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SEI brief

Tackling fossil fuel subsidies through trade agreements

Reforming fossil fuel subsidies is attracting attention as a way to meet the objectives for the Paris Agreement and the 2030 Agenda for Sustainable Development.

Published on 24 October 2017

Verkuijl, C., van Asselt, H., Moerenhout, T., Casier, L. and Wooder, P. (2017). Tackling fossil fuel subsidies through trade agreements. Climate Strategies, October 2017.

Oil rigg
Edward Stojakovic via Flickr

Though the World Trade Organization (WTO) is well suited to take the fossil fuel subsidy reform agenda forward, its involvement on this issue has been limited to date. This policy brief summarizes the key findings of a larger report on fossil fuel subsidies and trade agreements, to be published later this year.

The authors explain why fossil fuel subsidies have evaded WTO challenge, and they identify five avenues (beyond litigation) for reform of international trade policy to better address fossil fuel subsidies.

The five key avenues are:

  • Technical assistance and capacity-building through lesson-sharing on fossil fuel subsidy reform and techical cooperation through existing initiatives and other international organizations.
  • Improved transparency on existing fossil fuel subsidies.
  • Pledges by members to eliminate or reduce fossil fuel subsidies, and to follow up through reporting and review.
  • Negotiated interpretation of the scope of the Agreement on Subsidies and Countervailing Measures (ASCM) and clarification of the mandate of the Committee on Trade and Environment to discuss fossil fuel subsidies, or a more general affirmation that the WTO is an appropriate venue for intergovernmental dialogue on fossil fuel subsidies.
  • Inclusion of fossil fuel subsidies in the ASCM’s category of prohibited subsisidies.

Options could be pioneered by one or several WTO members, or though regional, mega-regional and plurilateral trade agreements, the authors conclude.

The discussion brief is part of the Climate Strategies project, “Making the International Trading System Work for Climate Change”, funded by the KR Foundation.

Read the policy brief (external link to PDF)

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