Biden`s Energy and Climate Plans - A Legal Appraisal

President-elect Joe Biden pursued three main energy and climate missions during his campaign. First, he promised to re-join the Paris Agreement on `the first day in office´, second, he wants to embark on an ambitious phase-out programme for fossil fuels and third he promised to re-join the Iran Nuclear Deal. But is all of that possible from a legal point of view? This blogpost looks at the three cornerstones of his energy and climate strategy and assesses what the world can expect in the coming four years. 

First Issue: Paris Climate Agreement

On 1 June 2017 President Donald Trump announced that the US is withdrawing from the Paris Climate Agreement. According to the then White House, the accord would undermine US competitiveness and jobs, as discussed earlier on this blog.

According to article 28 (1) of the Paris Agreement, parties to the Agreement may withdraw `at any time after three years from the date on which this Agreement has entered into force`. Since the Paris Agreement entered into force on 4 November 2016, a withdrawal via the route of article 28 (1) would be possible at 4 November 2019 and President Trump, indeed, proceeded that way. According to article 28 (2) Paris Agreement the withdrawal would become effective `one year from the date of receipt by the Depositary of the notification of withdrawal, or on such later date as may be specified in the notification of withdrawal`. The earliest possible departure for the US from the Paris Agreement would, accordingly, be 4 November 2020. And indeed, last week the application of the Paris Agreement to the USA ended officially.

President-elect Joe Biden claimed that he would re-join the Paris Agreement `on the first day in office.´ On 5 November 2020 Biden announced that `Today, the Trump Administration officially left the Paris Climate Agreement. And in exactly 77 days, a Biden Administration will rejoin it.´. This would mean on the first day of his presidentship. Article 20 of the Paris Agreement does not provide any hurdles for Parties that left the Agreement to re-join. Thus, accession and re-joining is possible, subject to the normal conditions of international treaties.

Second Issue: Fossil Fuels & Fracking

During the final debate between Donald Trump and Joe Biden, Biden reiterated his pledge to phase out subsidies for fossil fuels and said that the US should be moving over time towards net zero greenhouse gas emissions. However, he also made clear that fossil fuels would not be eliminated until at least 2050 in the US. Vice-President-elect Kamala Harris said during a speech in Georgia on 23 October 2020: `Let us be clear about this. Joe Biden is not going to ban fracking. He is going to deal with the oil subsidies.´ The campaign clarified that the aim would be to end fracking leases on federal land, but not to ban the controversial fracking technology that helped to switch the USA from a net-importer to a net-exporter of gas.

From a legal point of view phasing out subsidies for fossil fuels is a possibility, but this, of course, can only apply to those subsdiese handed out at the federal level. For some of these subsidies to be ended a decision by the Senate or the House of Representatives might be required. But there are also certain direct and indirect fossil fuel subsidies handed out by particular states, such as Texas for example. The President does not have the power to end those subsidies. Energy policy is in many cases dominated by the states, not the federal government in the USA. The same applies to fracking. Certain states imposed a moratorium or even a ban on fracking, while others remain supportive of the controversial technology  However, what lies within the realms of possibility for president-elect Biden is to halt fracking leases on federal land. While legally possible it is questionable to which extent such action, as a stand-alone measure, could have a significant impact.

Third Issue: Iran Nuclear Deal

The Trump Administration also withdrew from the Joint Comprehensive Plan of Action (JCPOA), also known as the "Iran nuclear deal" or the "Iran deal", on 8 May 2018. This caused a number of issues particularly because other big signatories like the EU tried to save and maintain the treaty. It is in existence until now, but is not working well at the moment. Joe Biden announced  during his campaign that he would re-join the Iran nuclear deal, but Biden set an important  condition for re-joining: he said `if Iran returns to strict compliance with the nuclear deal, the United States would rejoin the agreement(...)´ and then wants to embark in follow-on negotiations.

Iran, however, is not necessary likely to engage in that type of action. Besides the restoration of nuclear-related sanctions, the US also upheld and/restored other non-nuclear sanctions on Iran under the Iran Threat Reduction and Syria Human Rights Act (ITRSHA), which are relevant for energy. The effect of this `web´of sanctions: more than 700 individuals, entities, vessels and aircraft are on the sanctions list, including major banks, oil exporters and shipping companies. 

From a legal point of view these sanctions are problematic, as these are so called sanctions with extraterritorial effect. They are prohibiting, for instance, participation in a joint venture established for development of petroleum resources outside of Iran, if Iran is a substantial partner/investor in the joint venture . Moreover, they are prohibiting to own, operate, control or insure a vessel that on (or after) 90 days from the ITRSHA’s enactment was used to transport crude oil from Iran to another country or that is used in a manner that conceals the Iranian origin of crude oil or refined petroleum products on vessel.

Sanctions with extraterritorial effect are controversial under international law. Their idea is as follows: the subsidiaries of home state companies (in this case US companies) that are legally incorporated as lone-standing companies in other countries, so called `host states´ (for instance companies in the EU that are subsidiaries of US `mother companies´). The government of the home country (US) is now trying to direct the actions and the behaviour (do not deal with Iran) of those subsidiaries in other countries, although they are not incorporated in the US and are, thus, not subject to US jurisdiction. This is done via a legal trick: the US assumes jurisdiction under certain particular principles of international law, mostly the nationality principle (people working at these companies might be US citizens), the universality principle (used usually for international crimes that can be punished by any state) and the passive personality principle (jurisdiction over foreigners who commit severe crimes against nationals of the home state outside of home state territory). The aim is to create a level playing field by denying non-US companies opportunities that are made available by US sanctions. 

The problem is that US-controlled entities that are managed and incorporated in Europe have to act in contradiction to laws of host state (European countries) by not honouring their contractual obligations with Iranian companies. In an effort to counter the US sanctions the EU deploys a systemn of so called `blocking statutes´. They can take various forms. On 31 January 2019 Germany, France and the UK (on behalf of all others) set up a special purpose vehicle called `Instrument In Support Of Trade Exchanges (INSTEX)´. The aim was to facilitate EU-Iran trade under nuclear deal after US departure. INSTEX works like a barter arrangement operating outside of the US-dominated global financial system, not using the US-Dollar. Initially the system should only apply to non-sanctioned goods, not oil, but this was supposed to change in the future. The system never really took off, but simultaneously the IRan government weakened, as protests across the country erupted in the last months.

Joe Biden now would need to re-negotiate a new and better treaty within the period of just a few months, because Iran has its own election coming up in 2021 and hardliners in Iran are poised to win these elctions. The irony of the issue is that the reform.oriented current Iran government has been severly damaged by the failure of the Irna nuclear deal to improve the lives of ordinary Iranian citizens, inter alia due to the fact that when Trump left the deal he imposed maximum economic pressures via sanctions, as discussed above. So it will be crucial, for the possibility of implementation of Biden`s policy, that time for the Iran Nuclear Deal might be up already.