Fossil fuel subsidies harm the environment, add to health hazards caused by air pollution, and delay the energy transition. Scholars and practitioners have therefore been exploring ways to reform and eliminate them. The trade system offers binding rules which could be leveraged in this context.
The paper Fossil Fuel Subsidies Reduction and the World Trade Organization develops the contours of an ambitious approach to fossil fuel subsidy reform using the multilateral trade system. It does not remain within the limits of existing World Trade Organization (WTO) law, or the overall market-opening goals of the WTO. Once those constraints are relaxed, it becomes clear that the requisite components of (i) defining the fossil fuel aspect of subsidies and ensuring an otherwise operational definition of the subsidies to be disciplined, (ii) establishing appropriate regimes for quantification, reporting, and surveillance, (iii) negotiating reduction commitments that will permit efforts to make fossil fuel use more efficient, as well as to transition to renewables, (iv) ensuring that reform does not harm the poor, and (v) establishing independent evaluation and dispute settlement mechanisms with appropriate incentives for compliance, are (vi) within the institutional capacities of the relevant institutions, or the broader multilateral system, (vii) either through formally binding or informal rules, and (viii) either within or outside the WTO system.