Disciplining Fossil Fuel Subsidies: A Contribution of the Trade System to Climate Mitigation and SDGs

On 12 June, ICTSD organised an informal roundtable on disciplining fossil fuel subsidies as part of the E15 Initiative. Discussions built on some of the options with respect to fossil fuel subsidies which emanated out of the expert-driven phase of the project in 2016.

Energy use is the biggest cause of climate change, accounting for two thirds of the world’s greenhouse gas emissions. An energy transition is therefore necessary and pressing. Importantly, it will enable emission abatement while also spurring economic growth and development through improved energy security and access through renewable and sometimes off-grid sources of energy, not least in poor counties.

In spite of this, policies to stimulate such a transition are lagging. In fact, not only are measures like carbon pricing making slow progress, but in addition all major economies continue to subsidise both the exploration and the use of fossil fuels, thereby undermining the prospects of a speedy energy transition. Even in poor countries, fossil fuel subsidies (FFS) are being used, often with the intention to support the poor populations, however mostly missing the target.

There are tools available in the trade system to address this, which are currently not being fully utilised — notification of fossil fuel subsidies to the WTO under the Agreement on Subsidies and Countervailing Measures is inadequate, the dispute settlement system has not yet provided any guidance, and any attempts to hold discussions about climate change in the WTO Committee on Trade and Environment (CTE) struggle to get off the ground. In addition to making use of these tools, the magnitude of the climate threat may be a reason to step up efforts and to sharpen trade rules.

In order to make progress towards this end, it is necessary to build a solid technical and legal understanding about the trade-related options to addressing FFS, and to engage trade policymakers in an open and constructive dialogue. This workshop aims to provide negotiators with a better understanding of these technical issues and will help build convergence by providing a neutral space for informal dialogue among leading WTO negotiators and selected experts on the specific challenges under discussion.

The meeting follows on from the E15 Engagement Day on the WTO and MC11, held on 26 September 2016, and forms part of a series of dialogues being organised over the course of the year to delve further into selected topics as they evolve.