Fossil Fuel Subsidies and the Global Climate Regime

Abstract

This paper explores how the global climate regime established by the UNFCCC has governed, and could govern, fossil fuel subsidies. It begins by reviewing the literature documenting the relationship between fossil fuel subsidy (reform) and climate change (mitigation), which reveals not only that there is increasing evidence of the impacts of fossil fuel subsidies on greenhouse gas emissions, but also that efforts to reform subsidies can yield important climate change mitigation benefits. The paper then moves on to discuss how parties to the UNFCCC have by and large sought to avoid addressing fossil fuel subsidies directly, notwithstanding efforts by some parties. Although this could lead one to conclude that the global climate regime has had no discernible influence on fossil fuel subsidy reform at the national level, the paper moves on to discuss the various ways in which the UNFCCC can exert influence on fossil fuel subsidy reform in the future. The paper concludes that even though the role of the UNFCCC in the broader regime complex for fossil fuel subsidies may be constrained, it can nevertheless be an important complementary venue for promoting fossil fuel subsidy reform by: (i) increasing the reputational costs of not following through on voluntary pledges to reform subsidies; (ii) improving transparency around fossil fuel subsidies; (iii) changing incentive structures by providing financial support; (iv) strengthening an emerging international social norm on fossil fuel subsidy reform; and (v) offering a platform for inter-country learning.