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Trade Rules Undermine Transition to Clean Energy

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Responsible trade can help countries develop sustainably, foster a healthy environment, and expand the use of clean energy. But when used irresponsibly, trade and investment agreements do more harm than good. They can encourage production of goods in places with weak environmental laws and policies, increase carbon pollution by expanding long-distance trade, and accelerate pressure on scarce natural resources. And, by offering corporations broad rights to challenge environmental and other public interest policies, trade and investment rules can undermine one of the most urgent challenges of our time: the transition to a clean energy future.

Japan's Fukushima Daiichi nuclear disaster of 2011 demonstrated the human and environmental costs of nuclear energy. With tens of thousands of individuals internally displaced, the contamination of land and water, and the dangerous health impacts associated with the nuclear meltdown, the disaster in Japan led a number of governments to turn their backs on nuclear and change course.

Germany, for example, initiated a phase-out of nuclear power after the disaster in Japan and committed to transitioning to cleaner, greener, renewable energy sources. Reasonable, right?

Not according to Vattenfall, the Swedish energy firm that is suing the government of Germany because it initiated the nuclear energy phase-out. Vattenfall claims that Germany's decision to phase-out nuclear energy production violates its right as an investor in nuclear energy in Germany by diminishing its profits. While the case filing has not been publicly released, reports show that the corporation is seeking U.S. $4.6 billion in damages from Germany.

Vattenfall is using the Energy Charter Treaty, a trade and investment treaty for the energy sector signed by 51 states, including the European Union, to bring its lawsuit to a private tribunal at the World Bank in Washington, D.C.

Clearly, this case is an example of how trade and investment rules can threaten the environment and the health of communities.

As another example, just a couple of months ago, an American oil and gas firm notified Canada of its intent to launch a similarly outlandish case at the same World Bank trade tribunal used by Vattenfall. The Delaware-incorporated Lone Pine Resources noted its intent to sue Canada for $250 million under the North American Free Trade Agreement (NAFTA) over Quebec's moratorium on fracking -- the violent process of extracting natural gas from shale rock buried deep underground. The people and government of Quebec merely wanted to have time to study the environmental impacts associated with fracking.

The firm is using the rules in NAFTA -- rules similar to those that Vattenfall likely used under the Energy Charter Treaty against Germany -- that give corporations the right to sue a government over nearly any law or policy that the corporation argues is hurting its profit. In the Quebec case, the firm is willing to threaten safe drinking water and the health of communities in Canada by opening the dangerous floodgates of fracking.

Governments must be able to put in place clean energy and other policies that protect communities and the environment without trade rules getting in the way. Yet, the United States is currently negotiating a new trade pact with 10 other countries, the Trans-Pacific Partnership Agreement, which would virtually replicate the same flawed rules used in the cases described above and leave the door wide open to attacks like the ones on Canada's fracking moratorium and Germany's nuclear phase-out.

With climate disruption reaching its tipping point, the transition to a clean energy economy has never been more critical. In order for our trade system to support this transition, our elected officials must stop drafting trade pacts that empower the fossil fuel industry at the expense of communities and the environment. We can and must change course.

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