WTO Members Unveil Plan to Fossil Fuel Subsidy Reform

Forty-eight WTO members participating in the Fossil Fuel Subsidy Reform (FFSR) initiative presented a comprehensive plan on 27 February at the 13th Ministerial Conference in Abu Dhabi to advance work towards rationalisation, phase-out or elimination of harmful fossil fuel subsidies. The FFSR work programme will guide efforts in 2024 and 2025 towards the next Ministerial Conference.

Fossil fuel subsidies distort global trade in ways that are unfair and unsustainable,” the Hon. Todd McClay, New Zealand Minister for Trade, said at the press conference on the FFSR initiative. New Zealand is the FFSR coordinator. “We want to find a way to tackle these distortions to ensure that the benefits of trade are spread fairly while improving our prospects of mitigating climate change. This trade-focused initiative takes this objective forward,” he said.

The 48 FFSR co-sponsors are Albania; Chile; Colombia; Costa Rica; European Union (and 27 member states); Fiji; Iceland; Liechtenstein; Moldova, Republic of; Montenegro; New Zealand; North Macedonia; Norway; Panama; Paraguay; Samoa; Switzerland; Tonga; the United Kingdom; Uruguay; and Vanuatu.

Government support for fossil fuels almost doubled in 2022, during the global energy crisis, to over USD 1.4 trillion according to estimates cited in the Ministerial Statement on Fossil Fuel Subsidies. Phasing out fossil fuel subsidies that do not address energy poverty nor support just transitions is an important contribution to climate action goals, the Ministerial Statement notes, adding that the WTO founding agreement identifies trade as a powerful enabling force for progress towards sustainable development.

The work programme contained in the Ministerial Statement maps out more in-depth action steps under three key pillars.

First, members are agreed on making fuller use of WTO mechanisms to enhance transparency and improve the exchange of information on fossil fuel subsidies and on fossil fuel subsidy reform efforts. To support this work, the FFSR initiative members have put together a set of sample questions to promote the regular incorporation of information on fossil fuel subsidies and their reform in WTO Trade Policy Reviews.

Second, members are working to tackle crisis support measures, including by learning from member experience; developing guidelines to help make any such measures targeted, transparent and temporary in the future; and holding periodic reviews of how members are reforming, reducing and removing such temporary measures.

Third, members intend to work on identifying key types of fossil fuel subsidies and their harm to the environment and trade as well as to build broader support for pathways to reform, reduce and eliminate them. In doing so, members are also committed to fully considering the social and development dimensions of reform.