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Trade Impacts of Fossil Fuel Subsidies

Published online by Cambridge University Press:  14 July 2020

Tom Moerenhout
Tom Moerenhout*
Affiliation:
Columbia University, USA International Institute for Sustainable Development, Switzerland
*
Email: tom.moerenhout@iisd.net
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Abstract

This article introduces the various trade impacts of fossil fuel subsidies. There are large direct and pass-through trade impacts. Direct trade impacts are found when producer subsidies affect the markets for crude energy products such as crude oil, natural gas, and coal. Direct trade impacts are also found when consumer subsidies decrease the input costs of various industries, whether they refine crude products into energy carriers (e.g. gasoline, electricity) or they use energy products to produce non-energy products (e.g. iron and steel, plastics). Pass-through trade impacts are found when upstream fossil fuel subsidies lead to a lower-cost product that is then used in downstream production processes. We find that markets for fossil fuels, refined energy products and energy-intensive products are enormous. In 2018, crude fossil fuel exports were worth at least US$1.3 trillion, petroleum product exports at least US$800 billion, and exports of energy-intensive goods at least US$1.3 trillion. Their trade volume and export value, as well as their competition density highlight that fossil fuel subsidies have a direct impact on who wins and who loses in terms of market share.

Type
Research Article
Information
World Trade Review , Volume 19 , Special Issue S1: The Trade Impacts of Fossil Fuel Subsidies , July 2020 , pp. s1 - s17
Copyright
Copyright © The Author(s), 2020. Published by Cambridge University Press

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