Tackling Fossil Fuel Subsidies through International Trade Agreements

The report examines the discrepancy between the frequent WTO litigation of renewable energy subsidies and the absence of cases against fossil fuel subsidies. It argues that while political factors and the 'undercapture' of consumer subsidies by WTO law play a role, producer subsidies may still be actionable if sufficient evidence of adverse trade effects is provided. Through five G20 case studies, the authors highlight the difficulty of proving 'adverse effects' and the lack of transparency in subsidy notifications. The report recommends five avenues for reform: technical assistance, enhanced transparency, subsidy reform pledges, political declarations, and expanding the category of prohibited subsidies.

• Fossil fuel subsidies are estimated at several hundred billion dollars annually and hinder climate goals by locking in carbon-intensive energy systems and diverting investment from healthcare, education, and renewable energy.
• There is a significant gap in WTO litigation where renewable energy support measures are frequently challenged, but no legal proceedings have been initiated against subsidies for oil, coal, or gas.
• Political factors contributing to the lack of fossil fuel litigation include the influence of large multinationals and the 'loss-aversion hypothesis,' where long-standing subsidies are less likely to be challenged than new measures that disrupt investment expectations.
• Legal 'undercapture' occurs because many fossil fuel subsidies target consumers, making them 'unspecific' under the ASCM, whereas renewable energy subsidies often include local content requirements that categorize them as 'prohibited' and easier to litigate.
• Case studies of G20 measures indicate that consumer subsidies, such as petroleum price compensation in Indonesia and fuel tax credits in Mexico, are likely compatible with the ASCM because they lack the required specificity.
• Producer subsidies, such as the US expensing of intangible drilling costs and Germany's manufacturer privilege, are more likely to be 'specific' but are difficult to litigate due to the high evidentiary burden of proving 'adverse effects' on trade.
• The WTO's ASCM notification system suffers from 'chronic low compliance,' with a vast discrepancy between the 64 fossil fuel subsidies notified to the WTO between 2008 and 2013 compared to 640 identified in the OECD inventory for the same period.
• The Trade Policy Review Mechanism (TPRM) provides a potential but inconsistent alternative for transparency, as the level of detail on fossil fuel subsidies depends on the Secretariat's use of third-party data from the IMF, IEA, or IISD.
• The report proposes five reform avenues: promoting technical assistance, enhancing transparency through common notification templates, adopting reform pledges with review processes, issuing political declarations on ASCM interpretation, and expanding the 'prohibited subsidies' category to include those with specific environmental effects.

APA

Verkuijl, C., van Asselt, H., Moerenhout, T., Casier, L., & Wooders, P. (2017). Tackling Fossil Fuel Subsidies through International Trade Agreements. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2017/11/CS-Report_FFS-2017.pdf

Chicago

Verkuijl, Cleo, Harro van Asselt, Tom Moerenhout, Liesbeth Casier, and Peter Wooders. Tackling Fossil Fuel Subsidies through International Trade Agreements. Climate Strategies, 2017. https://climatestrategies.org/wp-content/uploads/2017/11/CS-Report_FFS-2017.pdf.

Wikipedia

{{cite report |last1=Verkuijl |first1=Cleo |last2=van Asselt |first2=Harro |last3=Moerenhout |first3=Tom |last4=Casier |first4=Liesbeth |last5=Wooders |first5=Peter |title=Tackling Fossil Fuel Subsidies through International Trade Agreements |publisher=Climate Strategies |date=November 2017 |url=https://climatestrategies.org/wp-content/uploads/2017/11/CS-Report_FFS-2017.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{verkuijl2017tackling, author = {Verkuijl, Cleo and van Asselt, Harro and Moerenhout, Tom and Casier, Liesbeth and Wooders, Peter}, title = {{Tackling Fossil Fuel Subsidies through International Trade Agreements}}, institution = {Climate Strategies}, year = {2017}, month = nov, url = {https://climatestrategies.org/wp-content/uploads/2017/11/CS-Report_FFS-2017.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }