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Fossil Fuel Subsidies Reform in the WTO: Options for Constraining Dual Pricing in the Multilateral Trading System

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Abstract: Dual pricing is a practice through which resource-endowed states sell their energy resources at significantly lower prices on the domestic market, as compared to the price on the export market. Dual pricing could be considered an environmentally harmful fossil fuel subsidy: States that maintain dual-pricing policies are not incentivised to curb their CO2 emissions, but are instead encouraged to keep burning ‘cheap’ fossil fuels through below global market domestic prices, to the detriment of switching to cleaner forms of energy. This article discusses the practice of energy dual pricing in the broader context of fossil fuel subsidy reform. In view of climate change mitigation, the World Trade Organization (WTO) should contribute to this reform and play an active role in curbing and phasing out such environmentally harmful subsidies. Therefore, the piece approaches dual pricing from the viewpoint of being a fossil fuel subsidy. The contribution explores avenues to constrain dual pricing within the framework of the WTO. It does so by proposing options under existing rules, as well as suggesting changes to the system beyond WTO current rules. The piece suggests that WTO Members wishing to take action again dual-pricing policies maintained by other members could explore bringing a case to dispute settlement on the basis of specific provisions under the GATT, SCM and or AD Agreements. Bringing a case would send a strong signal that dual-pricing policies are not immune to being challenged in a WTO dispute. Moreover, it is likely that this would function as a trigger to rapidly include talks on broader fossil fuel subsidy reform on the WTO agenda.

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