I want to greet you on behalf of the Director General of the WTO, welcome you all to the WTO, and thank you for organizing this conference under our roof. The initiative taken by the Global Subsidies Initiative, the International Institute for Sustainable Development and UNEP to organize this meeting, is an important and timely one.
Climate change is one of the most challenging environmental and developmental issues of our times. In fact, as Kofi Annan has put it, this is now a matter of “national security”; Bill Clinton has put it even more starkly when he said about Climate Change that, “It’s the only thing that I believe has the power to fundamentally end the march of civilization as we know it”.
Fossil fuel subsidy reform is undoubtedly one of the important tools in the hands of the international community in the fight against climate change. It would accelerate our movement towards renewable, and less polluting, sources of energy.
International negotiations to fight climate change are continuing under the auspices of the United Nations Framework Convention on Climate Change. The Copenhagen Accord, that was dismissed by many at the end of last year as being a failure, has slowly proved its utility.
The value of this Accord should not be underestimated. Parties to the UNFCCC “took note” of the Copenhagen Accord, albeit with certain reservations, and agreed to a particular process that would flow from the Copenhagen Climate Summit. This process entailed the notification of targets, actions and financing by a 31 January 2010 deadline. The world’s biggest emitters all met that deadline, with the result that the Copenhagen Accord is now the springboard from which a post-Kyoto Protocol regime would eventually emerge.
The Accord is now part of the rich background landscape of environmental law against which WTO rules would be interpreted and applied.
We are now, of course, in a post-Copenhagen landscape. And these are relatively uncertain times for the climate agenda, with a big and important milestone looming first at the Cancun climate summit at the end of this year, and then in South Africa at the end of 2011.
Clearly the international climate negotiation would be aided were fossil fuel subsidy reform to start taking place on the side. The G20 has in fact tasked a number of different organizations with exploring whether and how this reform can be achieved.
In my view, for the international community to have a better sense of how this powerful reform tool may be deployed, it would need to begin by answering a few questions.
Allow me to go through some of the ones that I think would be the most pertinent:
First, what constitutes a fossil fuel “subsidy”?
There may be different views on this issue. I would imagine that the definition could range all the way from the failure to integrate environmental cost, to the actual suppression of the price of fossil fuels below production cost. This is a very broad spectrum. Where the definition lands in that spectrum is as much an economic decision as it is a social and a political one.
Second, once a definition is established, would there be some fossil fuels subsidies that the international community would be willing to tolerate? In other words, would all fossil fuel subsidies be treated equally in a “reform” process, or are there some that would continue to be required?
I am thinking here of course of “energy poverty,” such as the about one and a half billion people who do not have access to electricity, as estimated by the International Energy Agency. In this background, some countries may consider it necessary to continue subsidizing the access of their poorest communities to energy.
Third, how would the international community actually go about reform and what would be the time horizon? Clearly the faster the reduction of fossil fuel subsidies, the faster the international community can progress towards alternative sources of energy. And, yet, clearly, fossil fuel subsidy reform is not likely to happen overnight.
And, finally, would the WTO rule-book be one of the avenues employed to achieve the needed reform? This question, you will note, I have brought up last. I do so deliberately since, in my view, it would be impossible to answer before we have a clearer response to the questions previously posed.
The WTO is a legal instrument that we can only deploy when we know where we are headed. At present, much brainstorming remains to be done.
In general, I see this debate as a continuation of a conversation the WTO started with the joint UNEP-WTO report on trade and climate change that was published last year. The report — as controversial as some may have considered it to be — kicked-off an important dialogue.
Reflections on the link between trade and climate change, and on the eventual role of the WTO rule-book on an issue such as fossil-fuel subsidies, must take place. We must prepare ourselves intellectually for the moment when we may be required to act.
While the WTO has an Agreement on Subsidies and Countervailing Measures, and an ongoing negotiation under the Doha Round to improve these disciplines, as well as to establish a specific regime for the reduction of environmentally harmful fisheries subsidies, fossil fuels are so complex that they will require much advance planning.
This conference would constitute part of the preparation for that planning, were a decision to eventually be reached that the WTO toolbox of disciplines needs to be employed. The interpretation of the present WTO rules and disciplines is to be done only by the Members of the WTO or the Dispute Settlement Mechanism. Any new rules would require a mandate to be agreed by the Members.
I wish you all the success in your deliberations at this conference, whose results we, in the WTO, will certainly be watching closely.