Rethinking the Concept of International Disciplines on Fossil Fuel Subsidies

The research paper argues for a binding international agreement on fossil fuel subsidies within the WTO framework to address global negative externalities and climate change. It proposes using the Agreement on Climate Change, Trade and Sustainability (ACCTS) as a model, specifically highlighting the Standardized Carbon Rate Measurement (SCRM) as a way to move beyond definitional debates. The authors suggest that successful subsidy reduction must be linked to a state's capacity to transition to green energy and may require WTO waivers on local content requirements to support renewable energy transitions.

• Voluntary and soft-law initiatives to reduce fossil fuel subsidies have largely failed, with G20 subsidies reaching $794 billion in 2023, the second-highest level ever recorded.
• The economic justification for a binding international agreement on fossil fuel subsidies is based on the need to address global negative externalities, as individual states lack sufficient incentive to prevent harmful environmental effects beyond their borders. The IMF projects that removing cash subsidies and tax breaks for fossil fuels could reduce global emissions by 6% below baseline levels by 2035.
• The Agreement on Climate Change, Trade and Sustainability (ACCTS) provides a viable model for a binding agreement, featuring a complete ban on subsidies for coal-related fuels and all stages of the oil and gas sector, while permitting subsidies for clean energy transitions, pollution reduction, and support for vulnerable groups.
• The Standardized Carbon Rate Measurement (SCRM) used in the ACCTS allows countries to commit to a carbon price; subsidies are only required to be eliminated if they cause the net carbon price to fall below that committed level. This approach shifts the focus away from debates over the definitions of subsidies toward the actual cost of carbon.
• Effective reduction of fossil fuel subsidies is dependent on a state's ability to transition consumers to affordable green energy alternatives. Without this transition, eliminating subsidies may result in regressive domestic redistributive impacts with minimal emissions reductions.
• Current WTO rules, including the Agreement on Trade-Related Investment Measures and GATT Article III, prohibit local content requirements that are often essential for supporting renewable energy transitions. The authors suggest a WTO waiver or 'peace clause' on these requirements for parties implementing a fossil fuel agreement.

APA

Howse, R., & van Bork, P. (2026). Rethinking the Concept of International Disciplines on Fossil Fuel Subsidies. Forum on Trade, Environment, & the SDGs. https://tessforum.org/latest/rethinking-the-concept-of-international-disciplines-on-fossil-fuel-subsidies

Chicago

Howse, Robert, and Petrus van Bork. Rethinking the Concept of International Disciplines on Fossil Fuel Subsidies. Forum on Trade, Environment, & the SDGs, 2026. https://tessforum.org/latest/rethinking-the-concept-of-international-disciplines-on-fossil-fuel-subsidies.

Wikipedia

{{cite report |last1=Howse |first1=Robert |last2=van Bork |first2=Petrus |title=Rethinking the Concept of International Disciplines on Fossil Fuel Subsidies |publisher=Forum on Trade, Environment, & the SDGs |date=10 April 2026 |url=https://tessforum.org/latest/rethinking-the-concept-of-international-disciplines-on-fossil-fuel-subsidies |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{howse2026rethinking, author = {Howse, Robert and van Bork, Petrus}, title = {{Rethinking the Concept of International Disciplines on Fossil Fuel Subsidies}}, institution = {Forum on Trade, Environment, \& the SDGs}, year = {2026}, month = apr, url = {https://tessforum.org/latest/rethinking-the-concept-of-international-disciplines-on-fossil-fuel-subsidies}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }