Tackling Fossil Fuel Subsidies Through International Trade Agreements: Taking Stock, Looking Forward

50 Pages Posted: 26 Mar 2018

See all articles by Cleo Verkuijl

Cleo Verkuijl

Stockholm Environment Institute (SEI)

Harro van Asselt

Stockholm Environment Institute; University of Eastern Finland

Tom Moerenhout

Columbia University

Liesbeth Casier

International Institute for Sustainable Development

Peter Wooders

International Institute for Sustainable Development

Date Written: March 26, 2018

Abstract

Fossil fuel subsidies undercut the international community’s Sustainable Development Goals and climate change objectives in many ways. Estimated at several hundred billion dollars a year, such subsidies also affect fossil fuel prices, and can therefore have distorting impacts on trade and investment. 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 internationally. However, its 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 Article highlights the range of explanations for this puzzling discrepancy. The Article analyses the compatibility of four selected fossil fuel support measures in the Group of 20 countries with the WTO’s 1994 Agreement on Subsidies and Countervailing Measures. In doing so, it identifies some of the key legal questions and challenges faced at the WTO. Specifically, the findings highlight the difficulty of litigating fossil fuel consumption subsidies. In light of these shortcomings, the Article identifies five complementary avenues for reform of international trade policy to enable countries to better address fossil fuel subsidies: (i) promoting technical assistance and capacity building; (ii) enhancing transparency; (iii) pledging subsidy reform and ensuring credible follow-up through reporting and review; (iv) adopting a political declaration; and (v) expanding the category of prohibited subsidies. Some of these options could be pioneered by one or several WTO Members, or through regional, megaregional and plurilateral trade agreements. The adoption of the 2030 Agenda and the Paris Agreement represent a call for more decisive action on climate change and sustainable development, providing a clear mandate for deeper engagement of the international trade community in this space.

Keywords: World Trade Organization, Fossil Fuel Subsidies, Agreement on Subsidies and Countervailing Measures, Energy Subsidies, Climate Change, Sustainable Development

JEL Classification: K32, K33

Suggested Citation

Verkuijl, Cleo and van Asselt, Harro and Moerenhout, Tom and Casier, Liesbeth and Wooders, Peter, Tackling Fossil Fuel Subsidies Through International Trade Agreements: Taking Stock, Looking Forward (March 26, 2018). Virginia Journal of International Law, Vol. 58, No. 2, 2018. Available at SSRN: https://ssrn.com/abstract=3149370

Cleo Verkuijl (Contact Author)

Stockholm Environment Institute (SEI) ( email )

Linnégatan 87D
Stockholm, 104 51
Sweden

Harro Van Asselt

Stockholm Environment Institute ( email )

Oxford
United Kingdom

University of Eastern Finland ( email )

PO Box 111
Joensuu, 80100
Finland

Tom Moerenhout

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Liesbeth Casier

International Institute for Sustainable Development ( email )

161 Portage Avenue East, 6th Floor
Winnipeg
Manitoba, R3B 0Y4, Manitoba
United States

Peter Wooders

International Institute for Sustainable Development ( email )

161 Portage Avenue East, 6th Floor
Winnipeg
Manitoba, R3B 0Y4, Manitoba
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
46
Abstract Views
255
PlumX Metrics