Exploring the Trade Impacts of Fossil Fuel Subsidies
- There are multiple pathways through which fossil fuel subsidies can affect competitiveness and trade at various stages of fossil fuel product value chains. These include both direct and more indirect effects.
- The trade impacts of fossil fuel subsidies are likely very important in markets for crude fossil fuels, transformed energy products, as well as non-energy but energy-intensive products, which are enormous and often highly competitive. Markets for substitute products, such as those related to renewable energy, can also be significantly affected.
- Fossil fuel subsidies are highly relevant from an international trade policy perspective, in particular for the World Trade Organization (WTO). Various options exist for the WTO to engage more meaningfully with fossil fuel subsidies and their reform.
In recent years, growing attention has been given in various contexts to fossil fuel subsidies and the need to reform them. Discussion on the topic, however, has focused almost exclusively on the environmental impacts of these support measures. This paper focuses on another, much less explored aspect: the trade impacts of fossil fuel subsidies. Despite the obvious trade implications that fossil fuel subsidies can have, those impacts have not yet been discussed in detail.
After an overview of the current state of the literature on the topic, the paper presents a conceptualization and explanation of the various pathways through which fossil fuel subsidies can affect trade at different stages of fossil fuel product value chains, and then looks at empirical evidence to shed light on the potential scale of those trade impacts. The paper also presents a series of options for how the WTO could engage more with fossil fuel subsidies and contribute to advancing their reform.
You might also be interested in
WTO Negotiations on Fisheries Subsidies: What's the state of play?
With only a few months to conclude WTO talks on fisheries subsidies, this update is an overview of the draft text circulated by the Chair of negotiations.
Potential Implementation Steps of a WTO Agreement on Fisheries Subsidies
As members of the WTO negotiate new rules to curb harmful fisheries subsidies, this policy brief examines the potential steps governments could take to implement successful subsidy reform that promotes more sustainable fisheries.
G20 Recovery Packages Benefit Fossil Fuels More Than Clean Energy
Are we building back better? EnergyPolicyTracker.org features weekly updated analysis of COVID-19 policy responses from a climate and energy perspective.
Is India Ready for an Electric Vehicle Revolution?
IISD's Tom Moerenhout looks at what India needs to do to keep up with countries already embracing the trend toward EVs.