How EU Clean Trade and Investment Partnerships Can Foster Sustainable Investment Governance
In this week's EU–South Africa summit, the European Commission is launching talks with South Africa on the first-ever Clean Trade and Investment Partnership (CTIP). Designing CTIPs to foster sustainable investment governance is time-sensitive, and even more important as Commission President von der Leyen wants them to be “a template for striking other bespoke partnerships [...], as part of a comprehensive offering to partner countries.” CTIPs should go beyond political promises and contain binding and tangible commitments from the EU to support partner countries in phasing out fossil fuels, fostering sustainable investments, and ensuring just transitions.
So far, little is publicly known about CTIPs. The Commission expects them to “help secure supply of raw materials, clean energy, and clean tech” while “scaling up European sustainable investments that are beneficial to partner countries,” and supporting their decarbonization efforts. Trade Commissioner Šefčovič is tasked with using CTIPs to strengthen EU competitiveness, diversify its supply chains, and boost the economies of its partners.
The Commission’s Clean Industrial Deal indicates that the EU will maintain and continue to negotiate free trade agreements (FTAs) to improve access to partners’ markets. CTIPs would complement FTAs “through a faster, more flexible, and more targeted approach, tailored to the concrete business interests of the EU and its partners.” They would bring together three components: Global Gateway investments, regulatory cooperation, and targeted trade and investment rules, combined into “a single whole-of-government partnership.”
Balancing divergent interests and clarifying the design of CTIPs
The EU’s commitment to combine public and private finance through Global Gateway investments can help partners access finance for sustainable investments. In addition, regulatory cooperation through CTIPs can help partners strengthen policy and regulations on clean tech, electrification, circularity, decarbonization, and carbon pricing.
But how will CTIPs reconcile tensions between EU objectives and partners’ interests? Competitiveness and security of supply for the EU may not deliver the type of economic boost that partner countries seek. Instead, these EU goals may lock resource-rich developing and emerging economies into the role of exporters of raw materials for advanced processing and manufacturing in the EU, working against partners’ ambition for economic linkages and diversification, value addition, and industrial development.
Another key design question remains unanswered: will CTIPs be legally binding? A geopolitically motivated “faster approach” may lead the EU to strive to swiftly conclude soft-law instruments, like its raw materials partnerships, which neither create rights or obligations under international or domestic law nor commit the EU to financial obligations. But creating “targeted trade and investment rules,” as the EU intends, would require binding international legal instruments, which may take longer to negotiate. If time is of the essence, it may be best for the EU to consider leaving “targeted rules” aside and focusing CTIPs on Global Gateway investments, regulatory cooperation, and other forms of support to partner countries.
The Commission’s Clean Industrial Deal contains only a few paragraphs on CTIPs, and no Commission Communication specifically focused on CTIPs exists or is in the Commission's programme. A Communication on CTIPs would be a useful instrument to help reconcile conflicting goals and clarify design questions. It could set the Commission's level of ambition and guidelines for CTIP talks. It could also contain commitments to participatory processes involving parliaments, industry, and civil society and to the publication of proposals and negotiating texts, thus living up to the EU’s “commitment to being the world’s most transparent public institution in the field of trade policy.”
Suggestions for sustainable investment governance under CTIPs
When negotiating the investment pillar of CTIPs, the EU could consider the following mechanisms and commitments:
1. Establishing joint committees with its partners could foster long-term bilateral cooperation on investment in specific sectors, as well as regulatory cooperation in relevant policy areas. The cooperation and institutional provisions (Chapter VII) of the EU Sustainable Investment Facilitation Agreement (SIFA) with Angola can provide a starting point. The EU and each partner country should jointly identify Paris-aligned, sustainable investment sectors for cooperation—including critical minerals, renewables, energy storage, electromobility, and digital infrastructure—and explicitly exclude coal, oil, and gas. Joint committees, which could also be established through non-binding CTIPs, would help identify Global Gateway projects.
2. Agreeing to specific EU commitments on capacity building and technical and financial assistance to partner countries, in line with mutually agreed priorities, is key to any meaningful partnership for sustainable development. Partner countries face pervasive challenges in scaling sustainable investment, including obtaining access to affordable finance for development, establishing appropriate regulatory and policy tools, building institutional capacity, and strengthening domestic administrative and judicial systems. As the EU seeks access to partners’ markets and resources, it may need to put more euros on the table—beyond project-level Global Gateway investments—to help partners overcome broader development challenges. Improved development outcomes in partner countries would also benefit EU investors operating there.
3. Creating binding obligations on investors and enforcement mechanisms could help ensure that EU investors abroad meet the highest social and environmental standards under EU law, the law of the partner state, and international agreements. If concluded as binding instruments, CTIPs could make any incentives or other benefits for foreign investors—whether under CTIPs or other legal instruments—conditional on legal compliance. They could also remove benefits for fossil fuel investors to help achieve EU climate goals and commitments under the Paris Agreement. The Commission wants CTIP investment rules to “contribute to a conducive environment for clean investment and business opportunities for EU companies to operate on an equal footing in foreign markets.” Ensuring EU investors’ compliance with the law is a precondition to that equal footing.
Terminating investment treaties
Fundamentally, the EU risks undermining a clean investment agenda if CTIPs merely add another layer atop trade and investment treaties with investor-state dispute settlement (ISDS) mechanisms without addressing existing dysfunctions in investment governance. There is no conclusive empirical evidence that investment treaties and arbitration support sustainable investment, while their high costs on public finances and constraints on policy space are extensively documented. As these treaties protect all types of foreign investment—including fossil fuels—it is difficult to justify maintaining them while seeking parallel clean ones. Shouldn’t all EU agreements be clean?
The EU already withdrew from the Energy Charter Treaty, and its Member States terminated intra-EU bilateral investment treaties (BITs)—agreements that were not in line with EU law and climate goals. To make CTIPs genuinely clean and partnership-like, the EU and its Member States should take the next step: terminate the more than 1,000 BITs between EU Member States and extra-EU partners and remove investment protection provisions from EU FTAs.
If grounded in binding EU commitments to support partner countries with the resources they need to meet their development priorities and combined with the overhaul of past agreements, CTIPs can offer an opportunity to align investment governance with EU goals.
About the authors
Martin Dietrich Brauch is a Lead Researcher at the Columbia Center on Sustainable Investment. Stefan Mayr is an Associate Professor at the Institute for Law and Governance at WU Vienna University of Economics and Business. Carl Frederick Luthin is an EU policy analyst. The views expressed are the authors’.