G20 Finance Ministers meet in DC Wednesday and Thursday this week, and G7 Climate and Energy Ministers meet in Sapporo, Japan, April 15th – 16th to discuss climate, energy and environment priorities. Both sets of meetings are critical moments to signal an acceleration of the climate transition from the world largest and richest economies.
- G20 Finance Ministers meet in DC Wednesday and Thursday this week. Disagreements between members regarding the war in Ukraine are likely to continue to disrupt progress in this forum. Like what was seen after the last G20 Finance meeting in February, a Chair’s Summary may be produced instead of a formal communiqué because of these disagreements. G7 Finance Ministers are expected to issue their own joint statement.
- G7 Climate and Energy Ministers meet in Sapporo, Japan, April 15th – 16th to discuss climate, energy and environment priorities. The communique is still under negotiation, but drafts have shown a danger that G7 ministers could end up backsliding on their existing promises on power sector decarbonisation and ending international fossil finance.
G7 climate and energy
As we approach this weekend’s 2023 G7 Climate, Energy and Environment Ministerial, many of the geopolitical challenges that pulled the focus of Germany’s 2022 G7 Presidency away from accelerating the climate transition remain. Hard-won progress was eventually made in 2022 on G7 domestic power sector decarbonisation, scaling up climate finance, ending international fossil finance and scaling up support for countries to address loss & damage due to climate impacts. Under the Japanese Presidency these are either stalled or at risk of regressing.
Dangerous distractions concerning upstream LNG and gas investment and ammonia co-firing with coal have entered negotiations. This would not only represent serious backsliding on existing G7 commitments on domestic decarbonisation and ending international fossil finance, but also risks tying countries to short-term fixes which fail to reduce longer-term dependency on volatile fossil fuels markets.
The outcome of the G7 ministerial is critical to keeping G7 leadership on coal phase out, broader fossil phase out and the phase out of international fossil finance on the minds of G7 leaders ahead of the Leaders’ Summit in Hiroshima in May. The lacklustre push from some G7 governments to prevent b backsliding risks signalling a G7 that is unwilling to reap the benefits of affordable, secure clean energy supplies or future growth markets in clean technologies and undercutting any claim by G7 countries to providing global leadership on the essential task of confronting the climate emergency.
G7 & G20 finance ministers
Multilateral coordination in the G20 Finance continues to be challenging this year. Divided views over the war in Ukraine has led to the publication of Chair summaries following G20 Finance meetings, instead of communiqués.
This puts the onus on G7 Finance Ministers to lead the way. In this critical juncture, what is needed from them is agreement on a full-fledged financial system reform agenda and set of outcomes, to accelerate the transition while managing the economic crisis response. The agenda needed rests on two main pillars:
- Reforming the international financial architecture and improving use of public finance tools. Key outcomes here include an accelerated evolution of the World Bank and all public development banks and ambitious pledges on recycling of Special Drawing Rights, but also improved coordination from G7 member countries on the leverage of their own fiscal tools to accelerate decarbonization goals.
- A pathway to reset finance rules to align private sector flows with climate goals. Beyond the topic of harmonised and mandatory disclosures, this includes a call for mandatory transition plans for the private sector, as well as a call to mainstream climate-related considerations into international prudential rules.
After meeting in Washington D.C. on April 12th, G7 Finance Ministers produced a statement:
- It mostly focuses on recent challenges to financial stability, economic resilience, and measures taken in response to the war in Ukraine
- It also included helpful signals on the first pillar mentioned above, especially on public finance tools, supply chain resilience and decarbonization goals, although more specifics on development banks or SDRs would have also been welcome
- It is worrying, however, that none of the outcomes pertaining to the private finance pillar of this reform agenda were mentioned.
G7 Finance Ministers will meet next in Niigata, Japan, in one month. It is essential for them, on that occasion, to close the gap on the private finance front.
The G7 Finance Ministers’ statement is a helpful preview of some of the discussion topics that will guide their main meeting.
Sime Kammourieh, G7 and G20 finance ministerial expert at E3G said:
“Their commitment to stepping up efforts to support low- and middle-income countries is welcome, although more concrete measures and outcomes will need to be demonstrated in Niigata”.
“The renewed focus on coordination of G7 countries’ fiscal policy, in the context of discussions on supply chain resilience, is a positive development. Fiscal policy coordination should be the bread and butter of Finance Ministers’ multilateral coordination efforts and is particularly critical to achieving collective decarbonization goals”.
“It is worrisome that their statement makes no mention of measures to accelerate the reform and transition of private finance. It is a critical, missing pillar of the systemic finance reform agenda for net zero. It is urgent for G7 Finance Ministers to accelerate their efforts and demonstrate leadership on this front. Going beyond harmonised and ambitious disclosure standards, this agenda should include mandatory private-sector transition planning. It should also include reform of international prudential standards, to ensure the preparedness of the financial sector to the climate challenge.”
Contact
Available for instant reaction, background and comment.
- Alden Meyer, Senior Associate (Mitigation Ambition, US Policy & Politics)
m: +1-202-378-8619, alden.meyer@e3g.org - Maria Pastukhova, Senior Policy Advisor (Energy)
m: +49 (0) 157 779 195 58, maria.pastukhova@e3g.org - Louise Burrows, Senior Policy Advisor (Fossil Fuel Finance)
m: +44 (0) 786 480 2177, louise.burrows@e3g.org - Sima Kammourieh, Senior Policy Advisor – (G7/G20 finance ministers)
m: +49 (0) 160 9596 4443, sima.kammourieh@e3g.org
Notes to Editors
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