Disciplining Fossil Fuel Subsidies: Trade Policy Options for Climate Mitigation and SDGs

In addition to being environmentally harmful, fossil fuel subsidies depress growth, reinforce inequality, add to health hazards caused by air pollution and slow down the energy transition. The need to reform and ultimately phase out these harmful subsidies is thus urgent.

In spite of pledges made by the world’s largest economies at the G20 and under the universal Sustainable Development Goals to phase out fossil fuel subsidies, countries around the world continue to use them widely. With its binding nature and effective enforcement mechanism, the WTO could have a unique role to play to effectively discipline their use.

Lessons for how to do this could, for instance, be drawn from the fisheries negotiations and from the Agreement on Agriculture. The WTO fisheries negotiations may serve as a good example, both with respect to how to place a sustainability issue at the top of the global trade agenda, and to the technical level in the development of concrete options to discipline harmful subsidies.

The Agreement on Agriculture, on the other hand, may provide particularly useful insights with regard to its ex-ante classification of subsidies based on their presumed impact. Such an approach would not only help restrict fossil fuel subsidies but also provide incentives to move towards cleaner energy sources by providing a safe harbour for clean energy support.

This workshop, organised by ICTSD in cooperation with the World Economic Forum, discussed these and other options for how to curb fossil fuel subsidies through the WTO, including through possible actions at MC11. Discussions were informed by brief expert presentations.

The meeting followed on from previous E15 workshops on disciplining fossil fuel subsidies, and forms part of a series of E15 dialogues on different topics being organised over the course of the year.