A carbon-free global economy requires the phase-out of fossil fuel subsidies. That’s why the Glasgow Climate Summit in 2021 agreed to phase out inefficient fossil fuel subsidies, on the back of a similar G20-decision dating back to 2009.
 
An analysis by the Dutch Government showed that in the Netherlands about half of all fossil benefits are tied up in international agreements. So if countries want to phase out these subsidies, they will have to join forces with other countries. Also, to prevent leakage of greenhouse gas emissions and economic activity to other places in the world. This is why the Netherlands established a coalition to phase out these benefits. The approach focuses on the following three pillars:

1. Transparency

The first step to reduce fossil subsidies is to gain insight. Member countries want to publish an overview of their fossil fuel subsidies before the next UN Climate Conference (COP29) in 2024. Cooperation between countries and international organizations (such as IMF, OECD, WTO, IEA, IMO and ICAO) is crucial for this. This includes developing a methodology that can be used by any country.

2. International agreements

The coalition is working together to identify and address international barriers to phasing out fossil subsidies. The Netherlands recently conducted an inventory showing that half of all subsidies stem from international agreements. Examples include the exemption from tax on heavy fuel oil in shipping and the exemption from tax on fuel consumption in international aviation. Other countries run into the same barriers and we need to address this together

3. National action

There will be an international dialogue to share knowledge, develop national strategies for phasing out fossil benefits, and seek joint action to minimize carbon leakage. This will also help maintain a level playing field between countries. This international dialogue can take place annually at COP meetings.

Related Article: MEPs want to vote to end all subsidies for fossil fuel globally by 2025 at COP 28

Minister for Climate and Energy Rob Jetten: “Fossil fuel subsidies have no place in a clean economy and must be phased out. This is why the Netherlands already started the phase-out for some 4.8 billion euros. At the same time, we see that half of all subsidies are tied up in international agreements and we must therefore cooperate with other countries. Therefore, I’m happy and proud to launch an international coalition to reduce fossil fuel subsidies together. We do this by creating transparency, addressing international agreements and working together on national phase-outs.”