How the WTO Should Address the Issue of Climate Change: The Case for New WTO Disciplines on Energy Subsidies

Abstract

This paper examines how the World Trade Organization (WTO) could help address the issue of climate change through its members negotiating new disciplines on energy subsidies. Energy subsidies are a controversial topic at the moment because on one hand, they contribute to carbon emissions and climate change when granted by governments in relation to fossil fuels, while on the other hand, they can be used to encourage investment in renewable or “clean” sources of energy. This paper therefore asks why energy subsidies are a desirable policy tool for WTO members, not only as instruments of economic and social policy, but also in terms of helping to mitigate climate change. It examines the existing WTO subsidies disciplines to identify what limitations, if any, countries currently face in terms of their ability to implement energy policy through energy subsidies; whether it is necessary or desirable to take active steps to permit energy subsidies in certain situations to help mitigate climate change, and if so, what steps should be taken. This paper contends that WTO members have the opportunity to make an important contribution to energy subsidy reform and the mitigation of climate change through introducing stronger, more transparent and predictable trade rules on energy subsidies. The best way to do this would be for members to negotiate a new energy subsidies annex to the SCM Agreement.