Tackling Fossil Fuel Subsidies through Trade Agreements (Climate Strategies)

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Given its central role in disciplining trade-distorting subsidies across sectors, the World Trade Organization (WTO) is an obvious candidate for advancing fossil fuel subsidy reform (FFSR) internationally. However, their engagement on this topic has been limited. While a growing body of disputes on renewable energy support measures have been brought before the WTO, Members have yet to initiate legal proceedings against subsidies for oil, coal or gas. This working paper highlights the range of explanations for this puzzling discrepancy. Specifically, the findings highlight the difficulty of litigating fossil fuel consumption subsidies, measures that remain substantial. While enhanced transparency could help address some of the challenges complainants may face, fossil fuel subsidy notification rates within the WTO system remain disappointingly low. In light of these shortcomings, the paper identifies complementary avenues for reform of international trade policy to enable countries to better address fossil fuel subsidies. The report is available for download on the Climate Strategies website.