Editor’s choice
Editor’s choice
The Paris Agreement and the 2030 Agenda represent calls for more decisive action on climate change and sustainable development, and they provide a clear mandate for deeper engagement of the international trade community in this space. Though the World Trade Organization (WTO) is an obvious candidate for advancing fossil fuel subsidy reform internationally, its engagement on this topic has been limited. A growing body of disputes on renewable energy support measures has been brought before the WTO, but members have yet to initiate legal proceedings against subsidies for oil, coal or gas. This article highlights the range of explanations for this puzzling discrepency, and suggests possible avenues for reform of international trade policy to address fossil fuel subsidies.
Fossil fuel subsidies undercut the international community’s Sustainable Development Goals and climate change objectives in many ways. Estimated at several hundred billion dollars per year, such subsidies also affect fossil fuel prices, and, therefore, such subsidies can have distorting impacts on trade and investment.
The World Trade Organization (WTO), which has a central role in disciplining trade-distorting subsidies across sectors, is an obvious candidate for advancing fossil fuel subsidy reform internationally. However, its engagement on this topic has been limited. Indeed, while a growing body of disputes on renewable energy support measures has been brought before the WTO, members have yet to initiate legal proceedings against subsidies for oil, gas or coal.
The article analyses the compatibility of four selected fossil fuel support measures in the Group of 20 (G20) countries with the WTO’s 1994 Agreement on Subsidies and Countervailing Measures. The authors identify some of the key legal questions and challenges faced at the WTO. The findings highlight the difficulty of litigating fossil fuel consumption subsidies.
The article identifies five complementary avenues that for reform of international trade policy to enable countries to better address fossil fuel subsidies. They are:
Some of these options could be pioneered by one or several WTO members, or through regional, mega-regional, or plurilateral trade agreements.
Past event / In this official COP24 side event panelists will discuss trade and climate, regional trade agreements, addressing fossil fuel subsidies, and options for reform.
Perspective / Can the international trade system reform fossil fuel subsidies to relieve costs, reduce pollution, improve energy security and tackle climate change?
Perspective / Trade deals and the World Trade Organization are widely seen as detrimental to climate mitigation efforts, but they could also work to support them.
