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G7 Summit: Leaders agree to create ‘Climate Club’ but talks stall on coal and biofuels

Pictured: Olaf Scholz delivering the closing press conference at Schloss Elmau. Image: G7GER

Leaders from the UK, US, Canada, Germany, France, Italy and Japan have today (28 June) wrapped up their discussions in Berlin as part of this year’s G7 Summit.

Also in attendance have been representatives from bodies including the UN, EU and International Energy Agency (IEA), as well as other major and emerging economies including Argentina, South Africa and India, whose Prime Minister Narendra Modhi was present.

Leaders had a lot on their to-do list this year, with the Covid-19 pandemic continuing and with Russia’s war in Ukraine exacerbating issues relating to food and energy costs and access. Host nation Germany had been calling on attendees to make “progress towards an equitable world”, recognising the interconnected nature of these challenges and the need to respond by creating benefits for the environment, the economy, peace and social sustainability.

In the Summit’s closing press conference, German chancellor Olaf Scholz called the start of Russia’s war a “watershed moment” meaning that “nothing is as it was before” in relation to all manner of issues including existing social and environmental challenges. He said the G7 must not backtrack on their “long-term” range of focuses, including “climate protection”.

The final communique from this year’s summit, as usual, features several mentions of the need to combat the climate crisis – with a particular focus on clean energy and food systems. But, also as usual, there are areas where G7 leaders have made weaker agreements than those recommended by key stakeholder groups including businesses, civil society groups and the green economy.

From the creation of a Climate Club to the failure to set a coal generation end-date, edie rounds up what was – and what was not – agreed at the G7 Summit in relation to environmental sustainability.

Accelerating the energy transition

The 2021 G7 Summit saw leaders committing to reach net-zero power systems in the 2030s. This would lay the foundations for net-zero across national economies by 2050. Earlier this year, member nations agreed to ensure that electricity systems are “predominantly” zero-carbon by 2035, with most agreeing that gas-fired generation should be abated with carbon capture by this point and that coal-fired generation should have ended. Japan had reportedly been pushing against a formal end-date to domestic coal generation from existing plants and asked for a “phase-down” rather than a “phase-out”.

“A sustainable planet” is the first topic addressed in the 2022 communique, but most inclusions on energy are there to reaffirm existing commitments and to look towards potentially strengthening commitments at COP27 or at G7 2023. Sholz promised that the G7 will “work even more intensively” on the energy transition in the coming months and at future Summits.

The communique reaffirms the existing 2035 emissions commitment and the commitment to end “inefficient” fossil fuel subsidies by 2025, redirecting them to clean energy and nature. It also reaffirms the nations’ commitments to reduce methane emissions from energy and agriculture by at least 30% between 2020 and 2030. It states that nations “will not compromise” on climate and nature in responding to the energy price crisis.

On coal, the document confirms that nations ended new, direct government support to unabated coal internationally by the end of 2021. It commits nations to end new, direct public support for unabated oil and gas internationally by the end of 2022, except in “limited circumstances” consistent with 1.5C. Scholz indicated that the creation of hydrogen from natural gas may fit this category. The document also flags liquid natural gas imports and storage as necessary in the short-term for some nations highly dependent on Russian gas.

There is, notably, a new commitment to “a highly decarbonised road sector by 2030” and a “Paris-compatible global goal on net-zero emissions from international aviation [and shipping] by 2050”.

Energy efficiency is mentioned several times but there are no new commitments, beyond a broad agreement to increase efforts in “all sectors through regulatory frameworks and incentive-based policy instruments”.

Ensuring a just transition

A summary of discussions on the energy transition and climate action, published on Monday (27 June), states that G7 leaders are “committed to working together to jointly… facilitate the creation of new decent green jobs”, upskilling and reskilling those in high-carbon sectors to fill them and ensuring that education prepares students for a net-zero economy.

That document also states that progress has been made in discussions on contributing to a just transition globally. It confirms that G7 nations want to launch more ‘Just Energy Transition Partnerships’, whereby wealthier nations provide developing and emerging nations with finance and expertise to help them transition high-carbon sectors. Support is provided in terms of policy changes, industry engagement and unlocking finance. The UK Government launched the first of these Partnerships, with South Africa, at COP26. The document confirmed plans to improve that initiative by COP27 and to prepare to launch more.

Other nations set to benefit from these partnerships include Indonesia, Vietnam, Senegal and India. Collectively, they will receive more than a billion euros of public funding from the G7.

Climate finance, loss and damage

After a no-deal at pre-COP27 talks in Bonn this month, G7 leaders were asked to clarify their plans for improving climate finance for developing nations. Wealthy nations pledged in 2009 to provide $100bn of finance annually, but this amount has never been raised in a single year and is unlikely to be raised this year either. Developing nations and leaders including Ban-Ki Moon had been asking for more clarity on when the full amount would be provided, whether back-payments would be made to close the gap, and whether finance would be in the form of grants rather than loans.

Developing nations were also hoping for more ambition on creating a loss and damage framework to help the most-affected nations deal with the economic fallout of physical climate impacts. The US and EU are understood to have opposed the creation of such a framework at COP26.

On finance, the G7 claims it has “made significant progress” towards the $100bn target. It states that new funding for food security, detailed below, should be counted towards this figure. However, there is no formal confirmation that the full amount will be provided by 2023. Nor is there any mention of shifting from loans to grants, or guaranteeing back-payments.

On loss and damage, the communique emphasises how “averting and minimising” damage is preferable to addressing the issue once it happens. It states: “We commit to scale up climate and disaster risk finance and insurance and will work towards a Global Shield against Climate Risks, building on the InsuResilience Global Partnership and other initiatives. We ask our Development Ministers to make progress on the Global Shield by COP27.”

Carbon pricing

G7 nations have never included an agreement on carbon price floors or ceilings in a Summit communique before, but agreed to dedicate time in the agenda to the issue for 2022, in recognition of the impact that carbon pricing can play in delivering the Paris Agreement.

As a result, the communique includes a commitment to establish a ‘Climate Club’ – a forum long-advocated by Germany – by the end of 2022. The Club should enable the sharing of best practice on emissions mitigation policies including carbon pricing, as well as meaningful emissions measurement and reporting.

The Club will also act as the forum for international collaboration on industrial decarbonisation policy packages, such as those designed to increase the uptake of emerging technologies and alternative fuels.

“Climate protection must be a competitive edge and not a drawback,” Sholz said. He emphasised that non-G7 nations will be able to ask to join the Club. Other Club supporters at this stage are the OECD, World Bank, IEA, WTO and International Monetary Fund.

Responding to the food crisis

The UN is estimating that disruption in food supplies from Ukraine and Russia, compounded by India’s wheat export ban, will cause up to 131 million additional people to suffer from undernourishment over the next three years. G7 leaders were under pressure to deliver a response which would also feed into long-term sustainability for food systems.

Sholz said: “The climate crisis, the pandemic and the war from Russia have made [hunger] problems even worse. This is an existential threat in many countries – in Africa, in particular.”

Germany had proposed a temporary waiver on biofuel mandates for road transport to help free up land for growing crops. This was not ultimately agreed to by all G7 parties, with observers noting strong resistance from the US and Canada. The UK was reportedly in strong support. A recent Green Alliance report found that the land used to grow biofuels for road transport in the UK could grow crops capable of feeding 3.5 million people.

The US’s approach, first outlined by Biden at a White House Summit earlier this year, has instead focused on efforts to reduce fertiliser waste in wealthy nations, so as to ensure that nations in the Global South can maintain their fertiliser imports despite disruptions in exports from Russia and Ukraine. Biden’s administration is also providing funding for new, innovative fertilisers that could be produced in different ways, thus enabling nations to increase domestic production.

A statement on food security, issued today, makes no mention of biofuels and tends more towards the US’s approach. It also emphasises the importance of making sure that grain stored in Ukraine is able to be exported safely.The headline Summit result on food security is the creation of a new Global Alliance, in partnership with the World Bank and the EU. The Alliance is committing $4.5bn of additional funding for food security over the next 12 months. Funding will be targeted to those already facing hunger and malnutrition, and those at risk of falling into this category. Nations will work with the private sector and nations with “large food stockpiles” to make food available as aid without distorting markets.

The document also hints that, in the future, G7 nations may make stronger commitments to combat food loss and waste, and to improve biodiversity and soil health to improve food system resilience in the long term. In the meantime, “all partners” are invited to join the new Global Alliance.

Conserving and restoring nature

To our deep concern, biological diversity is being lost at unprecedented and alarming rates, jeopardising sustainable economic development and human health and well-being,” the communique states.

It stresses the urgency of reaching a strong agreement at the UN’s COP15 on biodiversity, which is striving to create a ‘Paris-style’ deal for nature that would end nature loss by 2030 and bring about wide-reaching restoration thereafter. Talks in Nairobi last week proved unfruitful, leaving much work to be done at the final meeting in Montreal in December.

As we await that meeting, the G7 nations reaffirm their own commitment to conserve at least 30% of land and ocean-based habitats nationally by 2030, and to further efforts to deliver this progress internationally. The communique also states: “Recognising that the global crises of climate change, biodiversity loss and pollution are mutually reinforcing, we will intensify our actions in an integrated and holistic manner.” It goes on to recognise the link between not only climate and nature, but the circular economy and nature, with a focus on preventing plastic pollution and reducing waste in food value chains.

Climate risk reporting

After 2021’s Summit saw nations agreeing to implement mandatory climate risk reporting for big companies, this year’s communique states: “We support the Financial Stability Board Roadmap for Addressing Climate-related Financial Risks. We welcome the inauguration of the International Sustainability Standards Board’s (ISSB) and its progress of work on the global baseline of sustainability reporting standards. We support mandatory climate-related financial disclosures and look forward to the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD).”

The TNFD has this week launched its latest pilot to help businesses measure and report their nature-related financial risks and opportunities. A final framework is set to be launched in 2023 and may thereafter be mandated by national or sub-national governments.

© Faversham House Ltd 2022 edie news articles may be copied or forwarded for individual use only. No other reproduction or distribution is permitted without prior written consent.

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