Decarbonizing North America: A Review of the Balancing Problem in Expropriation Claims

The global drive for decarbonization has led to significant regulatory reforms, especially in North America, where new measures target emissions from the energy sector. This article examines how such regulations-particularly the 2024 U.S. EPA decarbonization rule and Canada’s coal phaseout regulations 2012 (as amended) -interact with international investment protections, focusing on the expropriation standard. But the balancing of states’ regulatory interests with investment protection is a precarious balance that requires transparency in regulation-making, collaboration between host states and investors, and regard for investment-backed expectations to prevent indirect expropriation of investments. On June 11, 2025, this precarious balance became tested when the US EPA announced its plans to repeal its decarbonization regulations barely a year after they came into effect, raising questions on the implications of this regulatory whiplash on the viability of expropriation claims, on investment-back expectations. Decarbonization disputes highlight the tension between states’ regulatory authority and investors’ treaty-based protections. This article argues that the balance between these competing interests begins at the treaty level, where language and structure shape how tribunals interpret regulatory actions. By analyzing US EPA decarbonization regulations and Canada’s coal-phaseout regulations, key treaties like the USMCA and CETA, alongside recent arbitral awards and court decisions, the article explores how investment protections are being recalibrated in light of public interest objectives in expropriation claims by courts and tribunals in North America. To this end, the article considers to what extent does the “proposed repeal” and indeed an actual repeal of the US EPA decarbonization regulations undermine the viability of expropriation claims. Also, litigation is discussed as an alternative to ISDS in balancing these competing interests. The article argues that there is a trend toward preserving regulatory space in modern treaties, awards, and decisions due to the requirement to prove substantial deprivation in expropriation claims. As tribunals defer more to state measures, investors may face heightened risks in energy-related projects. Ultimately, the article concludes that while environmental protection is vital, the evolving treaty landscape places greater emphasis on regulatory freedom, often at the expense of investment certainty. This shift has significant implications for foreign investors navigating climate-driven regulatory transitions in North America.