The Regulation of Environmentally Harmful Fossil Fuel Subsidies: From Obscurity to Prominence in the Multilateral Trading System

Abstract

Environmentally harmful fossil fuel subsidies were notably absent from efforts to enhance the mutual supportiveness of trade and environment in the multilateral trading system. However, a combination of factors has recently propelled the regulation of such subsidies up the trade and environment agenda. The recently launched initiative to negotiate a plurilateral Agreement on Climate Change, Trade and Sustainability (ACCTS) represents the latest and most ambitious of the growing number of initiatives to discipline fossil fuel subsidies. This article examines the factors that brought the regulation of fossil fuel subsidies to prominence and the prospects of the ACCTS initiative to introduce binding rules on fossil fuel subsidies. The article argues that such an initiative is long overdue, but it faces significant hurdles to succeed. Drawing on past and present intergovernmental initiatives to tackle environmentally harmful subsidies, the article highlights the key challenges on the road ahead and suggests possible ways forward.