a few well-connected industry groups

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while diffusing costs across the many. Scholars have used Stiglerian theory to debate numerous
drivers of these benefits, ranging from the tipping point model to heterogeneous adjustment costs,
compliance costs, business conflicts, and economic interests.
Chapter 3: Hypotheses
Two distinct hypotheses emerge from the literature which could explain why heavypolluting European energy firms support the European Climate Law:
H1. Heavy-polluting European energy firms feign support for the European Climate Law
because they see no other viable political path forward but want a seat at the negotiating
table.
H2. Heavy-polluting European energy firms support the European Climate Law because they
anticipate direct or hidden financial awards from the regulation.
However, as I introduced earlier, I am particularly interested in the impact of international law
on corporate behavior. International law might be one way to explain European firms’
counterintuitive behavior in supporting climate regulations. For instance, foreign firms may
strategically camouflage support for climate regulations because they perceive that investor-state
dispute settlement treaties protect their true business interests. Alternatively, firms may seek
compensation from host states through international investment arbitration if climate regulations
emerge which cause their assets to decrease in value.
While both hypotheses above can partially explain the role of investor-state dispute settlement
in corporate support of climate regulations, the corporate political power discourse largely ignores
international law as a potential explanation of business support for environmental regulations. This

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omission is puzzling given the significant impact that international investment treaties have on
both firm and state behavior (Schjelderup and Stähler 2021; Yackee 2008, Tienhaara 2011). To
explore the extent to which these treaties impact a firm’s decision to support climate regulations,
I offer a third hypothesis:
H3. Heavy-polluting European energy firms feign support for the European Climate Law
because they perceive that reducing their carbon emissions is a political inevitability and
believe they can recuperate these costs through dispute settlement arbitration if the strict
climate regulation is passed.
The remainder of the literature review will discuss the dispute settlement discourse and the
areas of overlap it shares with literature on corporate political power. I first summarize the
international investment legal regime and present the literature related to the Energy Charter Treaty
(ECT). Next, I discuss two significant areas of debate in international investment law discourse
related to climate regulation: the impact of investment treaties on state behavior, and their impact
on firm behavior. In doing so, I demonstrate that this third hypothesis has so far remained underdiscussed in the literature.
I begin by summarizing the primary dispute settlement mechanism relevant to highpolluting energy firms, the Energy Charter Treaty. The ECT is a multilateral treaty promoting
long-term cooperation within the energy industry. Negotiated between 1990 and 1998, the ECT
was initially intended to facilitate energy sector investment in Eastern Europe following the Cold
War. The treaty has since grown to include 52 member states across Europe and Asia (Walde 1996,
Tienhaara and Downie 2018). Like most international investment agreements, the ECT gives
foreign investors legal recourse to sue if their host states expropriate, nationalize, or otherwise

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devalue their assets. A group of three arbitrators settles disputes: one each selected by the claimant
and respondent, and a third mutually agreed upon by the first two arbitrators. Many dispute
settlement cases referencing the ECT are arbitrated through the International Centre for Settlement
of Investment Disputes (ICSID), an independent institution with a mandate to facilitate the
arbitration of international trade agreements. Investors have won over 75% of ECT cases (Di
Salvatore 2021), with the average amount awarded to fossil fuel companies being over $600
million.
Given the perceived bias toward investors and the large settlements that arbitrators have
awarded to the fossil fuel industry, the ECT has become increasingly viewed as a significant
impediment to European climate action in the discourse and public. Recent analysis shows that the
ECT protects fossil fuel infrastructure valued at over €344 billion in Europe alone, a figure that
exceeds two years of the European Commission's total expenditure (Moldenhauer and Schmidt
2021). Scholars posit that in the past, ECT member states have been unwilling to adopt radical
environmental regulations to accelerate the clean energy transition because they fear the fossil fuel
industry will seek compensation through the ECT (Brewin et al. 2021; Tienhaara 2011, 2018). If
states did enact radical climate regulations to phase-out heavy polluting industries, scholars claim
that they run the risk of litigious investors seeking significant amounts of money in compensation
through dispute settlement proceedings.
This concept of diluting the strength of climate regulations due to the fear of arbitration is
called “regulatory chill”. This concept has been gaining traction in academic and policy spheres
as nations look to implement stricter environmental policies. Tienhaart finds evidence of
regulatory chill in Costa Rica (2011), and Van Harten and Scott validate this concept within the
Canadian regulatory environment (2016). In Europe, policymakers have been vocal about the

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potential conflicts between the ECT and environmental regulation. Italy withdrew from the treaty
in 2016 after it passed domestic legislation reducing the subsidies given to foreign energy
investors, resulting in over 1,000 energy investors notifying the Italian government that they
intended to file formal lawsuits under the ECT (Fiorelli 2015). In 2017, the French government
succumbed to pressure from investors when it watered down a draft law banning fossil fuel
extraction by 2040. The modification came after Vermillion Energy, a Canadian oil company with
investments in Italian oil fields, threatened to sue France under the ECT (Ghantous 2022). France
acquiesced and carved in a provision to allow existing extractors to extend their permits beyond
the 2040 deadline. More recently, Spain and the Netherlands have declared their intention to
withdraw from the ECT, citing “[the] waste [of] public money on compensating fossil fuel
companies for undertaking policies that help curb emissions.” (Albisu 2022). These attempts at
withdrawing from the ECT are somewhat in vain, as the treaty has a 10-year sunset clause if states
during which investors can continue to file arbitration claims.
In addition to policymakers, European courts have responded to the increasing friction
between international investment agreements and EU law. A landmark ruling from the Court of
Justice of the European Union found that intra-EU investor-state dispute settlement (ISDS) is
inconsistent with EU trade law. A Dutch bank operating in Slovakia, Achmea, claimed that the
Slovak Republic breached obligations under the Slovak-Dutch bilateral investment treaty. Achmea
subsequently tried to initiate arbitration under the dispute settlement mechanism of the treaty.
Slovakia claimed that the arbitration tribunal lacked jurisdiction because it is overridden by
separate dispute settlement protections established by European Union treaty law. The CJEU sided
with Slovakia, claiming that investor-state dispute settlement between two EU member states was
incompatible with basic EU law (Slovak Republic v. Achmea BV 2018). The Achmea ruling

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demonstrates the increasing attention that courts are paying to investment treaties and highlights
the growing incompatibility between the EU dispute settlement regime and other ISDS
agreements.
Having discussed the impact of ISDS on state behavior, I will now outline the impact of
ISDS on firm behavior. This is an enduring topic of debate in the dispute settlement literature.
Much of this discussion focuses on whether international investment agreements encourage firms
to invest more in countries that have signed investment treaties. The “grand bargain” of
international investment treaties implies that states give up a portion of their autonomy in settling
disputes when they sign trade agreements in order to attract foreign direct investors (Salacuse and
Sullivan 2005). Investors may not otherwise have the assurance of legal protection in host states
without these investment treaties, and therefore they may be less willing to invest in non-IIA
signatory countries.
Scholars have not been able to demonstrate conclusively that IIAs increase FDI inflow.
Tobin and Rose-Ackerman find that overall FDI flows to developing countries increase as the
number of investment treaties increases (2010). Yet they also find that as investment treaties
proliferate worldwide, the marginal effect of a country’s investment treaties may cause foreign
direct investment (FDI) to fall due to heightened competition for FDI from other countries.
However, a meta-analysis of 74 studies on this topic finds “robust evidence that the effect of
international investment agreements is so small as to be considered zero” (Brada et al. 2021).
Beyond whether investor-state dispute settlement treaties impact FDI flows, the dispute
settlement literature also discusses additional ways in which ISDS may impact firm behavior.
Konrad (2017) claims that ISDS leads to over-investment by multinational firms, resulting in a
shift in business strategy. Perhaps closer to my research are Schjelderup and Stähler (2021), who

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find that ISDS makes multinational firms more aggressive because they perceive that larger
investments would result in larger ISDS settlements.
My research sets itself apart from the existing literature by focusing on whether the legal
protection offered to multinational firms by investment treaties impacts the proclivity of these
multinational firms to support climate legislation. The following section outlines the methodology
I will use to investigate the impact of investor-state dispute agreements on firm behavior.
Chapter 4: Research Design
I will use a mixed-methods approach to test my three hypotheses. First, I will analyze
public statements by heavy-polluting firms on emerging climate regulations. I will then explore
this relationship further by analyzing case law from the Energy Charter Treaty and the Court of
Justice of the European Union (CJEU). The qualitative data I will initially explore through public
feedback will be particularly helpful in ascertaining whether investor-state dispute settlement
(ISDS) plays a role in corporate support of emerging climate regulation. If firms support climate
regulations but nevertheless warn legislators of the need to provide compensation for stranded
assets, I may be able to reject my two base hypotheses and accept my alternative hypotheses.
Conversely, if firms provide other reasons for supporting emerging climate regulations or do not
discuss the need for host states to provide compensation for their investment because of a stricter
regulatory environment, then I may have to reject my alternate hypotheses and accept my base
hypotheses, or accept one of them.
While analyzing public statements may be beneficial in exploring why firms support costly
climate regulations, it will provide little insight into how this dynamic has played out in actual
investor-state dispute settlement cases. Examining ECT and ICSID case law will fill this gap. My

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alternate hypothesis could be validated if I demonstrate that firms have engaged in ISDS arbitration
to resolve disputes caused by climate regulations. My hypothesis would be validated even further
if I find that these firms initially supported the climate regulations which they later cited as a form
of host state expropriation in ISDS arbitration proceedings.
In sum, this mixed methods approach will allow me to explore how firms articulate support
and opposition to climate regulations both at the legislative stage (through public statements), and
after these regulations have been enacted subsequently (through arbitration proceedings). I believe
this approach will lead to a more robust understanding of the relationship between climate
regulation and dispute settlement, as it will explore how these competing regimes interact in two
distinct political stages.
The remainder of this thesis will present the methodology, data, and results from these two
research approaches before drawing overall conclusions about how ISDS agreements impact
corporate support of climate regulations. In the following section, I will present findings from my
exploration of public statements published by heavy-polluting firms. I will then present my
analysis of relevant ECT and ICSID case law.
Chapter 5: Analyzing Lobbying Records Data
It is no surprise that firms often keep their corporate strategy a secret. From maximizing
profitability to maintaining a competitive advantage, there are myriad reasons why corporate
executives may choose to withhold internal strategy from the public. The Coca-Cola Company
famously keeps the formula for their iconic beverage locked inside a heavily fortified vault in their
Atlanta headquarters. In the energy sector, firms closely guard sensitive information about their
carbon emissions profiles, intellectual property, and long-term capital investments. And each year,

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firms are spending more and more to guard their secrets. Global spending on information security
and risk management exceeded $150 billion in 2021, up 7% from the previous year (Moore 2021).
In the hopes of keeping an upper hand over competitors, firms fork over millions to keep their
secrets confidential.
This veil of corporate secrecy makes studying corporate behavior difficult. How can an
outsider study the internal preferences and decision-making apparatus of a firm if firms remain so
secretive in their operations? Scholars have taken different approaches to analyze what little
publicly available information exists on internal firm strategy. For example, Hacker and Pierson
undertake archival research to study how firms reacted to emerging social security regulations in
their exploration of the American welfare state (2002). The scholars analyze correspondence sent
between corporate executives to ascertain whether they supported or opposed welfare legislation.
They also analyze minutes from meetings of the American Chamber of Commerce. Initially
confidential, these materials were only made public decades after their creation. While archival
research may be a bountiful source of internal corporate policy, I am unable to adapt this method
for my research as the regulations I wish to study are far too contemporary to find relevant
information about them in historical archives.
In contrast with the archival research method, Genovese and Tvinnereim use corporate
survey data in their study of business preferences for climate regulations (2018). They analyze a
private survey undertaken by a market research firm to measure how different European energy
companies reacted to emerging European cap-and-trade regulations. This model is closer to how I
wish to research my topic, as it allows scholars to analyze corporate support for climate regulations
as the legislation emerges in near-real time. However, the survey data Genovese and Tvinnereim

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analyzed is not publicly accessible, and neither is any other comprehensive survey polling energy
firms on their policy preferences.
While both archival and survey data have merits in examining firm behavior, I turn to
another major, publicly available source of business preferences in my research: lobbying data.
This trove of data has long been used by European policymakers to make informed decisions about
potential regulations. Lobbying data also makes for the ideal dataset to evaluate both whether
European firms support climate regulations, and if so, whether they support such regulations
because of ISDS agreements. This is true for several reasons. First, the European Commission
collects information on all lobbying undertaken by firms in a robust “transparency register”. This
dataset is a rich source of publicly available materials submitted to the EU by European businesses
on a wide range of legislative issues, including climate regulations. Second, the EU transparency
register is updated daily. This allows me to examine lobbying data on contemporary climate
legislation, including the European Climate Law I aim to focus on in my research. Finally,
lobbying data is arguably a more reliable bellwether of business preferences than survey data or
archival records. What business executives say to the government matters more than what they
would say on a survey or to a colleague, as the government is directly responsible for regulating
the firm. In sum, lobbying data from European polluters is the ideal data source to examine my
thesis because of its accessibility and real-world legislative impact on shaping EU policy.
Having introduced my intended data sources, I will now outline the methodology I used to
collect and analyze firm-level lobbying data.
Chapter 5.1: Methodology

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As noted in the previous section, I analyzed public feedback submitted to the European
Commission by major polluters to investigate whether ISDS agreements play a role in the support
of climate regulations. The Commission solicits feedback from the public on policies in
development through their online “Have your say” web portal, accessible via the EU Transparency
Register.1 On the “Have your say” portal, the Commission regularly runs campaigns to solicit
feedback on pending legislation. Any individual, business, NGO, or association can submit
feedback to the commission regardless of nationality. Since its inception in 2016, the Commission
has published 2,323 public feedback campaigns on the “Have your say” webpage. They segment
these campaigns into categories that represent all categories of EU legislation, from national
security to education. Two categories are particularly relevant to this study: energy and climate
action. The EU has published 92 energy campaigns and 84 climate action campaigns. Figure 1
presents the number of campaigns per year broken down by topic:
Figure 1. Count of EU public feedback campaigns by year and topic
1 URL: www.ec.europa.eu/info/law/better-regulation/have-your-say

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While the number of feedback campaigns fluctuates yearly, the above graph shows that the
Commission regularly solicits feedback from external stakeholders on both energy and climate
action legislation. These public opinion campaigns take one of two forms. Most frequently, the
Commission designs a structured questionnaire to ask respondents how the EU should craft future
legislation. This model is like that of a survey. The second, less-frequent model simply asks
respondents to submit unstructured typed feedback on a defined legislative proposal. Stakeholders
can also upload additional documents to their responses where they can explain their opinions in
further detail under both models.
The combined 176 campaigns that fall under these two categories generated tens of
thousands of responses from businesses, associations, and individuals. To analyze this lobbying
data effectively, I need to only select several campaigns to focus on. I conduct preliminary research
on these feedback campaigns for the remainder of this section to determine which: (1) allow
businesses to articulate why they support or oppose a given climate regulation such that I can
analyze the role of ISDS, if any, in this decision; and (2) offer enough relevant information to
develop a robust set of evidence on this topic.
First, I chose to only examine lobbying data submitted by firms under the first feedback
model. The structured responses to set questions made it easier to compare feedback across firms
and extract relevant insights. While the unstructured feedback model was also helpful in
ascertaining business preferences, the open-ended nature of responses collected under these
feedback campaigns made it difficult to compare responses across firms.
To further narrow down the list of public feedback campaigns, I ranked each campaign by
how many large European energy firms submitted feedback. The previous section notes that any
external stakeholder can submit feedback to these campaigns. However, this research is only

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focused on the policy preferences of large European energy firms: I am not interested in analyzing
feedback submitted by individuals, NGOs, or firms operating in non-related industries. Rather, I
am interested in analyzing public feedback submitted by firms, particularly energy firms engaged
in power generation and distribution, as carbon emissions generated in their operations constitute
the largest single source of pollution in Europe. Additionally, these firms stand to lose the most
from climate regulation, as they must bear the costs to transition from legacy power generation
infrastructure (e.g., coal and fossil fuels) to less-carbon-intense technologies (such as solar or wind
power). I also include energy industry associations in my analysis, as these organizations are
funded by energy firms, and represent the unified lobbying voice of this industry.
To this end, I created a list including the top twenty European energy companies by market
capitalization, the four largest global oil firms headquartered in Europe, and FuelsEurope, the
continent’s most active energy industry association.
2 These energy companies and “oil
supermajors” are among the largest polluters globally and the loudest voices in the fossil fuel
lobby, and collectively account for over 40% of European carbon emissions. Figure 2 summarizes
the group’s lobbying activity between 2016-2023, measured by the number of contributions each
firm made to European Commission public feedback campaigns:
Figure 2. Number of lobbying contributions by major European energy organizations
2 Seven global oil firms are designated as “oil supermajors”. I select four of these

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The above indicates that most large energy organizations in Europe frequently lobby the
EU on pending climate and energy legislation. These 25 firms submitted 748 responses to 132
separate EU feedback campaigns since 2016. Using this data, I constructed a list of which feedback
campaigns the 25 energy firms responded to most frequently. The table below presents these
findings. I only included the top five as I am solely interested in examining feedback campaigns
with the highest response rate from large European energy firms. In addition to the number of
major polluters who responded to each campaign, I also include information about how many other
firms responded, as well as the total number of stakeholders who responded (including individuals,
NGOs, and business associations) and additional information on the year and type of campaign.
These additional data points were beneficial in further narrowing down which feedback campaign
to analyze.
Table 1. EU public feedback campaigns ranked by how many major polluters responded
Campaign title Year Responses from top
25 energy firms3
Responses
from all firms
Total responses
(all stakeholders)
Feedback method
3 This number can exeed 25 because firms can submit multiple rounds of feedback to the same feedback campaign.
Additional submissions are double counted here.

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EU renewable
energy rules –
review
2020 27 232 39,046 Free response
Revision of EU
rules on Gas
2021 26 131 263 Questionnaire
2030 Climate
Target Plan
2020 24 202 4,032 Questionnaire
Updating the EU
Emissions
Trading System
2020 23 141 481 Free response
Revision of the
EU’s electricity
market design
2023 22 275 1,350 Questionnaire
Based on these results, I determined that the second and third campaigns, “Revision of EU rules
on Gas” and “2030 Climate Target Plan”, were the ideal datasets to test my hypotheses. I
eliminated the first and fourth campaigns because of their open-ended feedback method. As
discussed above, the questionnaire-style feedback mechanism the Commission uses in the second,
third, and fifth campaign prompts firms to respond to a set of questions regarding potential climate
regulations. This structured output allows for a more robust analysis of the data because the policy
preferences of each business can be explored in finer granularity.
I also eliminated the fifth campaign, “Revision of the EU’s electricity market design”.
Though the campaign also used a questionnaire model and had a high response rate from the 27
large polluters I focus on, the legislation is less relevant to my research. Rather than climate action,
the feedback campaign focuses on potential measures the EU can take to stabilize electricity
pricing during the coronavirus pandemic. The limited scope of this feedback campaign does not
fully capture Europe’s climate ambition.
Having eliminated three of the five shortlisted lobbying campaigns, I selected the
remaining two for further analysis. The lobbying data gathered from the “2030 Climate Target
Plan” and “Revision of EU Gas Rules” public feedback campaigns are the ideal candidate datasets

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to test my hypothesis for several reasons. First, the legislative differences between each
campaign’s proposed regulation allow me to test my hypothesis under two distinct legislative
scenarios. It is important to note that the European Climate Law is not just one piece of legislation,
but rather a general framework to guide all other climate legislation. Separate (albeit
interconnected) legislation defines how the specific steps member states should take to
decarbonize. The two campaigns I selected reflect each of these priorities. “2030 Climate Target
Plan” focuses on the EU’s broader ambitions to create a more sustainable climate and energy
policy by 2030, while the “Revision of EU Gas Rules” concentrates on the decarbonization of the
gas industry. This focus reflects a more specific and technical lever the EU hopes to pull to reach
their overall climate targets. Measuring how firms react to each type of proposed legislation will
lead to a more robust and nuanced understanding of when and why they support climate
regulations.
Given their focus on different legislative areas, the two feedback campaigns I selected also
attracted far different levels of feedback from different stakeholder groups. These differences in
respondent demographics further enable me to test my hypothesis under different scenarios. The
breakdown between respondent types is summarized in Figure 3 below:
Figure 3. Count of feedback submissions by respondent type

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Over 4,000 individuals submitted feedback for the “2030 Climate Target Plan” campaign.
81% of these respondents were EU citizens. Businesses and business associations only constituted
10% of the respondents, with the balance representing NGOs, academics, and non-EU citizens.
The “Revision of EU Gas Rules” campaign has practically the inverse demographics: businesses
and business associations represent 81% of the total respondents. Far fewer EU citizens submitted
feedback to this campaign: this group only represents 1.5% of total respondents. Also important
to highlight is the fact that there were far fewer overall responses to the gas plan campaign, with
only 263 feedback instances received across all respondent groups. These results are not surprising
given the technical, industry-focused nature of the gas campaign compared to the broader focus of
the 2030 Climate Law campaign.
Having discussed how I selected the appropriate lobbying data to analyze, I will now
present my findings from the two feedback campaigns.
Chapter 5.2 (a): Results from First Set of Lobbying Data
I will begin by presenting my findings from the “Revision of EU Gas Rules” dataset. As
discussed above, the European Commission launched this feedback campaign during a review of
EU gas regulations in March 2021 “to ensure that the gas market framework contributes to the
achievement of the more ambitious greenhouse gas emissions reduction targets set in the European
Green Deal and the 2030 Climate Target Plan…” (Commission 2). The objective of the campaign
was to collect feedback from relevant stakeholders on how gas regulations could be modified to
facilitate decarbonization while “ensuring an integrated, liquid and interoperable EU internal gas
market.” 214 individuals representing businesses and business organizations submitted feedback
to this campaign, responding to a 201-question-long questionnaire focused on how the EU should

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regulate the phase-out of high-carbon gas infrastructure in favor of investments in greener,
hydrogen-based natural gas sources.
EU Gas Policy in Context
To place the feedback generated from this campaign into the broader context of European
climate policy, decarbonizing the gas industry is a top priority for the EU. Most frequently used to
generate electricity, heat buildings, and operate industrial processes, natural gas is a significant
source of both energy and greenhouse gas (GHG) emissions in Europe. This fuel source gas
represents 25% of the EU’s total energy consumption and 30% of its overall GHG emissions.
Privately firms have invested billions of euros into Europe’s extensive network of pipelines,
terminals, power plants, and other gas-related energy infrastructure. Yet these investments might
soon become less relevant. The EU has released plans outlining the gradual replacement of natural
“fossil” gasses with natural “renewable” gasses such as hydrogen. This decarbonization strategy
jeopardizes incumbent energy companies that have already invested heavily in conventional
energy infrastructure. The “Revision of EU Gas Rules” feedback dataset I analyze below focuses
on how the EU should proceed with these proposed gas regulations.
To analyze this dataset, I first measured whether a particular energy company lobbied in
support or opposition to further climate-related regulations. I then attempted to capture why firms
chose to support the climate regulation, or why they chose to oppose it. In doing so, I was able to
test my hypothesis and examine whether firms may be supporting additional climate regulations
because it would allow them to seek compensation from stranded assets under ISDS arbitration.
Corporate Support of Additional Gas Regulations

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My first step was to determine whether energy firms supported further gas regulations. In
my literature review, I discuss the unexpected trend of European businesses supporting additional
EU climate regulations despite the financial burdens the regulations place on firms. I expect the
lobbying campaign data to be consistent with this trend. A preliminary exploration of the “Revision
of EU Gas Rules” feedback validates this assumption: 90% of energy firms and industry
associations support revising the EU’s legacy gas directives to “help achieve climate regulations”
while only 1% do not see the need to raise regulations. The remaining 9% of respondents left the
question blank. In any case, these findings make it clear that most energy firms who submitted
feedback support stricter climate regulations.
When asked how the EU should update gas regulation, energy firms also tend to converge
in perspective. Most firms agree that regulatory changes should focus on subsidizing the
deployment of greener energy sources as opposed to prohibiting the use of conventional fossil
fuels. Figure 4 summarizes these findings below.
Figure 4. Corporate Support of Climate Regulations

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The fact that energy firms prefer the EU to incentivize renewable energy sources instead of
disincentivizing conventional fossil fuel sources is significant. This finding implies that while
energy firms may support stricter climate regulations overall, they prefer regulations that allow
them to continue operating their existing conventional fuel facilities. In other words, they support
climate regulations that maximize their ability to generate revenue from investments they have
already made.
When asked to provide additional comments on what the main elements of the EU’s reform
of gas policies should be, many businesses use vague phrases and business jargon to express their
desire for the EU to compensate energy firms that are impaired by stricter regulations. For instance,
the German energy association BDEW supports updating EU gas legislation but underscores the
need for regulations to offer investors “a maximum of investment security.” 12 other firms also
cite investment security as a direct concern to new regulations.
Further, Greek energy conglomerate Mytilineos emphasizes the need for reforms to
“provide a clear set of incentives that will… facilitate the [transition to producing] renewable and
decarbonized gases.” Neither BDEW nor Mytilineos explains what they mean by investment
security or the financial incentives they hope to receive. However, this implicit posturing and focus
on maintaining the integrity of current investments suggests that firms hesitate to accept radical
changes to the regulatory framework without some form of compensation from EU member states.
This observed behavior seems to align with the “Stiglerian” perspective of corporate
political power at first glance: firms lobby for stricter gas regulations in hopes that new legislation
could provide them with further government subsidies to finance their energy transition. While the
policy feedback provided by firms does not directly reference the ECT or other investment
protection agreements, the focus on financial incentives implies that firms might leverage dispute

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settlement courts if new regulations do not address firms’ hopes for compensation. In the sections
below, I analyze the feedback campaign further to determine if ISDS agreements and international
investment treaties play a more direct role in corporate support of new gas regulations.
Risk of Stranded Assets
A major focus of the feedback campaign was firms’ perception of the likelihood that their
gas infrastructure will become stranded assets if stricter climate regulations were passed. Stranded
assets, or assets that diminish in economic value well ahead of their anticipated lifespan, are
particularly relevant to investor-state dispute settlement (Bos and Gupta 10215). Investors can only
sue host states under ISDS agreements under very limited circumstances. Unanticipated
government regulations imposed by the host state that strand foreign-owned infrastructure is one
generally accepted circumstance under which an investor could initiate dispute-settlement
proceedings.
Stranded assets were a common topic in the gas feedback campaign. While the campaign
does not directly refer to dispute settlement mechanisms, the focus on stranded assets implies the
enforceability of the ECT and other ISDS treaties. Figure 5 summarizes how firms responded when
asked about stranded assets:
Figure 5. Perceived risk of gas infrastructure becoming a stranded asset

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I calculated the above numbers by manually coding each firm’s written response to the
question. 60% of all energy firms and business associations believe that gas infrastructure is
subject to the risk of becoming stranded assets with new climate regulations. This ratio increases
when the feedback is filtered by respondent type: business associations are slightly more concerned
about stranded assets than their constituent businesses. However, Europe’s largest energy firms
are even more adamant about the risk of their assets becoming stranded – approximately 70% of
large energy firms reported being concerned about this risk. This behavior is expected, as the
largest energy firms have invested the most money in conventional gas infrastructure, and thus
stand to lose the most under new climate regulations.
Firms provide several proposals for how the EU should mitigate this stranded asset risk.
Representatives from Ørsted, Denmark’s largest energy provider, write that stranded assets are an
“unavoidable consequence of the [energy] transition,” and that conventional gas infrastructure
should be decommissioned “without detriment to the markets.” Major German energy producer
RWE suggests that the EU establish “decommissioning funds” to mitigate the cost of stranded

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assets for companies. And Vermilion Energy, a Canadian oil and gas producer operating in Europe,
believes that energy firms should be “directly compensated by Member States” to avoid excessive
transaction costs. These proposals emphasize the energy firms’ belief that the EU should provide
financial support to energy firms with impaired assets caused by new regulations.
Several firms, including BP, Shell, Enel, and Equinor, also suggest that the risk of stranded
assets can be mitigated with support to convert conventional gas infrastructure into infrastructure
that can process renewable hydrogen gas. Some firms even indicate that they do not believe their
infrastructure would be subjected to the risk of stranded assets because they already assume they
will be able to undertake the necessary conversions. For instance, French energy giant Engie sees
“a limited risk of stranded assets,” partially because, “gas infrastructure can be repurposed to
[hydrogen] which is more cost-effective than building new [hydrogen] pipelines.” Naturally,
ENGIE and others would prefer to continue operating their existing gas assets over investing
billions in new hydrogen infrastructure.
In a similar manner to the section above, firms hesitate to directly reference investor-state
dispute settlement in their answers on stranded assets. This means that no definitive conclusions
can be drawn in this section of the dataset about the relationship between ISDS and support of gas
regulations. However, firms may be implying the role of ISDS in their discussion of stranded
assets. Dispute settlement can only occur if assets become stranded because of actions taken by
the host state. It is also one of the only tools that investors have at their disposal when seeking
compensation for stranded assets. Most energy firms see stranded assets as a likely consequence
of new gas regulations in the above analysis. It is therefore not unreasonable to assume that firms
may see ISDS as a mechanism they can leverage to mitigate the risk of stranded assets caused by
a revision of the EU gas directive.

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Dispute Settlement
The previous two sections found that while energy firms typically support stricter gas
regulations, investor-state dispute settlement is not directly cited in discussions of stranded assets
or how the EU should design new regulations. However, several questions on the “Revision of EU
Gas Rules” dataset directly refer to dispute settlement. These questions are situated in a section on
how new regulations can ensure customer protection and empowerment. In one instance, the EU
asks energy firms which policies on customer protection and empowerment should be prioritized
in a revised EU gas framework. Firms were given 13 predefined answers to select, two of which
are relevant to dispute settlement:
• Provisions on single points of contact for consumers for information on rights, gas
consumption and costs, legislation and dispute settlement. (45 selections)
• Provisions on protection mechanisms to ensure efficient treatment of complaints through
transparent, simple and inexpensive procedures and out-of-court dispute settlements. (41
selections)
These answers were ranked sixth and seventh highest most frequently cited by energy firms. The
top five categories are listed below:
1. Provisions on accessibility to transparent information on share of renewable gas
consumed, gas quality, applicable prices and tariffs and on standard terms and conditions.
(65 selections)
2. Provisions on accessibility of consumption data. (59 selections)
3. Provisions related to switching suppliers (switching related fees, final closure account).
(52 selections)
4. Provisions on supply contract information and modification. (50 selections)

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5. Provisions on protection of energy-poor and vulnerable customers. (46 selections)
Despite the vague phrasing of the question and the predefined answers firms could select,
the dispute settlement mechanism that the European Commission references here do not refer to
investor-state dispute settlement. The Commission instead references consumer dispute settlement
mechanisms (CDS). Directive 2013/11 of the European Parliament recognizes that consumers
have the right to seek redress from businesses in an “easy, fast, and inexpensive way” through
CDS arbitration. This mechanism is virtually identical to ISDS, but with a focus on customers
instead of investors (Hodges 195). Under CDS proceedings, two parties agree to resolve their
differences out-of-court by submitting to a neutral third-party arbitrator.
These results indicate that energy firms value customer-facing alternative dispute
settlement procedures and support legislation that reinforces these mechanisms. Though the two
provisions on dispute settlement were not ranked highest, over 58% of firms who responded to
this section indicated that at least one of the dispute settlement provisions was relevant in their
answers. A subsequent set of questions yields even stronger results: over 71% of all firms
responded that dispute settlement in the energy sector is “moderately effective,” “effective,” or
“highly effective” in accessing speedy and effective complaint-handling procedures. When only
large energy firms and energy business organizations are included, this figure spikes to 91%.
While the nature and scope of consumer dispute settlement and investor-state dispute
settlement vary significantly, their basic mechanics are the same. The fact that firms consider CDS
an important aspect of future climate regulations could indicate their advocacy of dispute
settlement programs more broadly. Despite the distinct focuses of these two dispute settlement
mechanisms, energy firms likely support measures that allow them to seek redress from host states
if they support measures granting consumers the same legal protection. I concede that this

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statement is not strongly supported by direct evidence. However, it is nevertheless important to
report on these findings given the prominence that dispute settlement plays in the lobbying dataset
– albeit a different type of dispute settlement than I was expecting.
Having presented my analysis of the European Commission’s feedback campaign on the
revision of the gas directive, I will now summarize the main findings from this dataset concerning
my research question before moving on to my analysis of lobbying data submitted by energy firms
on the 2030 Climate Law. To summarize:
1. As expected, nearly all energy firms claim to support additional gas regulations to ensure
the EU stays on track to meet its overall emissions reduction targets.
2. However, energy firms clearly indicate that they prefer regulations that incentivize the
development of sustainable gas infrastructure over regulations that disincentive their ability
to continue operating conventional gas assets as usual.
3. Most energy firms are concerned about the risk of their investments becoming stranded
assets. Many indicate further that they hope to receive direct compensation from EU
member states if stranded assets do become a reality.
4. While firms do not cite investor-state dispute settlement directly, many cite the need to
include customer dispute settlement mechanisms in future amendments to the EU gas
framework. In the context of my previous findings, which suggest that energy firms accept
stricter gas regulations while simultaneously pushing for compensation, this support of
alternate dispute settlement could be a subtle indication that firms also support ISDS
arbitration and are considering leveraging this mechanism.
Chapter 5.2 (b): Results from Second Set of Lobbying Data
Having analyzed the gas regulation public lobbying campaign, I will now present findings
from the 2030 Climate Law lobbying campaign. This feedback campaign received 4,032 responses
from the public – over 15 times the number of responses received for the EU’s gas regulation

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campaign. However, I will only analyze feedback submitted by businesses and business
associations engaged in the energy sector to maintain consistency with my procedure in the
previous section. Only 77 such entities submitted feedback, a relatively smaller sample size than
the 214 energy firms and associations that submitted feedback to the gas regulation dataset.
Another main difference between the two lobbying campaigns is their legislative focus.
The dataset I analyze above is only focused on EU gas regulations. This dataset is centered on the
2030 Climate Law, a much broader regulatory framework that legislates across all sectors and
decarbonization pathways. The law proposed to increase the EU’s commitments to reduce
greenhouse gas emission reductions from 40% to at least 50% compared to 1990 levels. The
feedback campaign asks stakeholders to comment on whether they support this more ambitious
target, and if so, what the “necessary actions are in different sectors” would be to reach the target.
I expect that energy firms will respond differently than they did in the gas feedback campaign
given the more general nature of this feedback campaign.
To analyze the dataset and evaluate this assumption, I first explored whether energy firms
supported the more ambitious 2030 GHG reduction targets. For energy firms who lobbied in
support of these further climate regulations, I then explored what justification they provided in
their public statements. Exploring this subset of the data allowed me to ascertain the role that
investor-state dispute settlement courts play in corporate support of climate regulations.
Corporate Support of Stricter Climate Regulations
By and large, most energy firms (58%) support more ambitious climate regulations. In fact,
many energy firms even support stricter energy regulations than the EU proposes in the 2030
Climate Law: 43% support increasing the emission reduction target to 55% by 2030, above the

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50% reduction target that the EU suggests. Only 9% of firms believe that the target should remain
unchanged at 40%. Figure 6 summarizes these findings below, displayed as a percentage of total
responses broken down by the size of the firm.
Figure 6. Support of Further Climate Regulations
As the graph illustrates, very few firms believe that EU climate targets should remain
unchanged. There also seems to be a loose correlation between the size of the firm and the
proclivity to support stronger climate regulations. In firms of all sizes, at least half of respondents
indicate that their firms support at least a 50% reduction. Yet small firms have the highest
percentage of respondents supporting stricter reduction targets, at 72%. Large firms are the
strongest supporters when analyzed absolutely, with 24 firms supporting a sharper reduction.
The graph also shows that 25 energy firms did not respond when asked what they think the
EU’s 2030 climate targets should be, including high-profile companies such as BP, Siemens Gas
and Power, and Engie. This significantly skews the proportion of firms that support stronger

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climate regulations. With non-respondents omitted, over 86% of firms support stronger climate
regulations.
It is unclear why so many firms left this question blank on the feedback campaign. The
questionnaire itself is extensive: it asks over 130 questions. Perhaps some representatives simply
chose to answer the questions most relevant to their firms instead. Many firms also attach
additional documentation to their survey responses. In some cases, their answers to survey
questions are included in such documents. Alternatively, perhaps firms do not want to publicly
admit that they do not support more restrictive climate agreements. In any case, determining the
true cause why of why so many firms left this question blank is beyond the scope of this research
project.
Having validated that most firms support more restrictive climate regulations, I will now
analyze why firms support this legislation in greater detail.
Stated Reasons for Support of 2030 Climate Law
In the lobbying questionnaire, the EU asks firms to state which opportunities are “most
relevant for the undertaking of a higher climate ambition by 2030.” The purpose of this question
is to ascertain what the motivations are of a firm for supporting stricter climate regulations. To this
end, firms can select one or more options from a list of motivations the EU has predefined. Table
2 summarizes this list of motivations and the frequency of their selection by energy firms.
Table 2. Frequency of relevant opportunities for undertaking stricter emission targets
Opportunity Frequency
It will create new (green) jobs, including those that are difficult to outsource outside the EU 47
It will allow a more gradual pathway to reaching a climate neutral EU by 2050 46
It will help mitigate costs associated with climate change to society 45

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It will ensure a growing EU economy based on new production and consumption models 38
It will create new (green) jobs, including those that are difficult to outsource outside the EU 38
It will lower pollution, improve health… and thus increase the well-being of citizens. 36
It will give the EU industry a first-mover advantage on global markets 36
It will improve energy security and reduce the EU dependency on imported fossil fuels 28
It will be a chance to… [help save] the planet and… future generations 27
Other 26
As the table indicates, energy firms are primarily motivated to support stricter emissions
targets under the 2030 Climate Law for three reasons: they wish to create green jobs, increment
their reductions4
, and mitigate potential large-scale costs that climate change has on society, such
as extreme weather events. On the other end of the table, two outliers define less frequently cited
reasons why firms support climate. First, energy firms are less motivated by a desire to reduce the
EU’s dependency on fossil fuels. This finding is expected: many businesses who responded to this
feedback campaign continue to operate fossil fuel infrastructure, which relies on gas imported from
outside the EU. Finally, firms were also unmotivated by “saving the planet” and doing good for
future generations. Given its vague and idealistic image compared to the other choices, it is not
surprising that fewer energy firms selected this motivation.
Responses in the “other” category were less generalizable, though at least 12 firms cited
investments as a motivation for supporting stricter emissions targets. These firms perceive that
frequent changes to the regulatory framework deter investors from pledging further capital toward
energy projects. By setting the 2030 climate law in stone, capital owners may be motivated to
invest more heavily in energy firms. According to Austrian energy producer Verbund: “[The 2030
Climate Law] will confirm the EU's willingnessto reduce GHG emissions and will therefore create
4 The EU eventually hopes to achieve an 85%-90% reduction in emissions by 2050. Setting stricter interim targets
along the way helps firms achieve a gradual reduction in their absolute emissions.

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more long-term certainty for investments and strategic business decisions.” Statkrat, a major
Nordic hydropower operator, provides similar feedback: “Quick actions are important to avoid
sunk cost and lock in of investments, and create predictability for market participants to make
sustainable investments.” Finally, the European Engine Power Plants Association simply
comments, “set the framework and fire the signal to accelerate investment.” These firms may or
may not truly prefer stricter climate regulation. However, Verbund, Statkraft, and others accept
these regulations in hopes of attracting long-term capital from investors given the current volatility
in markets caused by regulatory uncertainty.
These findings largely eschew the possibility that firms support climate regulations because
they hope to receive compensation from host states in investor-state dispute settlement arbitration.
While some energy firms allude to the need to attract further capital, most energy firms cite other
reasons when articulating why they support climate regulations. Having said that, it is also
important to emphasize that firms were not able to freely write their opinion: while they could
select “other”, they had to choose from a list of prewritten motivations. None of the prewritten
options referred to ISDS or compensation directly, so it is understandable why few firms cited
these concerns in their statements.
Opposition to Stricter Climate Targets
In addition to collecting feedback on why energy firms support stricter emissions targets,
the European Commission also collected feedback on why firms may oppose stricter targets. They
use the same method to collect this data, giving firms options from a list of potential challenges in
undertaking a higher climate ambition. Table 3 presents this list along with the frequency each
challenge was cited by firms and business associations:

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Table 3. Frequency of relevant challenges for undertaking stricter emission targets
Challenge Frequency
It will represent a significant investment challenge for EU industry, services, transport and
energy sectors. The costs of investments are likely to be passed on to consumers via higher
prices or taxes.
48
It will likely lead to a structural shift and changing skill requirements in the economy, in
particular leading to a decline of sectors and jobs linked to fossil fuels extraction and carbonintensive manufacturing.
41
It may lead to societal inequalities due to an initially higher cost of green products, sustainable
food and transport and renewable energy, which may negatively impact the lower income
people/regions and contribute to energy poverty.
29
It will change the existing policy and will confront us with reduced lead-time for devising and
implementing additional measures and for the economic actors to adjust.
28
The simultaneous transition to climate neutral, circular and digital economy and society may
lead to significant labour reallocation across sectors, occupations and regions. Businesses,
especially SMEs could face challenges in re-skilling and ensuring sufficient workforce.
27
Other (please specify) 25
The EU, if acting alone, will lose out in terms of international competitiveness. 24
Even with a more ambitious 2030 target, it is difficult to ensure sufficient action to reduce
greenhouse gas emissions on the ground.
23
To summarize the table, firms see two major challenges in implementing more ambitious
emissions targets: the cost of investments and the decline of the conventional energy industry.
Even if they support stricter regulations overall, more than 63% of energy firms cite either one or
both categories when discussing what they see to be roadblocks to the legislation. The other six
categories received less frequent engagement: energy firms seem to be less interested in issues
related to social inequality, supply chain, labor reallocations, and international competitiveness.
Ironically, 21 of the firms indicated they are concerned about the significant labor reallocation that
would result from passing the legislation, but also said support the 2030 Climate Law because of
how many green jobs it would create in the previous question. Nevertheless, the significant drop-

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off in the number of times each of the bottom six categories was selected compared to the first two
indicates that firms are most concerned about the cost of investments and the decline of the
conventional energy industry.
Open-Ended Feedback
One shortcoming of using survey-based lobbying data is that the structure and content of
the questions have a major impact on how firms respond. To mitigate the implicit bias of how the
EU designed this survey, I also analyzed the section of the feedback questionnaire where firms
could submit additional information on topics not reflected in the other questions. This step is
important because the structure and focus of the questions naturally shape the nature of the
responses.
Only 49 firms out of 77 submitted additional feedback, and of these, only 5 (6.5%)
referenced their desire to receive support from the EU in financing their energy transition. Three
of these firms specifically cite the EU’s state aid policies in their response. These policies define
the limited set of circumstances under which a member state can provide direct subsidies to
individual companies. The other two firms, namely the Polish Electricity Association, and Veolia,
a major French energy MNC, cite the need for the EU to provide “compensatory measures” for
member states whose economies depend on coal and are unable to fully self-finance their energy
transition.
It is difficult to generalize the other tranche of open-ended feedback, but one common theme
was discussing what decarbonization categories the EU should leverage to reach the stricter 2030
pathway. Several energy firms advocated for the EU to strengthen a cap-and-trade system, while
others lobbied in support of designating the nuclear industry as a source of low-emissions energy

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to this end. In any case, while several firms mentioned compensation for stranded assets and state
aid, these mechanisms did not play a comprehensive role in most firms’ lobbying agenda.
Having presented my analysis of the 2030 Climate Law feedback campaign, I will now
summarize key findings from this section. I will subsequently discuss my overall conclusions from
this segment of the research project. To summarize my key findings from this feedback campaign:
1. Energy firms largely support the more restrictive carbon emissions targets proposed by the
2030 Climate Law.
2. Energy firms claim they support 2030 Climate Law for three main reasons: because the
new regulations will create an abundance of green jobs, allow for a more gradual long-term
transition pathway, and mitigate the cost of harmful climate change-induced events on
society.
3. Though most energy firms support the proposed regulation, many are concerned about the
capital investments required to implement it. Energy firms are also concerned about the
structural shift away from fossil fuel industries if the EU implements stricter climate
regulations.
4. Fewer energy firms claim that they desire to receive compensation for implementing the
2030 Climate Law than the Revision of Gas Directive, but several firms discuss this
preference in the “additional feedback” section of the questionnaire.
Chapter 5.3: Conclusion
When comparing the results of the Revision of Gas Directive lobbying data with the 2030
Climate Law data, a distinct trend emerges. Most energy firms lobbied in support of both climate
regulations. However, firms tended to be more focused on advocating for financial kickbacks from
the EU when discussing the Revision of Gas Directive regulations. When discussing the 2030
Climate Law, energy firms acknowledged that the legislation would result in significant costs for

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the industry – both in terms of new capital investment and retraining their workforce. Yet they fell
short of directly lobbying for compensation to assist them with these heightened costs. As
discussed above, the 2030 Climate Law does not include specific measures on how the EU should
decarbonize. The main goal of the legislation is rather to set binding, high-level climate targets
that member states should achieve. On the other hand, the Revision of Gas Directive is one policy
the EU is implementing to deliver on the lofty ambitions of the 2030 Climate Law. This regulation
specifically imposes a series of decarbonization mechanisms on the gas industry. It is therefore
notable that firms accept and support the vague 2030 Climate Law but suddenly begin to make
noise about how much everything is going to cost when the targeted Revision of Gas Directive
legislation comes along.
That polluters tend to support climate regulations in early stages but become skeptical once
regulations become more specific and complex is a finding consistent with other studies on
European corporate behavior. For instance, Genovese and Tvinnereim find that high-emission
firms supported the EU’s Emissions Trading System mechanism when it was in its early, lenient
stage, but tended to walk back this support after revisions made the system stronger and more
expensive for industry (Genovese and Tvinnereim 2018). Firms may support these climate
regulations when they are novel and under public scrutiny, waiting to voice their concerns about
the cost of compliance until a more concrete set of details emerge.
In evaluating which of my hypotheses is strongest supported by the lobbying data, firms
did not overtly mention investor-state dispute settlement in either campaign. However, the
tendency to support climate regulations from the beginning but only lobby for financial incentives
from the government once legislation becomes more defined exhibits signs of both Stiglerian and
Olsonian behavior. Energy firms understand that more sophisticated climate regulations are a

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political inevitability. Yet they also want to maximize any financial incentives they can get out of
these inevitable regulations. Therefore, energy firms support climate regulations wholeheartedly
as soon as the European Union proposes them to avoid the possibility of even stricter regulations
emerging in the future. This demonstrates the Olsonioan aspect of the scheme. Only after these
regulations have been approved and the discussion turns to how to best implement these
legislations do the Siglerian intentions of heavy-polluting firms emerge, as firms begin to lobby
for financial incentives from the government. Firms likely always understood how much the new
climate regulations would cost them. Rather, this tactical withholding of their preferred policy
outcome until after initial regulations have been implemented illuminates a strategy to pay as little
as possible for legislation they view as an inevitability. In other words, firms know that they will
eventually have to become more sustainable, but they pander for compensation to decarbonize at
a cheaper price.
While it is difficult to demonstrate given the limitations of the datasets examined above,
Europe’s robust framework of investor-state dispute settlement mechanisms likely helps enable
energy firms to overstate their initial support of climate regulations. These legal mechanisms act
as an insurance policy: executives know that whatever happens, they can always fall back on the
Energy Charter Treaty and other international investment agreements to shield them from any
liability imposed on them by overreaching host state actions. Though firms are often successful in
receiving large awards through ECT arbitration (in some cases receiving far more from host states
than what they initially invested in), dispute settlement is costly, risky, and time intensive. This
could explain why firms initially simply lobby for pending climate regulations to include
provisions granting them compensation from host states directly instead of jumping directly to
dispute settlement.

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Having summarized my major conclusions drawn from this section, I will now respond to
a potential counterargument of using lobbying data to evaluate my research question. Critics of
my argument may posit that if firms support climate regulation because they hope to seek
compensation for damages these regulations have caused, as I claim, they are likely to mask their
true intentions when providing feedback to policymakers. These critics would thus suggest that
the feedback I am examining through the European Commission is an unreliable indicator of true
corporate strategy. This critique essentially restates Hacker and Pierson’s “problem of
preferences”, which I outline in my literature review. I admit that firms may overstate their support
for climate legislation in these public feedback campaigns, and this data source has inherent
limitations. However, the EU’s public feedback mechanism is one of the few ways business
executives can express their preferences on pending legislation directly to the EU. Because of this,
the feedback firms provide in the two campaigns I selected is a valuable source of business opinion
and warrants detailed analysis.
Yet lobbying data is not the sole source of business opinion. In the following section, I will
turn to another primary source of corporate strategy: arbitral proceedings from investor-state
dispute settlement cases.
Chapter 6: Case Study
In February 2021, German energy firm and Europe’s largest carbon dioxide emitter RWE
announced that it was using the ECT to sue the Netherlands over recent Dutch legislation to phase
out the use of coal energy by 2030. Dutch policymakers implemented this legislation in hopes of
bringing the Netherlands in line with the EU’s broader 2030 climate reduction targets, but the law
had no mention of compensation for firms that would be impacted by its strict mandate. This was
unfortunate for RWE: the firm had opened a coal power plant in the Netherlands just six years

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prior. RWE invested over €3 billion in this project with the support of the Dutch government.
Following the Netherlands’ coal phase-out law, the value of its Eemshaven plant was reduced to
virtually zero overnight.
Immediately before filing the request for arbitration under the Energy Charter Treaty at
ICSID’s headquarters in Washington, D.C., RWE published an unexpected press release on its
website entitled “RWE expressly supports Dutch CO2 reduction target.” In the document, senior
executives explain that while RWE supports climate transition regulations, they cannot come at
the expense of energy industry:
RWE expressly supports the energy transition in the Netherlands and measures to reduce
CO2 emissions. We do not by any means question the coal phase-out decided by
parliament. However, we do not consider it right that the law does not provide
compensation for the resulting disruption to the company’s property. Therefore, we have
filed a request for arbitration against the Netherlands at the International Centre for
Settlement of Investment Disputes… RWE is consistently phasing out coal and at the same
time investing massively in renewables, energy storage and hydrogen...” (2021).
The statement is curious: RWE makes it clear that they have long supported European climate
ambitions. The firm goes so far as to declare that it supports the Dutch coal phase-out law.
However, RWE filed its request for arbitration with the Netherlands at ICSID less than two months
after the law RWE supposedly supports passed. Executives at the energy firm claim that the Dutch
regulations violate both the “fair and equitable treatment” and “most constant protection and
security” standards accorded in Article 10 of the Energy Charter Treaty. RWE claims these
violations of the ECT would result in €1.4 billion in damages to the firm’s coal infrastructure
(Braun 2021).

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To complement the analysis of lobbying data, this section uses an in-depth case study of
relevant ISDS proceedings to further examine the drivers of European corporate political power.
While the findings from the previous section helped determine that energy firms exhibit signs of
both Stiglerian and Olsonian behavior, the datasets did not clearly elucidate the role of
international investment agreements in supporting climate regulations. ISDS arbitration
proceedings are the ideal source of evidence for a more in-depth examination of this relationship.
Finally, comparing how firms respond to climate regulation at both the legislative and arbitration
stages leads to a more robust understanding of how corporate political power manifests over time
and in different legal regimes.
Chapter 6.1: Case Selection
The Energy Charter Treaty is the world’s most frequently cited international investment
agreement (Quirico 2021). Firms have filed at least 150 arbitration requests citing the ECT since
2001. Most of these cases resolve investment disputes: a host state illegally nationalizes an asset,
fails to honor promised subsidies, or discriminates against foreign investors. However, energy
firms have filed several ECT arbitration requests since 2012 after a host state passed costly climate
regulations. Table 4 summarizes these cases below:
Table 4. Energy Charter Treaty cases focused on objections to climate legislation
Case
No.
Year Claimant
(Nationality)
Respondent Subject of dispute Result
ARB
12/12
2012 Vattenfall AB
(Sweden)
Germany Mandatory phase-out of
nuclear power plants by
2022
€1.4 billion awarded to
claimant in settlement
ARB
21/4
2021 RWE AG
(Germany)
Netherlands Dutch phase-out of coal
power plants by 2030
Pending
ARB
21/22
2021 Uniper SE
(Germany)
Netherlands Dutch phase-out of coal
power plants by 2030
Claim withdrawn after
Uniper was nationalized
by Germany in 2022

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RWE v. Netherlands is particularly well suited to analyze my hypothesis. While the obvious
selection might be Vattenfall, this case focuses on Germany’s phase-out of nuclear power plants.
The German Bundestag passed these regulations in 2012 in the wake of Japan’s Fukushima
disaster and decades of anti-nuclear protests throughout Germany (Hake et al. 532). Germany’s
nuclear energy phase-out can therefore arguably be attributed to this mass social unrest – it is not
necessarily the result of a strategic repositioning of the nation’s long-term climate policy (CITE).
While Vattenfall was successful in receiving over €1.4 billion in compensation from Germany, the
scope of the German nuclear legislation far exceeds this research's narrow focus on climate
regulations.
The Uniper case is unsuitable for analysis because the firm withdrew its claims shortly
after its request for arbitration. The German federal government provided a bailed deal to Uniper
during Europe’s energy crisis in 2022, after the energy firm lost billions due to a decline in Russian
gas imports (Kantchev and Pancevski 2022). The German government included a provision in the
bailout insisting that Uniper withdraw its pending ISDS case with the Netherlands (Hodgson and
Miller 2022). Arbitrators had not reached conclusions on the case before Germany compelled
Uniper to withdraw the case as a condition of its bailout.
This leaves RWE as the most suitable case to examine in this section. Though the proceeds
remain pending, the case warrants analysis because of how closely RWE’s behavior matches my
intended research focus: the firm initially supported the Dutch coal phase-out, but then sued the
Netherlands because of the very legislation it initially supported. In many ways, I am more
interested in why RWE leveraged the ECT’s dispute settlement mechanism than I am in any
conclusions the ICSID arbitrators reach. This research focuses on the political preferences of

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energy firms – RWE made its political preference clear when it initiated ISDS proceedings against
the Netherlands.
The case study will proceed as follows. First, I will summarize the Dutch coal phase-out
regulation. I will then discuss RWEs long history of supporting climate initiatives since at least
1998, and even supported the Dutch climate law before it was passed. I will then discuss why RWE
initiatives dispute settlement proceedings before launching into a legal analysis of the case.
Chapter 6.2: Analysis of RWE vs. Netherlands
The Netherlands Coal Phase-Out Law
In May 2018, the Dutch government announced its plan to ban the use of coal in all
electricity-generating activities by 2030. The aptly titled “Law Prohibiting the use of Coal with
the Production of Electricity” laid out a gradual plan to accomplish this: coal plants built before
1990 must decommission by 2025 while newer plants had until 2030. It also stipulated that coal
plants can only operate at 35% capacity starting from 2021 (Grantham Institute 2). The Dutch
parliament adopted the measure in December 2019.
The Netherlands only had five coal-powered plants in operation when the law went into
effect in January 2020 (Putter 1). These plants accounted for roughly 9% of the Netherlands’ total
energy generation – not nearly as significant as the 40% generated from natural gas. However, the
carbon emissions stemming from coal power generation in the Netherlands are more than double
what is produced at gas power plants (Oosterhuis and de Vlam 2). The 9% of energy generated
from coal is also not easily offset by other power sources without the need for further investment
(International Energy Agency 2). Therefore, the coal phase-out constituted an important

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incremental step in the Netherlands delivering on its broader climate ambitions in line with the
2015 Paris Agreement and EU-wide targets.
Energy firms initially enthusiastically responded to the Netherlands’ proposed coal phaseout legislation. Vattenfall released a press release “welcoming” the legislation in May 2018. “After
a coal phase-out discussion of over two years, we are pleased that with this decision the
government has now provided clarity,” the Swedish energy company announced in a press release
(Kihlström 1). Following the introduction of the Netherlands’ proposed coal phase-out law,
Vattenfall executives announced their willingness to prematurely shut down their coal-fired power
plant Hemweg ten years ahead of its forecasted lifespan in 2024.
Though slightly more skeptical than Vattenfall, RWE also accepted the coal phase-out. The
legislation impacted their operations substantially: in addition to the Eemshaven plant RWE
opened in 2015, the firm also owns the older Amer 9 coal plant, which opened in 1993. RWE
acknowledged in their 2018 Annual Report that, “earnings could be curtailed significantly if [the
Netherlands] implements its [coal phase-out] plans,” but also shared plans to retrofit both of their
coal plants to support lower-emission biomass cofiring (“RWE Annual Report 2018” 20). RWE
also announced that it had received over €2.6 billion from the Netherlands in state aid to support
this biomass conversion over eight years.
In addition to the subsidies received for the biomass conversion project, RWE also lobbied
the Netherlands for additional compensation to account for the premature closure of its coal plants.
During the consultation phase of the legislation, RWE made this point clear in a piece of public
feedback submitted to the Dutch parliament: “The fact that the proposal does not include any
compensation scheme for damage resulting from the premature closure of the power plants does
not, of course, detract from the Dutch government's obligation to compensate for this (very

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substantial) damage.” (RWE 2018). RWE estimated that the premature closure of Eemshaven
would result in over €3 billion in losses from reduced revenue and a write-down of their capital
investments.
The Dutch government soon created a plan to compensate certain energy firms operating
coal power plants. In 2019, the Netherlands announced that they would pay Vattenfall €52 million
for the premature closure of its Hemweg power plant. (State Aid SA.54537 1). Vattenfall’s coal
plant is the oldest of the Netherlands’ five coal power plants and is nearly at the end of its
operational lifespan. However, there there was no mention of compensation for either of RWE’s
plants. Dutch legislators said that the RWE, “should not have expected that the government would
not impose measures to significantly reduce carbon emissions” given how developed the EU’s
climate strategy was by the time the Eemshaven plant opened in 2015. RWE protested further,
calling the Netherlands’ decision to withhold compensation “unfair” given their recent
announcement to compensate other energy firms with even older power plants. Yet Dutch
legislators held firm.
As it became clear to RWE that the Netherlands was not expected to provide any
compensation for the closure of the Eemshaven plant, their statements on the pending coal
legislation became more intense. RWE even went so far as to threaten legal measures in its 2019
Annual Report to investors (published in March 2020): “We believe that our ownership rights are
being violated by the Dutch coal phaseout due to the lack of compensation. Therefore, we are
considering taking legal action.” (RWE 2020). After another 11 months of failed consultations
with the Dutch government, RWE filed its request for arbitration at ICSID in February 2021. Thus
began the lengthy arbitration process.

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RWE’s Claims
In documents submitted to ICSID, lawyers RWE accused the Netherlands of breaching
several main clauses of the Energy Charter Treaty. First, they claim that the coal phase-out law
indirectly expropriates RWE assets without providing compensation. Their argument was
straightforward: the coal phase-out law prevented RWE from being able to operate its Eemshaven
power plant. No financial awards were made to compensate for the loss in revenue stemming from
the premature closure of the coal power plant. RWE lawyers argue that this violates Article 13 of
the ECT, which ensures that energy investments “shall not be nationalized, expropriated or
subjected to a measure or measures having effect equivalent to nationalization or expropriation”
unless a host state can demonstrate that the act is non-discriminatory, in the public interest, or is
accompanied by “the payment of prompt, adequate and effective compensation.” (ECT Art. 13).
RWE further claimed that the Netherlands violated the ECT’s umbrella clause, which
relates to the obligation of treaty member states to “observe any obligations it has entered with an
Investor or an Investment.” (ECT Art. 10(1)). RWE received multiple permits from the Dutch
government in the decade preceding the commissioning of the Eemshaven coal plant. Notably, the
Netherlands affirmed in 2008 that it would not “compulsorily determine the number or type of
(coal) power stations” and that RWE could operate coal power plants for an “indefinite” amount
of time. RWE argued that the coal phase-out law breaches both agreements.
Finally, using similar arguments to their first two claims, RWE also accused the
Netherlands of breaching both the “fair and equitable treatment” standard and the “most constant
protection and security” standard of the ECT. These treaty stipulations offer additional protection
to foreign investors. They argue that the coal phase-out law is unfair because only foreign firms
operate coal power plants in the Netherlands. Therefore, singling out the coal industry constitutes

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a “discriminatory” act, despite the ECT obliging the Netherlands to offer “physical… [and] legal
protection and security to investments of investor.” (ECT Art. 10(1)(3)).
The Netherlands’ Response
The Dutch government took a multi-layered strategy in defending itself against RWE’s
litigation, both responding to the merits of RWE’s claims and attacking the jurisdiction of the
tribunal itself. First, it filed an “anti-arbitration” injunction in a German court in hopes of blocking
the ICSID case from proceeding (Putter 1). The Netherlands’ central goal with this procedure was
to attack the jurisdiction of the ICSID arbitral tribunal. The Dutch government argued the Energy
Charter Treaty is incompatible with other obligations the Netherlands has with EU law related to
investment protection. Specifically, Dutch government lawyers cited a landmark 2018 ruling from
the Court of Justice of the European Union (CJEU) in Slovakia vs. Achmea. The CJEU ruled in
this case that ISDS clauses within intra-EU bilateral trade agreements were “incompatible” with
EU law. While lawyers for the Dutch government acknowledged that the Netherlands remains a
signatory to the ECT, they cite the Achmea ruling to argue that the ICSID tribunal has no standing
to resolve the trade dispute. They argue that EU law has primacy to resolve the dispute at hand,
and that EU law is both deeper and more relevant than the Energy Charter Treaty. Because of the
incompatibility between these two legal regimes, the Netherlands argued that ICSID tribunal lacks
jurisdiction and cannot proceed.
The Netherlands’ secondary strategy in responding to RWE’s claims was to advance an
argument on the merits of the case. However, Dutch lawyers have not yet been able to advance
this argument: as of March 2023, arbitrators have yet to determine whether the tribunal has
jurisdiction over the dispute. However, should the case proceed, one notable argument that Dutch

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lawyers would likely make on merits is that RWE already foresaw a devaluation of its coal
infrastructure before the climate regulations were enacted (Putter 2022). Dutch think tank SOMO
reported in 2021 that RWE had already been devaluing its Eemshaven power plant in financial
statements it reported to investors in 2019 – before the coal phase-out law was passed (SOMO
2021). Using this information, Dutch lawyers could argue that the decreased value of RWE’s coal
power plants did not stem from the coal phase-out regulations, but from other circumstances.
Chapter 6.3: Case Study Conclusions
It is unclear which side will prevail in the case of RWE v. the Netherlands, or even whether
the Netherlands will be able to proceed with this potential set of arguments on the merits of the
case. ICSID arbitrators suspended arbitral proceedings in September 2022 while injunction
proceedings at the German court were underway. However, Dutch Minister for Climate and
Energy Policy Rob Jetten announced in October 2022 that the Netherlands will withdraw from the
ECT. While this decision will not change the direction of the RWE case (the ECT has a 20-year
sunset clause during which investors may continue to file ISDS cases even if a state withdraws),
it indicates that the Netherlands perceives the treaty as an increasingly significant impediment to
achieving national climate goals.
Regardless of how the arbitration proceedings will end, several important conclusions can
be drawn from this case study. My hypothesis predicts that firms overstate their support for climate
regulations because they perceive them to be a political inevitability and they believe they can
recuperate transition costs through dispute settlement arbitration if passed. If countries did not
impose such strict climate legislation, firms would have no legal complaints on which to base ISDS

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arbitration cases and would therefore potentially be obligated to fully fund their transition costs
themselves.
The RWE case demonstrates one instance of this phenomenon occurring. First, RWE
issued a statement asserting their “express support for Dutch CO2 reductions targets.” Soon
thereafter, the firm initiated ISDS proceedings against the Netherlands under the Energy Charter
Treaty. RWE likely would not have closed their coal power plants ahead of schedule on their own
volition. But they nevertheless supported the coal phase-out regulations because they saw no other
viable political option: the law was supported by the Dutch parliament, the federal government,
the EU, and even fellow coal industry participant Vattenfall. Moreover, I discuss above that the
firms already began to write down the value of their Dutch coal power plants on financial
statements even before the Netherlands passed the coal law. This further emphasizes that RWE
perceived coal power to not be viable in the long-term. By feigning support for the coal phase-out
legislation, RWE acknowledged the importance of climate regulations in general while
simultaneously being able to add “gunpowder” to an ISDS case against the Netherlands if the
measures passed.
However, correlation does not necessarily mean causation. While the RWE case shows that
firms may initially support a climate regulation and then initiate ISDS against a host state because
of the new regulation, the former is not necessarily predicated on the latter. In other words, the
case cannot prove with certainty that firms support climate regulations with the intention of
seeking ISDS compensation if the regulations are passed. In fact, I demonstrate above that RWE
repeatedly called for compensation from the Netherlands for the coal phase-out before the firm
submitted initiated proceedings at ICISD. RWE’s initial response to the regulations was negative.
It was no surprise that RWE later filed a request for arbitration under the ECT: they threatened to

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do so in the months leading up to the decision. By receiving compensation through typical state
aid pathways instead of ISDS, RWE would have undoubtedly saved time, money, and the intense
public scrutiny arising from public arbitration proceedings.
Another limitation of this case study is that it examines domestic climate regulation, not
the EU-wide climate regulations I discuss in my previous sections. I concede that my decision to
focus on national climate regulation in the case study results in a different level of analysis than
my previous chapter on lobbying data. However, I believe this decision was appropriate for several
reasons. First, domestic climate regulation among EU member states is highly influenced by EUlevel climate targets and policies. The EU has “consistently taken steps in obliging its member
states to take appropriate steps” toward transforming their economies to support a low-carbon
future (Kyrk and Guzowska 2021). In fact, the Dutch coal phase-out regulation explicitly
references EU-level climate obligations in its text, and policymakers repeatedly cited the need for
the Netherlands to “catch up” with EU climate policies as the legislation was under review. The
relationship between EU-level climate regulations and those of member states is closely correlated,
which helps validates my choice to focus on the Dutch coal phase-out law in my case study.
Second, and more practically, my decision to focus on domestic legislation in my case
study is valid because firms are only able to initiate ISDS proceedings against national
governments. Firms cannot typically sue the EU or supranational bodies in dispute settlement
arbitration. Therefore, because the topic of this research focuses so closely on dispute settlement,
it is necessary to also analyze domestic climate legislation, even though I am mainly analyzing
firm behavior and climate regulation on the EU level.
One final limitation of analyzing RWE v. Netherlands was focusing on a case that remains
pending. I concede that selecting a concluded case might have resulted in stronger data and more

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robust findings. However, I discuss above that only three relevant ECT cases exist in which a firm
sues over novel climate regulations. Only one of those cases is concluded: Vattenfall v. Germany.
I assert that the RWE case is more appropriate for analysis even though arbitrators have not reached
a verdict because the subject matter of the dispute (Netherlands’ coal phase-out law) is more
closely related to the climate regulations I focus on in my chapter on lobbying data. The German
regulations relevant to the Vattenfall case focus on nuclear power plants – much “cleaner” than
coal as a fuel source in terms of carbon emissions.
Further, while it may have been helpful to incorporate the results of arbitration proceedings
into my discussion of the case, I am less interested in outcomes. My research focuses on
understanding why firms support climate regulations and the role that ISDS plays in this process.
Therefore, the two key metrics relevant to my research are whether firms support climate
regulations and whether they filed requests for dispute settlement arbitration. The outcomes from
such ISDS arbitration are less relevant to my research.
Despite these limitations, the RWE vs. Netherlands case study demonstrates one instance
of an energy firm suing a host state for damages caused by climate regulations it had previously
supported. This outcome validates my alternative hypothesis. Future studies on corporate political
power should continue to examine the case as it develops to ascertain the impact that firm-level
opposition to climate policy has on climate legislation.
Chapter 7: Conclusion
Using insights from international trade law, I have attempted to pinpoint why large
European energy firms support climate regulations despite their significant cost. My research
evaluates three hypotheses to explain this counterintuitive behavior: the Stiglerian “economic

Blum 63
opportunism” perspective, the Olsonian “strategic accommodation” theory, and an alternative
hypothesis focused on international investment law and ISDS.
Results from my two research chapters generated mixed results. First, the findings from
my analysis of lobbying data indicate that while firms may not explicitly mention dispute
settlement, questions of compensation and financial incentive are almost always top-of-mind when
European energy firms support EU climate regulations. Most European energy firms I analyze in
this chapter support climate regulations while also simultaneously lobbying governments for
compensation to reduce the cost of these regulations. This finding is consistent with the Olsonian
theory of strategic accommodation. Radical changes to European climate regulation are likely not
energy firms’ first policy preference. However, my findings suggest these firms nevertheless
support new regulations because it allows them to advocate for compensation and other cost-saving
measures for legislation they view as inevitable. Notably, I find that energy firms are more likely
to lobby for compensation when commenting on highly technical, industry-specific climate
regulations. When responding to broader legislation proposals that target the public to a larger
degree, the same energy firms are more reticent in calling for compensation.
Readers may note that this focus on financial compensation seems like it aligns with the
Stiglerian economic opportunism theory. They would be partially correct. I concede that the
constant appeals to compensation that firms make when lobbying governments do seem like they
anticipate receiving financial rewards from the compensation. However, neither of the two
legislative proposals I analyze in my analysis of lobbying records directly offers compensation to
firms. What I am trying to say is that firms do not support climate legislation because they stand
to gain money if the laws are passed, but rather that firms support climate legislation because doing
so allows them to leverage their political influence to negotiate better terms for themselves. In this

Blum 64
sense, the Olsonian “strategic accommodation” perspective offers a more nuanced and accurate
explanation in analyzing this unexpected behavior than Stigler’s theory.
My alternate hypothesis – that ISDS agreements explain why polluters support climate
resolutions – was not supported by the evidence I presented in my analysis of lobbying data.
However, I found evidence that supports this hypothesis in my case study on RWE vs. Netherlands.
This case demonstrates a situation when ISDS was a decisive factor in the firm’s decision to
support climate regulation. Initially, RWE’s behavior in responding to the Netherlands’ proposed
coal phase-out regulation aligned with the “strategic accommodation” theory: they appealed to the
Dutch government for compensation while simultaneously acknowledging the long-term need to
eventually divest from coal power plants. However, as it became clear that the Netherlands had no
intention on compensating RWE, the firm issued a statement affirming its support of Dutch climate
law while simultaneously announcing its intention to initiate ISDS proceedings under the ECT.
This behavior validates my alternate hypothesis: in some cases, ISDS and international investment
law plays an important role in how energy firms respond to proposed climate legislation.
Though I find support for my alternate ISDS hypothesis in the RWE case study, I concede
that the distinctions between this hypothesis and the Olsonian and Stiglerian theories are blurred.
I present my alternate ISDS hypothesis as a potential third theory in understanding why firms may
support climate regulations. However, my findings suggest that the role of ISDS in corporate
political behavior is limited. While ISDS may not have the empirical significance to stand on its
own as an independent theory, it sheds new light on both existing theories. Indeed, the literature
on corporate political power has so far avoided discussing the impact of ISDS agreements on why
firms support regulations. My research fills this gap. I find that in some situations, ISDS
agreements can be a significant factor in shaping how energy firms express their support for

Blum 65
emerging climate regulations. Ultimately, while both the “economic opportunism” and “strategic
accommodation” theories are helpful in determining the drivers of corporate regulatory support,
my research demonstrates that incorporating the impact of ISDS into these discussions yields a
richer and fuller set of findings.
In sum, ISDS agreements are an important source of corporate political power that can
influence firm behavior under both Olsonian and Stigelrian climate regulations. While ISDS may
not impact the political preferences of all firms, this relationship is significant even in low numbers
– a single dispute settlement award can cost states billions of dollars. States understand this risk:
five European nations have withdrawn or announced their intent to withdraw from the Energy
Charter Treaty. Until then, understanding this driver of corporate political power presents an
important takeaway for legislating climate action. My findings on ISDS shed light on a major
obstacle in states achieving their climate goals.

Blum 66
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Appendix
Figure 7. Further analysis of lobbying data
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
All energy firms Only large energy
firms
All energy firms Only large energy
firms
All energy firms Only large energy
firms
Establishing conditions to exercise the
right of withdrawal?
Accessing to speedy and effective
complaint handling procedures?
Providing available out-of-court
procedures?
Are dispute settlement mechanisms are effective in...
Highly effective Moderately effective Effective Somewhat ineffective Not effective No opinion

Abstract (if available)

Abstract In 2020, the European oil refining industry publicly supported the European Climate Law, which aimed to achieve net zero greenhouse gas emissions by 2050. This behavior seems counterintuitive as the new climate regulations would heavily affect the industry's daily operations and bottom line. The existing literature on corporate political power offers two explanations for why firms support costly regulations: either firms fear that even harsher regulations will arise if they withhold support, or they anticipate direct or hidden financial gains. However, little attention has been given to international investment treaties – legal documents that grant foreign investors the right to sue host states if their investments are impaired. Drawing on an analysis of corporate lobbying data and case law from investor-state dispute settlement (ISDS) arbitration, this thesis argues that firms feign support for climate regulations because they believe they can recuperate damages caused by the regulations by suing host states under international treaties. Specifically, it examines the proceedings of the Energy Charter Treaty (ECT), the most active and developed investment agreement in the energy sector. It finds that while firms may not explicitly cite investment treaties in public statements, these agreements allow energy firms to overstate their support for climate regulations. A tacit understanding of this issue has emerged between firms and regulators following several high-profile ECT arbitration cases. Findings from this research could be applied by states to understand the potential roadblocks that exist in legislating climate action.

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Creator Blum, Benjamin (author)

Core Title From polluters to protectors: when energy firms support climate regulations

School College of Letters, Arts and Sciences

Degree Bachelor of Arts

Degree Program International Relations

Degree Conferral Date 2023-05

Publisher Los Angeles, California (original), University of Southern California (original), University of Southern California. Libraries (digital)

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