Background Note on Fossil Fuel Subsidy Reform

As fossil fuel subsidies are expected to swell following rapidly rising energy prices, IISD offers a background note on the rationale and international initiatives for reforming fossil fuel subsidies.

By Ieva Baršauskaitė on August 29, 2022
  • Fossil fuel subsidies roared back to 2018 levels in 2021 and will further swell following soaring energy prices, harming both environment and international trade. International cooperation needs to provide a pathway to meaningful fossil fuel subsidy reform.

  • The G7, G20, and Asia-Pacific Economic Cooperation economies pledged to rationalize and phase out inefficient fossil fuel subsidies that encourage wasteful consumption. New World Trade Organization initiatives could provide a meaningful platform to exchange information about the best ways forward.

  • At least 53 countries have made individual efforts to reform fossil fuel subsidies. Can international pledges by the G7, G20 or Asia-Pacific Economic Cooperation be turned into a collective effort to rationalize the support that has serious impacts on both environment and trade?

In addition to providing an overview of the environmental and trade effects of fossil fuel subsidies, it also examines international pledges and steps already taken by governments aiming to rationalize and reduce such support, including through the initiatives that take place through the G7, G20, Asia-Pacific Economic Cooperation, United Nations Framework Convention on Climate Change, and the new trade and environment initiatives at the World Trade Organization.