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Energy and climate: the many faces of G20

A diplomatic action plan is needed at the forum in October that takes into account the position of the various participating countries on the issues of energy and climate. The energy transition on the agenda is (still) a mixed affair.

by Luca Franza (IAI)
12 February 2021
10 min read
by Luca Franza (IAI)
12 February 2021
10 min read

The G20 group has a particularly marked responsibility to step up ambition on greenhouse gas emission reduction. G20 countries collectively account for approximately 80% of global emissions and thanks to their political clout they can stir global climate action even beyond the group’s borders by setting norms and standards. Some hopeful signs for decarbonization can be observed. The global political landscape has improved at the end of 2020 as more countries have joined the net-zero-by-mid-century club, the US has been brought back in the Paris Agreement by President Joe Biden and the principle that economic recovery from COVID-19 should be green has gained traction.

Diplomacy in action

However, the picture remains quite mixed even within the G20 group, where countries with high climate ambition and consistent decarbonization policies coexist with less committed countries. This article provides an overview of where the G20 stands collectively on energy transition and climate and identifies outstanding issues in specific countries with which Italy could engage diplomatically as the country holding the G20 presidency at the summit scheduled for this October. Adding further nuance, it should also be noted that even if some countries are more ambitious and compliant than others overall, it can happen that a country excels in one or a few indicators but still lags behind in others. Finally, it is important to stress that political announcements are not always accompanied by concrete action. All of the above needs to be taken into account to assess the standing of various G20 countries and options for diplomatic engagement.

The role of Italy

The G20 and COP26 are going to be interlinked political processes in 2021 and Italy plays an important role in both, as it co-chairs COP26 together with the UK. For this it is very relevant that President Biden made the US re-join the Paris Agreement through one of his very first executive orders, creating momentum for climate action through both the G20 and COP26. Among G20 countries, the only one that has not yet ratified the Paris Agreement is Turkey. While Turkey does not account for a significant share of the world’s emissions and climate agreements could certainly go ahead without Turkey, a change in the country’s climate course could be an important signal for other skeptical countries, and a way for Turkey to reduce its political isolation. Italy’s pragmatic diplomatic stance towards the country could be an asset for dialogue, including on this subject.

Even if all the other G20 countries have at least formally embraced the objectives of the Paris Agreement, the level of ambition of and compliance to G20 communiqués on climate is generally insufficient. The actual emission trajectories of G20 countries are even more alarmingly off-target. So far, G20 communiqué conclusions have focused on green growth and recovery from the 2008-2009 crisis, support for the UN Framework Convention on Climate Change (UNFCCC) and the need to mobilize climate finance. Until now, the G20 has made 91 collective commitments on climate, reaching a maximum annual number of commitments in Hamburg in 2017. As this is going to be the first G20 to be presided over by an EU country since then, the pressure on Italy is strong to score as well as (or better than) the German presidency did back then.  

Promoting compliance with Paris

Commitments alone don’t mean much if they’re not followed by compliance. There are some good news on this front, as compliance has increased over time. Historically, the most compliant countries have been EU Member States, and particularly Germany. The United Kingdom has also shown high levels of compliance to G20 climate commitments. This year, Italy will need to focus on the most reluctant countries and create solid political consensus around climate objectives - not only to be able to reach joint statements at the end of the process, but also to make sure that countries stay compliant afterwards. The past years have shown that holding a same-subject ministerial meeting ahead of the plenary summit translates into a higher number of related commitments and compliance. This is why a ministerial meeting on climate should be held.

Broadening commitment towards zero emissions

There are many important areas of action pertaining to energy transition and climate where the G20 could make a difference as a forum. Firstly, an important political achievement for the G20 would be to further expand the group of its Members that are committed to net-zero emission targets beyond the EU, the UK, China, South Korea, Japan, Canada and South Africa. The US is probably going to join this club, but before setting up a precise emission reduction timeline and formally revising the US Nationally Determined Contribution as part of the COP process, President Biden will have to conduct a careful process of consultation of internal stakeholders in the US. In addition to the overall net-zero target, some countries have committed to fully decarbonize the electricity sector by an earlier date. In his presidential campaign, Biden has pledged to fully eliminate CO2 emissions in the US power sector by 2035. It would be important for other countries, and notably heavy coal users in Asia, to also set sectoral targets. 

The challenge of removing subsidies

Secondly, a long-standing issue (and also a thorny one), is the cancellation of fossil fuel subsidies. This meets a lot of political opposition also inside of the G20, looking beyond official country positions. For many poorer countries, ending fossil fuel subsidies could be politically and socially difficult because weaker layers of society could face negative repercussions in default of compensation measures. And what is more, this would happen in a context of economic stress and growing inequalities provoked by COVID-19. 

A global agreement on carbon tax

Thirdly, a global agreement or at least a shared understanding on key principles in the area of carbon pricing would be beneficial, not only from the perspective of emission reduction but also from that of international trade, which risks being compromised by unilateral initiatives such as carbon border adjusted mechanisms, the effects of which are really hard to forecast. As a multilateral forum, avoiding fragmentation should be one of the key objectives of the G20. 

Governance reform

Fourthly, it would be important for the G20 to take bolder steps in economic and financial governance reforms - probably the policy area where the group is meant to play the most important leading role due to its origins and DNA - so that global financial flows are made compatible with climate objectives. A lot could be done in terms of climate risk disclosure, mandate and action of multilateral banks and lending criteria. The G20 is the most apt forum to discuss these issues.

Decarbonization strategies not always compatible

Finding consensus is not going to be easy as the points of departure of G20 countries are very different. A few G20 countries have adopted binding coal phase-out plans, notably Canada, France, Germany, Italy and the UK. Of these, Canada, France, Italy and the UK have target dates that are compatible with the emission reduction goals set in Paris, that is keeping global warming within 1.5 degrees, while Germany’s target date for coal phase-out is Paris-incompatible. Other countries have adopted regulations that limit coal consumption (or at least consumption of lignite). However, it would be necessary to see more coal phase-out plans being adopted in as many countries as possible, starting with those that have committed to net-zero emissions such as Japan, South Korea and especially China.

It indeed remains to be seen how China’s long-term pledge to become carbon neutral by 2060, cherished by many, will be translated into concrete action today, as the country’s long-lasting addiction to coal is not easy to break for political, economic and social reasons. This is relevant globally as China accounts for half of the world’s coal consumption.  

Renewable energy? Reports look good

In terms of renewable energy targets, G20 countries have fared much better. As many as sixteen Members of the group have policies in place that actively mandate to increase generation from renewables. The countries that don’t have such policies in place are Australia, Canada, Mexico and the US. Another area where most countries have taken at least some action is reducing the carbon footprint from the building sector. In the G20, only Russia and Argentina lack policies to construct near-zero energy new buildings. On carbon pricing, all G20 countries except for India and Australia are implementing explicit schemes. However, both coverage of emissions and tax rates are too low. The lowest tax rates in particular are observed in South Africa, Japan, Mexico and Argentina. Countries like Brazil, Russia, Saudi Arabia, Indonesia and Turkey still have to unveil details and concrete plans for their carbon pricing schemes.

Watchword: consensus

Identifying where G20 countries lag behind in terms of climate action is the first step to organise diplomatic engagement, with a view to fill the gap within the G20 and create further political alignment within the group. Progress can more easily be achieved in some areas than in others and efforts should not be diluted - calling for prioritisation. To be sure, not every outstanding issue will be solved this year, but significant progress can be achieved in a year where climate action seems to enjoy tailwinds. Creating solid political consensus will be key to make sure that there is concrete action and compliance beyond the final G20 communiqué.

The author: Luca Franza

Luca Franza is the Head of the Energy, Climate and Resources Programme at Istituto Affari Internazionali (IAI). He is also a Research Fellow at the Clingendael International Energy Programme (CIEP) in The Hague (The Netherlands) and a lecturer in the Energy Master of the Paris School of International Affairs (PSIA) – SciencesPo.