Climate Change Clauses in Investor–State Mining Contracts

Domestic laws and regulations are the ideal legal instrument to regulate the mining sector’s contribution to climate change mitigation and adaptation. Even so, as a stop-gap-measure in the absence of a robust legal and regulatory framework, governments may consider updating model mining development agreements (MMDAs) or negotiating climate­-related contractual provisions.

The CCSI paper Five Years After the Adoption of the Paris Agreement, Are Climate Change Considerations Reflected in Mining Contracts?, published in July 2021, explores whether governments are using, and how they can use, investor–state mining contracts to advance climate goals. We synthesize our findings and recommendations for six categories of provisions: 

  • Integrating renewable energy into mining products
  • Reducing deforestation
  • Requiring a climate risk assessment and community vulnerability assessment
  • Regulating water use
  • Requiring tailings dam design justifications
  • Integrating climate risks into closure plans

The companion piece Allocation of Climate-Related Risks in Investor–State Mining Contracts, published in June 2022 expands the analysis, by examining risk allocation provisions that are commonly used or could be used in mining contracts and discussing how they should be drafted to clearly allocate the risks and impacts associated with the ever-worsening effects of climate change between states and mining companies. The paper covers the following risk allocation clauses (in addition to a note on the risks of investor–state dispute settlement, or ISDS):

  • Force majeure
  • Liability and compensation or indemnification for climate-related risks
  • Insurance requirements
  • Stabilization or change-in-law clauses
  • Periodic review
  • Warranties and representations
  • Step-in rights
  • Termination

Both papers examine investor–state mining contracts obtained from ResourceContracts.org, the largest online repository of publicly available oil, gas, and mining contracts from around the world, developed by CCSI in partnership with the World Bank and the Natural Resource Governance Institute (NRGI).

The June 2022 blog Integrating Climate Change, Decarbonization, and Just Transition Considerations into Extractive Contracts, also available in a three-page PDF, summarizes the takeaways from the two papers above and includes links to other relevant publications.

Based on its extensive research, CCSI provides technical assistance and capacity building for governments of resource-rich countries on how to embed climate-related clauses into investor–state mining contracts.

 

 

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