The diversity of international institutions governing fossil fuel subsidies includes the international legal regimes for climate change and trade, informal coalitions such as the Friends of Fossil Fuel Subsidy Reform, and international economic organizations such as the Organisation for Economic Co-operation and Development and the International Monetary Fund.
The chapter argues that while this institutional fragmentation can pose coordination challenges, it also offers advantages in that different institutions can drive fossil fuel subsidy reform by employing multiple rationales.
The chapter further highlights that fossil fuel subsidies, by and large, remain outside the purview of legally binding disciplines. Under the international climate change regime, the main development has been the voluntary inclusion of fossil fuel subsidy reform in some countries’ ‘nationally determined contributions’. Under the international trade regime, existing disciplines on subsidies have largely failed to capture fossil fuel subsidies. Instead, the institutional complex for fossil fuel subsidies and their reform is characterized by a growing system of informal international law, including voluntary commitments and efforts to make fossil fuel subsidies transparent through measurement, reporting and review.
The chapter argues that the influence of such informal international law can nonetheless be significant in situations of complex governance. However, to strengthen the influence of the institutional complex as a whole, it is necessary to clarify the definition and measurement of fossil fuel subsidies and extend commitments and transparency to countries not yet covered.
The chapter is contained in the book A Multifaceted Approach to Trade Liberalisation and Investment Protection in the Energy Sector, which brings together leading academics and practitioners to discuss the most significant challenges faced by trade liberalization and investment protection in the energy sector. The book also addresses environmental and human rights issues that often underlie these challenges. The book attempts to bridge the gap between these different perspectives and pave the way to a multifaceted and comprehensive approach to the subject.