G7 leaders urged to set bolder energy transition and climate finance goals

G7 nations account for 27% of global fossil fuel production.

On the eve of the G7 Leaders’ Summit in Italy, ACT2025, a coalition focused on the climate needs of vulnerable developing countries has urged G7 leaders to take decisive steps for a sustainable future, emphasising five key areas.

ACT2025 is calling on G7 countries to set ambitious targets in their Nationally Determined Contributions (NDCs) – their plans for delivering their fair share of the Paris Agreement – by early 2025. It recommends reducing greenhouse gas emissions (GHG) by at least 43% by 2030 and 60% by 2035, relative to 2019 levels, and achieving net-zero emissions by 2050.

Additionally, ACT2025 is asking G7 leaders to commit to adopting a New Collective Quantified Goal on Climate Finance (NCQG) at COP29 in Baku, reflecting the estimated trillions of dollars needed by developing countries for climate action up to 2030.

The previous goal was set in 2009 and entailed providing $100bn a year by 2020. This milestone was met two years late.

ACT2025’s recommendations for scaling climate finance include proposing a generous financing package for the next International Development Association (IDA) replenishment to help vulnerable countries cope with climate impacts, as well as combining public finance with private and innovative sources, like international taxes, to increase funding for climate action in the poorest countries.

G7 leaders have also been urged to conduct debt restructuring, in order to give developing countries the financial space needed for climate investments without adding to their debt burden.

Nearly 60% of low-income countries are now in debt and they collectively spend six times more repaying their debt than what the World Bank lends in a year.

Lastly, ACT2025 has urged the G7 to stop fossil fuel financing and eliminate inefficient fossil fuel subsidies by 2025, by redirecting these funds towards climate action investments in developing countries. At present, the group has a 2030 deadline and has not outlined how nations are defining ‘inefficiency’.

G7 continue to finance fossil fuels

New data from Oil Change International (OCI) data has revealed that G7 countries are still heavily supporting fossil fuels, despite their COP28 commitment to transition away from them.

According to the data, G7 nations account for 27% of global fossil fuel production and are investing billions in fossil fuel infrastructure abroad. From 2023 to 2050, the US, UK, and Canada alone could account for nearly half of the carbon dioxide emissions from new oil and gas projects, equivalent to the emissions of nearly 600 coal plants.

The data has also revealed that the G7 provided $25.7bn annually for fossil fuel projects, compared to $10.3bn for clean energy, with only 1% of clean energy finance going to low-income countries. Most of this clean energy support was in the form of loans, which exacerbates the debt crisis in these nations.

Last month, the G7 countries declared a commitment to eliminate unabated coal-fired power plants by 2035, in line with the International Energy Agency (IEA)’s pathway to net-zero by 2050 for the energy sector. However, the pathway to net-zero requires not only a stop on any new unabated coal-fired power plants, but also no new coal mines or mine extension projects. Upstream oil and gas projects with long lead time should also be halted.

Despite this, the UK has introduced a new bill intended to expand oil and gas licensing in the North Sea.

Oil Change International’s public finance strategist Adam McGibbon said: “The G7 are not just delaying taking climate action – they are actively blocking a fair, fast, full and funded phase-out of fossil fuels with massive expansion plans at home, and backing fossil fuel projects abroad with billions in public money.

“This summit [in Italy] is a critical moment for G7 nations to demonstrate true leadership. We’re calling on G7 leaders to acknowledge that fossil fuel expansion is incompatible with the 1.5C limit.”

Oil Change International recommends that G7 leaders strengthen their fossil fuel phase-out commitments, robustly implement COP28 decisions, support clean energy transitions with increased financing, and uphold their 2022 commitment to end new public support for fossil fuel projects.

Investment in clean energy transition

In related news, new research from the International Energy Agency (IEA) has confirmed that while global spending on clean energy technologies and infrastructure is projected to hit $2tn this year for the first time, an additional $1bn continues to be invested in the fossil fuel industry.

According to the IEA’s latest World Energy Investment report, total energy investment worldwide is expected to exceed $3tn in 2024 for the first time. Of this, around $2tn will be directed toward low-carbon technologies such as renewables, electric vehicles (EVs), nuclear power, grids, storage, low-emission fuels, efficiency improvements, and heat pumps.

However, the remaining $1tn will go to coal, gas and oil.

The IEA warns that there are significant imbalances and shortfalls in energy investment flows across various regions. Particularly concerning is the low level of clean energy spending in emerging and developing economies outside China.

Investment in these regions is expected to surpass $300bn for the first time, driven mainly by India and Brazil. Yet, this represents only about 15% of global clean energy investment, which is insufficient to meet the growing energy demands of these countries.

The high cost of capital remains a significant barrier to the development of new projects in these regions.

The report underscores the need for targeted efforts to address these financing challenges and ensure a more balanced distribution of clean energy investment globally. It highlights the importance of international cooperation and supportive policies to facilitate increased clean energy spending in emerging and developing economies, crucial for achieving global climate goals and sustainable energy access for all.

IEA executive director Fatih Birol said: “The rise in clean energy spending is underpinned by strong economics, by continued cost reductions and by considerations of energy security.

“But there is a strong element of industrial policy, too, as major economies compete for advantage in new clean energy supply chains.

“More must be done to ensure that investment reaches the places where it is needed most, in particular the developing economies where access to affordable, sustainable and secure energy is severely lacking today.”

Related news: G7 Commits to Ending Unabated Coal-Fired Power by 2035

 

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