Fossil Fuel
Subsidy Reviewed in WTO
At a meeting on 7 July, WTO members participating in the Fossil Fuel Subsidy
Reform (FFSR) initiative reviewed outcomes from the 14th WTO Ministerial Conference
(MC14) in Cameroon and highlighted progress across key work areas since MC13. Members
also examined global policy responses to energy market disruptions stemming from
the conflict in the Middle East, focusing on lessons from crisis-support measures
and approaches to promote the energy transition in the longer-term.
1. Review of MC14 Outcomes
·
WTO members
under the Fossil
Fuel Subsidy Reform (FFSR)
initiative reviewed outcomes of MC14
(Cameroon).
·
48
co-sponsors reaffirmed
their commitment to reform harmful fossil fuel subsidies.
2. Three Pillars of the FFSR
Initiative
Members continued work on:
·
Enhancing
transparency in fossil
fuel subsidies.
·
Improving
crisis-support measures during
energy shocks.
·
Identifying
and addressing harmful fossil fuel subsidies.
3. MC14 Joint Ministerial Statement
·
Reaffirmed
commitment to:
o Rationalize, phase out, or eliminate harmful
fossil fuel subsidies.
o Ensure crisis support measures are targeted, temporary, and transparent.
·
Included
updated sample questions for WTO
Trade Policy Reviews.
4. Coordinator's Progress Report
(2024–2025)
·
New Zealand
released a report summarizing progress.
·
Included
a draft Grid
on Subsidy Types and Impacts,
mapping:
o Types of fossil fuel subsidies.
o Their environmental and trade impacts.
5. Discussion on Middle East
Energy Crisis
·
Members
examined government responses to energy price shocks caused by the Middle East conflict.
·
Emphasized
that emergency support should remain:
o Targeted
o Temporary
o Transparent
6. Chile's Energy Price Response
·
Chile adjusted
its Fuel
Price Stabilization Mechanism (MEPCO).
·
Introduced:
o Temporary fiscal measures.
o Targeted support for households, vulnerable
groups, and small businesses.
·
Aimed to
balance consumer
protection with fiscal sustainability.
7. OECD Energy Support Measures
Tracker
·
OECD reported
that most countries used:
o Fuel tax reductions.
o Price caps.
·
Support
mainly focused on diesel
and gasoline.
·
As energy
prices declined, governments started phasing
out emergency support.
·
OECD recommended:
o Diversifying energy supplies.
o Improving energy efficiency.
o Strengthening preparedness for future crises.
8. IEA Energy Crisis Policy
Response Tracker
·
Covers
110+
governments worldwide.
·
Findings:
o 92 governments introduced price-support measures.
o 58 governments adopted energy-conservation measures.
o 28 governments announced long-term structural reforms.
·
IEA stressed:
o Energy efficiency.
o Structural reforms.
o Greater energy security and resilience.
9. Members' Views
·
Members
supported:
o Monitoring the phase-out of crisis measures.
o Accelerating the transition away from fossil
fuels.
o Increasing investments in renewable and clean
energy.
·
The European Union highlighted its Accelerate EU Catalogue of best practices.
10. Capacity Building
·
An FFSR 101 learning workshop, organized by New Zealand and the International Institute for Sustainable Development
(IISD), helped
improve understanding of fossil fuel subsidy reform.
·
Members
supported holding more training sessions and thematic discussions.
·
The FFSR
initiative promotes:
o Rationalization, phase-out, or elimination
of harmful fossil fuel subsidies.
o Information sharing and cooperation among WTO
members.
·
48
WTO members currently
participate as co-sponsors.
[ABS News Service/13.07.2026]
New Zealand, the coordinator
of the FFSR initiative, recalled the key outcomes achieved by 48 co-sponsors at
MC14, which represented progress across the three pillars of the FFSR initiative
identified in its MC13 workplan. These pillars are enhancing transparency, crisis-support
measures, and identifying and addressing the most harmful fossil fuel subsidies.
New Zealand noted that the MC14 Joint Ministerial Statement reaffirms co-sponsors' commitment
to the rationalization, phase-out, or elimination of harmful fossil fuel subsidies,
and sets out guidelines for designing transparent, targeted and temporary fossil
fuel subsidy measures in response to energy crises. Also annexed to the statement
is an updated non-exhaustive list of sample questions for use in the WTO's Trade
Policy Reviews.
In addition, New Zealand released
a coordinator's progress report summarizing the main areas of
work under the initiative during 2024-2025. These included a working draft of a
Grid Outlining Subsidy Types and Impacts, which compiles information on the situations
and sectors in which fossil fuel subsidies are used and their possible harmful environment
and trade impacts.
Building on the positive outcomes
achieved at MC14 in March 2026, co-sponsors felt it was timely to deepen discussions
on crisis-support measures. Following the outbreak of the conflict in the Middle
East, many governments introduced temporary measures to shield households and businesses
from rising energy and commodity prices. Mindful of the implications of such interventions
for fossil fuel subsidy reform, the coordinator underscored the importance of ensuring
that emergency support measures remain targeted, temporary and transparent.
Chile presented its policy response
to the 2026 fuel price shock. Given its near-total dependence on imported fuels,
the country sought to balance consumer protection with fiscal sustainability. Rather
than relying on broad-based energy subsidies to fully absorb the rise in international
oil prices, the government adjusted its Fuel Price Stabilization Mechanism (MEPCO)
to limit fiscal costs. At the same time, it implemented a package of targeted and
temporary fiscal and economic measures to stabilize the market, mitigate the social
and economic effects of higher fuel prices, and protect households, vulnerable groups
and small businesses.
The Organisation for Economic
Co-operation and Development (OECD) presented its Energy Support Measures Tracker, which analyses new measures
adopted by OECD countries in response to the energy crisis. The data showed that
most OECD members relied on broad-based untargeted measures - particularly fuel
tax reductions and price caps - to cushion the impact of higher energy costs, with
support often focused on diesel and gasoline. The OECD also noted that as global
energy prices have recently declined to pre-crisis levels, governments have begun
phasing out emergency support measures introduced during the crisis. Looking ahead,
the OECD emphasized the importance of strengthening resilience to future shocks
through greater energy supply diversification, improved energy efficiency and better
preparedness.
The International Energy Agency
(IEA) presented its 2026 Energy Crisis Policy Response Tracker, which monitors policy responses
by more than 110 governments worldwide. According to the tracker, 92 governments
introduced price-support measures to assist households and businesses, 58 adopted
energy-conservation measures and campaigns to curb fuel consumption, and 28 announced
structural policies aimed at strengthening long-term energy resilience. Looking
beyond immediate crisis management, the IEA also emphasized the importance of structural
reforms to enhance energy security and resilience, including scaling up energy-efficiency
programmes, which can help reduce reliance on emergency support measures.
Members welcomed the valuable
information shared, expressing interest in monitoring the phase-out of crisis support
measures while at the same time reinforcing the need to accelerate the transition
away from fossil fuels. Several members also outlined their own crisis-response
measures, emphasizing the need to align short-term interventions with longer-term
transition goals and to redirect resources towards renewable energy and clean energy
investments. For example, the European Union highlighted its AccelerateEU Catalogue of best practices in this respect.
In closing the meeting, the coordinator
highlighted the FFSR 101 learning workshop held just ahead of the FFSR meeting,
organized by the International Institute for Sustainable Development and New Zealand.
The workshop, which received positive feedback from participants, was aimed at advancing
understanding of fossil fuel subsidy reform. Building on this success, additional
training sessions and in-depth thematic discussions could be held alongside future
FFSR meetings.
The FFSR initiative seeks to
achieve the rationalization, phasing-out or elimination of harmful fossil fuel subsidies
through the use of existing mechanisms or the development of new pathways to reform.
It encourages WTO members to share information and experiences to advance discussions
at the WTO. Forty-eight members are currently participating in the initiative as
co-sponsors.