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Climate action needs investment governance, not investment protection and arbitration – Phys.org

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Existing investment treaties do not and cannot advance climate goals. There is a fundamental misalignment between the existing international investment regime—including its centerpiece: investor–state arbitration—and the actions needed to meet the objectives of the international climate regime and avoid catastrophic climate change. For international investment law to support climate goals, we need a wholly new regime for investment governance, not investment protection and arbitration.

Investment is crucial to achieving climate mitigation and adaptation goals. We need substantially more in zero-carbon sectors, such as renewable power generation (solar, wind, hydropower, and geothermal), batteries and other energy storage technologies, green hydrogen, electric transportation, and energy efficiency, while phasing out investment in fossil fuels and other high-emission economic activities. The 2022 Intergovernmental Panel on Climate Change (IPCC) report on Impacts, Adaptation and Vulnerability also stresses that investments in mitigation must be coupled with investment in adaptation and climate-resilient infrastructure to help billions in areas of growing climate risk.

International investment law should accelerate climate-friendly, sustainable investment and the phase-out of climate-unfriendly investment. Existing investment treaties and investor–state dispute settlement (ISDS) fail to do either. They were not designed to advance those goals, but to protect economic interests of foreign investors and their investments, regardless of their climate friendliness.

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The clashing climate change and investment regimes: Back to the 1990s

The 2015 Paris Agreement’s umbrella treaty, the United Nations Framework Convention on Climate Change (UNFCCC), was adopted in 1992 and entered into force in 1994—a landmark moment that emphasized the need for long-term planning for a climate-friendly future. Its ultimate objective is to stabilize greenhouse gas concentrations in the atmosphere “at a level that would prevent dangerous anthropogenic interference with the climate system.”

In a 1994 report—months before the first Conference of the Parties (COP) to the UNFCCC—the IPCC indicated that “the main anthropogenic sources of [carbon dioxide] are the burning of fossil fuels [among others].” The same report also estimated a carbon budget, which indicated the amount of greenhouse gases we could, starting in 1994, still emit while stabilizing concentrations at safe levels. The report stressed that “stabilization [of greenhouse gas concentrations] is only possible if emissions are […] reduced well below 1990 levels.”

The —including states as well as investors—has been on notice since the 1990s: to prevent disastrous anthropogenic interference with the climate system, in the atmosphere must be stabilized. To do that, emissions must be reduced well below 1990 levels, which requires transitioning away from fossil energy. Yet emissions have since increased substantially as states and investors have been too slow in adjusting course.

If fossil energy companies have any “legitimate expectation” since the 1990s, it is that states would take steps to phase out their sector. In the International Energy Agency’s (IEA) pathway to net-zero by 2050, “there is no need for investment in new fossil fuel supply”: “Beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our pathway, and no new coal mines or mine extensions are required.” In the next three decades, trillions of dollars in fossil fuel assets need to be stranded to achieve , including reserves and projects that fossil and infrastructure companies have continued recklessly to develop.

States need to push more forcefully for the transition away from fossil energy in both the climate and investment regimes. It took 26 COPs for the 2021 Glasgow Climate Pact to call upon states, for the first time, to “[accelerate] efforts towards the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies.” The climate regime still needs to toughen up language on the need to accelerate the phase-out of all fossil fuel development.

Similarly, states need to stop maintaining an investment protection regime that—among other flaws—does not even try to regulate investment or to phase out high-emission investments. Since 1994, states have concluded roughly 2000 investment treaties that are still in force. The Energy Charter Treaty (ECT) is an important one from a climate action perspective—but not the only one. All those treaties protect coal, oil, gas, and other high-emission investments that emit well beyond the carbon budget. Even if investment treaties may not have been intentionally designed to thwart climate goals, the fact that they have that detrimental effect can no longer be ignored.

Investment treaties and arbitration make climate action costly and chill climate regulation

Investment treaties and arbitration make it more costly for states to take legitimate climate action, including the phase-out of fossil fuels and the regulation of high-emitting sectors. Under the existing investment regime, companies are allowed to claim monetary compensation from states for policy measures that negatively affect the companies’ interests.

For instance, when a government takes measures to restrict oil and gas exploration or exploitation, stop the expansion of pipelines and other fossil fuel infrastructure, or phase out coal-fired power generation, investment treaties and arbitration allow investors to seek compensation for those measures. In other words, investment treaties and arbitration protect and reward investments that interfere dangerously with the climate system.

Law firms are making sure that companies are aware of this opportunistic use of investment arbitration against the public interest. As one firm advises: “Climate change litigation […] is an opportunity […] for companies exposed to certain climate-related government measures to vindicate their rights. Companies in industries most affected by states’ obligations (e.g., fossil fuels, mining, etc.) should audit their corporate structure and change it, if needed, to ensure they are protected by an investment treaty. […] It is […] important to assess which treaty would best protect the company from any adverse climate-related government measures.”

Even the possibility of climate-related investment arbitration discourages policy action. Denmark, France, and New Zealand have openly admitted that they pushed back their deadlines to phase out oil and gas exploration or exploitation because of investment treaties and the fear of arbitration claims. There may well be other countries that are delaying action or lowering ambition because of the investment regime, but just not admitting it openly.

Fossil companies already account for almost one-fifth of investment arbitrations, and they won about three of every four cases initiated. Without fundamental reform, the investment regime will continue to allow fossil companies to chill climate regulation and to get states (and ultimately taxpayers) to cover losses that result from corporate recklessness.

Climate-focused reform won’t do

Various reform proposals aim to make investment treaties and arbitration more climate friendly, by training arbitrators in climate science; changing how damages are calculated to avoid shifting the risk and cost of decarbonization to states; integrating climate carve-outs, exceptions, or right-to-regulate clauses into treaties; or allowing climate-related counterclaims by states. Proponents of these reforms argue that they are steps in the right direction, even if they are piecemeal approaches.

The international community should not settle for sub-optimal approaches, for three main reasons.

First, climate blindness is far from being the sole issue with the investment regime. Investment protection and arbitration constrain states’ duty and right to regulate not only in the climate policy space, but also in public health, access to public goods, protection of human rights and the environment, and the pursuit of sustainable development. States and other stakeholders have been increasingly critical of broadly worded provisions—including the promises of fair and equitable treatment (FET) and the protection of legitimate expectations, as well as protections against discrimination and indirect expropriation—that work against public-interest regulation. The member states of Working Group III of the United Nations Commission on International Trade Law (UNCITRAL) have identified various problematic aspects of investment arbitration.

Second, there is inconclusive evidence to support that investment treaties and arbitration can perform on their key expected benefits. Existing treaties neither increase the quantity or quality of foreign direct investment (FDI), depoliticize conflicts between home and host countries of investment, promote good governance reform, nor strengthen the rule of law. If a regime cannot achieve its main purposes, and its costs substantially outweigh its uncertain benefits, why put so much effort into fixing it?

Third, it is irresponsible vis-à-vis present and future generations to keep in place a knowingly flawed regime, with uncertain benefits and great known costs, in hopes that tweaking it at the margins will cause the necessary fundamental change. Given the global climate emergency, too much is at stake.

Overhauling investment protection and arbitration in favor of investment governance

The optimal, most effective solution is to build a new international investment regime to help achieve global goals, advancing the types of investments that are desirable, supporting the phase-out of climate-wrecking investments, and preserving and strengthening states’ right and duty to take climate action and other measures in the public interest. States should move away from the existing regime, which puts profit above people and planet, by terminating or withdrawing from existing investment protection treaties and arbitration and not negotiating new ones that do not align with their climate and sustainable development objectives.

From a clean slate, the international community can design a regime that shapes and governs investment to achieve climate goals and the Sustainable Development Goals (SDGs). Investment governance treaties could contain guidance and commitments on governing investment in line with the SDGs, including climate action; establish cooperation mechanisms to address challenges in the governance of international investment, including with respect to intellectual property, technology transfer, and data; and support domestic administrative and judicial systems to facilitate investment governance and enforcement. Importantly, the regime could foster international cooperation, research and development (R&D), and financing mechanisms for climate-aligned investments, including in energy efficiency, renewable electricity, green hydrogen, batteries, recycling, and climate-resilient infrastructure. It could also affirm states’ binding commitments to phase out investment protections and incentives for and other high-emission investments; and create climate justice and just transition mechanisms to protect the rights and interests of those affected by zero-carbon investments.


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This story is republished courtesy of Earth Institute, Columbia University http://blogs.ei.columbia.edu.

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Climate action needs investment governance, not investment protection and arbitration (2022, March 18)
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Amazon completes $4B Anthropic investment to advance generative AI – About Amazon

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Amazon concludes $4 billion investment in Anthropic.

Customers of all sizes and industries are using Claude on Amazon Bedrock to reimagine user experiences, reinvent their businesses, and accelerate their generative AI journeys.

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The work Amazon and Anthropic are doing together to bring the most advanced generative artificial intelligence (generative AI) technologies to customers worldwide is only beginning. As part of a strategic collaborative agreement, we and Anthropic announced that Anthropic is using Amazon Web Services (AWS) as its primary cloud provider for mission critical workloads, including safety research and future foundation model development. Anthropic will use AWS Trainium and Inferentia chips to build, train, and deploy its future models and has made a long-term commitment to provide AWS customers around the world with access to future generations of its foundation models on Amazon Bedrock, AWS’s fully managed service that provides secure, easy access to the industry’s widest choice of high-performing, fully managed foundation models (FMs), along with the most compelling set of features (including best-in-class retrieval augmented generation, guardrails, model evaluation, and AI-powered agents) that help customers build highly-capable, cost-effective, low latency generative AI applications.

Earlier this month, we announced access to the most powerful Anthropic AI models on Amazon Bedrock. The Claude 3 family of models demonstrate advanced intelligence, near-human levels of responsiveness, improved steerability and accuracy, and new vision capabilities. Industry benchmarks show that Claude 3 Opus, the most intelligent of the model family, has set a new standard, outperforming other models available today—including OpenAI’s GPT-4—in the areas of reasoning, math, and coding.

“We have a notable history with Anthropic, together helping organizations of all sizes around the world to deploy advanced generative artificial intelligence applications across their organizations,” said Dr. Swami Sivasubramanian, vice president of Data and AI at AWS. “Anthropic’s visionary work with generative AI, most recently the introduction of its state-of-the art Claude 3 family of models, combined with Amazon’s best-in-class infrastructure like AWS Tranium and managed services like Amazon Bedrock further unlocks exciting opportunities for customers to quickly, securely, and responsibly innovate with generative AI. Generative AI is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next.”

Global organizations of all sizes, across virtually every industry, are already using Amazon Bedrock to build their generative AI applications with Anthropic’s Claude AI. They include ADP, Amdocs, Bridgewater Associates, Broadridge, CelcomDigi, Clariant, Cloudera, Dana-Farber Cancer Institute, Degas Ltd., Delta Air Lines, Druva, Enverus, Genesys, Genomics England, GoDaddy, Happy Fox, Intuit, KT, LivTech, Lonely Planet, LexisNexis Legal & Professional, M1 Finance, Netsmart, Nexxiot, Parsyl, Perplexity AI, Pfizer, the PGA TOUR, Proto Hologram, Ricoh USA, Rocket Companies, and Siemens.

To further help speed the adoption of advanced generative AI technologies, AWS, Anthropic, and Accenture recently announced that they are coming together to help organizations—especially those in highly-regulated industries including healthcare, public sector, banking, and insurance—responsibly adopt and scale generative AI solutions. Through this collaboration, organizations will gain access to best-in-class models from Anthropic, a broad set of capabilities only available on Amazon Bedrock, and industry expertise from Accenture, Anthropic, and AWS to help them build and scale generative AI applications that are customized for their specific use cases.

Deepening our commitment to advancing generative AI, today we have an update on the announcement we made to invest up to $4 billion in Anthropic for a minority ownership position in the company. Last September, we made an initial investment of $1.25 billion. Today, we made our additional $2.75 billion investment, bringing our total investment in Anthropic to $4 billion. To learn more about the broader strategic collaboration between Amazon and Anthropic, of which this investment is one part, check out the stories below:

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Amazon doubles down on Anthropic, completing its planned $4B investment – TechCrunch

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Amazon invested a further $2.75 billion in growing AI power Anthropic on Wednesday, following through on the option it left open last September. The $1.25 billion it invested at the time must be producing results, or perhaps they’ve realized that there are no other horses available to back.

The September deal put $1.25 billion into the company in exchange for a minority stake, and certain tit-for-tat agreements like Anthropic continuing to use AWS for its extensive computation needs.

Amazon reportedly had until the end of the first quarter to decide whether to increase its investment to a maximum of $4 billion, and here we are just before the deadline, and the company has decided to throw in the maximum amount.

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Anthropic’s AI models are one of very few that compete at the highest levels of capability (however you define it) yet are available at scale for enterprises to deploy internally or in user-facing applications. OpenAI’s GPT series and Google’s Gemini are the others up there, but upstarts like Mistral may soon threaten that fragile triumvirate.

Lacking the capability to develop adequate models on their own for whatever reason, companies like Amazon and Microsoft have had to act vicariously through others, primarily OpenAI and Anthropic. The two have reaped immense benefits by allying with one or the other of these moneyed rivals, and as yet have not seen many downsides.

What we can take from Amazon’s decision to invest the maximum after (one must assume) getting a pretty close look at how they make the AI sausage over there is, really, pretty scant.

It makes too much strategic sense for these companies, which possess enormous war chests saved up for exactly this purpose (outspending rivals when they can’t out-innovate them), to pour cash into the AI sector. Right now the AI world is a bit like a roulette table, with OpenAI and Anthropic representing black and red. No one really knows where the ball will land, least of all the companies that couldn’t predict or create this technology themselves. But if your bitter enemy puts their chips down on red, it only makes sense for you to bet on black.

Especially if you can bet on black at a discount — which is what Amazon got here, since it could invest at Anthropic’s September valuation, which is most certainly lower than it is today.

That said, if things were looking sketchy over there — the way they must have looked at Inflection before Microsoft pounced on it — Amazon could have backed out or just invested less than the full supplemental $2.75 billion. But that might have sent a confusing signal no one wants getting out there, least of all existing multibillion-dollar investors.

We know Anthropic has a plan, and this year we’ll find out what Amazon, Apple, Microsoft and other multinational interests think they can do to monetize this supposedly revolutionary technology.

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Canada to tighten foreign investment rules for AI, other sectors

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Canada will require foreign companies to warn the government in advance before making investments or acquisitions in artificial intelligence, quantum computing and space technology, Bloomberg News reported on Tuesday, citing an interview with Innovation Minister Francois-Philippe Champagne.

The move will aid the government in conducting a national-security review before transactions get too far advanced and would-be investors may be restricted in their access to target companies’ user data or other property while the inquiry is taking place, the report said.


Click to play video: 'Canadians concerned about risk of AI generated fraud'
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Canadians concerned about risk of AI generated fraud

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The tougher rules will also apply to investments in critical minerals and potentially other sectors, Champagne said to Bloomberg.

Earlier this month, Champagne said Canada will crack down on foreign investment in the interactive digital media sector to stop state-sponsored actors from endangering national security.

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