Energy Transition Risks in Contracts for the Extractive Industries

Risks have commonly been assessed and managed through the law. But with the climate change and energy access challenges, the view now is there is a new type of risk, and these can be referred to as ‘justice’ risks. These have been created by all the various factors affecting society today and have now transcended directly into the energy sector whereby they can be classed as key energy transition risks. In the past there has been a broad definition of risk in energy referred to as ‘commercial risk’. This broad and clear definition is one that states commercial risk covers all risk except political risk, with political risk commonly understood as expropriation, adverse government action (including change in law or tax regime), and political or civil disturbance. This chapter therefore analyses the various energy transition risks, and spotlights how these could be mitigated, taking into cognizance the energy justice and just transition principles.