Options for International Agreements on Fossil Fuel Subsidies

This options paper by the International Institute for Sustainable Development (IISD) provides a framework for governments to develop international agreements to reform and reduce fossil fuel subsidies (FFS). It outlines six key building blocks for such agreements: objectives, scope, substantive disciplines, carve-outs and exceptions, special and differential treatment (SDT), and enforcement mechanisms.

• The global value of fossil fuel subsidies was estimated at approximately USD 1.4 trillion in 2022, though associated environmental and social costs could increase this total to around USD 7 trillion.
• Negotiators can define the scope of an FFS agreement using three primary approaches: an SCM-based approach using WTO definitions of 'subsidy' and 'specificity', an AoA-based approach using a broad, open-ended definition of support, or a stand-alone approach involving positive/negative lists or party-specific schedules.
• Four types of substantive disciplines are identified for FFS agreements: prohibitions (the most ambitious), reduction commitments (flexible but less ambitious), effects-based obligations (subject to defined harmful effects), and standstill requirements (preventing new or increased subsidies).
• A hybrid approach allows parties to combine different disciplines, such as prohibiting the most problematic subsidies while applying reduction commitments or standstill requirements to others, potentially staggering their implementation over time.
• The Agreement on Climate Change, Trade and Sustainability (ACCTS), signed on November 15, 2024, by Costa Rica, Iceland, New Zealand, and Switzerland, is cited as the first international agreement to include a specific definition and detailed disciplines for FFS.
• Procedural obligations, specifically notifications, are essential for monitoring compliance and increasing transparency, though the paper notes that WTO members have historically been reluctant to provide detailed subsidy notifications.
• To provide flexibility, agreements can use 'carve-outs' to permanently or temporarily remove certain FFS from disciplines, or 'exceptions' to justify subsidies based on specific policy objectives or other international obligations.
• Special and Differential Treatment (SDT) can be implemented through the non-application of disciplines, transition periods, grace periods, lower ambition levels for reduction commitments, or the provision of technical assistance and capacity building.
• Enforcement mechanisms range from 'soft' options, such as self-reporting and review procedures, to 'hard' options, including binding independent dispute settlement and the imposition of remedial actions or compensation.

APA

Baršauskaitė, I., Coppens, D., Lau, C., Vincent, A., & Wooders, P. (2025). Options for International Agreements on Fossil Fuel Subsidies. International Institute for Sustainable Development. https://www.iisd.org/system/files/2025-04/options-international-agreements-fossil-fuel-subsidies.pdf

Chicago

Baršauskaitė, Ieva, Dominic Coppens, Christian Lau, Ariane Vincent, and Peter Wooders. Options for International Agreements on Fossil Fuel Subsidies. International Institute for Sustainable Development, 2025. https://www.iisd.org/system/files/2025-04/options-international-agreements-fossil-fuel-subsidies.pdf.

Wikipedia

{{cite report |last1=Baršauskaitė |first1=Ieva |last2=Coppens |first2=Dominic |last3=Lau |first3=Christian |last4=Vincent |first4=Ariane |last5=Wooders |first5=Peter |title=Options for International Agreements on Fossil Fuel Subsidies |publisher=International Institute for Sustainable Development |date=April 2025 |url=https://www.iisd.org/system/files/2025-04/options-international-agreements-fossil-fuel-subsidies.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{barauskait2025options, author = {Baršauskaitė, Ieva and Coppens, Dominic and Lau, Christian and Vincent, Ariane and Wooders, Peter}, title = {{Options for International Agreements on Fossil Fuel Subsidies}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = apr, url = {https://www.iisd.org/system/files/2025-04/options-international-agreements-fossil-fuel-subsidies.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }