The protection of property rights under the European Convention on Human Rights and the promotion of low-carbon investments

Investors in alternative modes of electricity production that build their business cases on support schemes face the risk that states modify the financial incentives provided by these schemes once investments are made and costs are sunk. Similarly, operators of high-efficiency production installations could, in the context of liberalized electricity markets, be confronted with state interference with the electricity price formation mechanism that could prevent them from recovering the higher investment costs of their state-of-the-art equipment. Investors’ perception that states could act opportunistically by reneging on commitments that constitute the financial basis of their low-carbon investments will generate emission reductions at a higher cost than in a guaranteed stable regulatory environment. This paper analyses the extent to which the right to property in the European Convention on Human Rights could offer adequate protection against such potential opportunistic interference of states. It argues that, although the ECHR does not provide investors with absolute guarantees against such interference, it creates essential procedural safeguards that prevent states from imposing most costs of emission reductions on private investors. These safeguards, in turn, contribute to the increased efficiency of climate change policies.