Global call to end support for fossil fuels & promote renewable energy

Originally posted in Financial Express on 11 May 2023

On the background of geopolitical challenges, the 49th G7 Summit to be held in Japan, will be a major event for developed countries to review their ongoing pursuit to address the global climate crisis and to pave the way for developing world to follow and spur collective action on this global challenge. A major demand raised by international civil societies is ‘to develop a roadmap to operationalise the G7 leaders’ commitment to end government support for all fossil fuels through Official Development Assistance (ODA), export finance, investment and financial and trade promotion support and accelerate the transition to renewable energy’.

In the 2022 summit, the G7 emphasised that climate change is a global challenge that requires urgent and ambitious actions. In 2023, G7 ministers agreed to speed up the clean energy transition and set new targets for solar and wind capacity as a part of the goal to reach net-zero greenhouse gas (GHG) emissions by 2050 (Obayashi, 2023). This year, the summit is committing to the transition to a global value chains towards net-zero, climate-resilient, pollution-free, more circular and nature-positive ones. But there are lacks of actual action measures, rather most are still very broad based, generalised and often less specified goals, objectives and future commitments. The timeline of the implementation process and funding mechanism are not clear. They also have not reached to a consensus on a set timetable for coal phase-out.

Being an emerging developing country, Bangladesh has special interest on this summit on multiple accounts, including food and energy security, climate change and sustainable development. Based on the contemporary geo-political dynamics of the global energy sector, it is the absolutely necessary to raise the issues and concerns related to G7 countries investment in fossil fuels in developing countries, particularly in Bangladesh and to demand for accelerated renewable energy financing in the coming years.

Global Commitments of G7 Countries for Energy Transition: G7 countries have taken part in the global race of commitment to shifting to renewables and reducing GHG emissions. However, not all are meeting their commitments at the same rate and a lot of delay tactics are used. In order to meet the commitments, various actions with work-plans including fossil fuel phase-out, financing in the renewable energy sector, meeting NDC targets, and fulfilling the promises as members of various inter-governmental organisations such as Green Climate Fund (GCF), Global Environment Facility (GEF) are required. The commitments of G7 countries are summarised in the tables.

Current Debate on Energy-Related Issues in the G7 Summit 2023: The G7’s commitment to achieve net-zero emissions during the summit is confounding. On one hand the group is showing decent commitments on some issues, on the other hand, the efforts are not even bare minimum on other issues. The group itself has acknowledged that their movements on the phase-out of fossil fuel and fossil fuel subsidies are far behind their commitment. The discussion on ending LNG finances is still off the table as the group is considering “LNG as transitional fuel.” The group has shown notable progress on setting some concrete renewable energy goals to be achieved by 2030 in parallel to the fossil fuel phase-out. However, they still have not expressed any strong determination to mobilise the climate finance to fight against the risks of climate change, adaptation and mitigation, and accelerate renewable energy finances in the LDCs, developing and vulnerable countries.

Phasing out coal at home and abroad. At the most recent meeting of the G7 countries, the group of nations couldn’t come up with any firm date to phase out coal. The G7 countries had committed to abandoning coal by 2030 at home and to end new direct public support for the international unabated fossil fuel energy sector by the end of 2022. Canada and the UK pushed for the inclusion of a 2030 deadline and more ambitious plans to eliminate domestic coal-fired electricity. But their plan failed following strong opposition from other G7 countries. As France has already phased out coal and has accepted the proposal, Japan debated against them, which was supported by the United States (US) and the European Union (EU). Germany reportedly offered alternative wordings to the firm timeline proposed by the UK, with drafts being circulated mentioning coal phase-out “ideally by 2030” or “in the 2030s”. The group is deviating from the uniform goal of coal phase out. Japan, US, Canada and UK are also financing and planning to finance ‘clean coal power plants’, that will use technologies such as carbon capture and ultra carbon capture, greenwashing etc.

Phasing out LNG at home and abroad. G7s have admitted that fossil fuel subsidies are inconsistent with the goals of the Paris Agreement to the elimination of inefficient fossil fuel subsidies by 2025 or sooner. The 2023 environmental ministers’ communique stated that investment in the gas sector can be appropriate to help address potential market shortfalls (high energy prices and inflation for the degradation of environmental, economic and social impact) provoked by the Ukraine crisis. The group has emphasised the importance of LNG and natural gas as energy sources for the transition period to the global net zero commitment. USA with the highest LNG export capacity is now working on promoting ‘green’ natural gas. Canada plans to enter the LNG export regime in 2025 and will be able to export 14m tonnes of LNG yearly with the future potential of 28m tonnes. Japan is considering the requirement of gas and LNG for about 10 to 15 years before figuring out the exit plan if there will be any. Japan is investing in LNG globally, including in Bangladesh.

Promoting renewable energy at home and abroad. G7 nations recalled their commitment to achieving fully or predominantly decarbonised power sectors by 2035. They also assured to remain committed to ensuring access to affordable, reliable, and sustainable energy for all, through the Communiqué. The group announced major new wind and solar goals, targeting a collective increase in offshore wind capacity of 150 GW and 1 TW Solar PV by 2030. The plan involves accelerating the deployment of all renewable energy sources, such as solar, onshore/offshore wind, hydropower, geothermal, sustainable biomass, biomethane, and tidal power. However, G7 member nations are yet to shed light on their individual targets to promote renewable energy overseas and mobilise funding for those.

Global commitments to support developing countries to address climate change. G7 aims to work towards ensuring that the Green Climate Fund (GCF) continues to promote the paradigm shift towards low-emission and climate-resilient development pathways by using ambitious, cost-effective, and transformative climate investments. Through acceleration of innovative solutions and de-risking investments both for mitigation and adaptation. The G7s commit to implement establishing new funding arrangements for responding to loss and damage. The fund will include a special fund for assisting developing countries that are particularly vulnerable to the adverse effects of climate change in responding to loss and damage (Article 8, Paris Agreement). G7 countries are committed to the Global Shield Financing Facility that will finance integrated financial protection packages to those vulnerable to climate shocks and disasters

Financing debate. The group has highlighted the necessity of mobilising financial resources from private and public, national and international sources to achieve the existing commitments. The environment ministers emphasised on the leading role of International Financial Institutions (IFIs) including Multilateral Development Banks (MDBs) in mobilising finance. The G7s will continue to speed up efforts to implement the Glasgow Climate Pact’s call to developed country Parties to at least double their collective provision of climate finance for adaptation to developing country Parties from 2019 levels by 2025. After failing to scale up finance provision to developing countries to US$100b per year, G7s are working with partner contributors to scale up from US$ 20b in 2019 to US$40b in 2025. The freshly doubled allocation is far less than what is actually required. Given global inflation, increasing the global commitment to beyond US$ 100b per year – or beyond US$ 50b for climate adaptation would be required.

Technology as a means to achieving net zero targets. The environment ministers of the G7 countries have recognised that low-carbon and renewable hydrogen and its derivatives. Ammonia should be developed and used where they are impactful but only if it proves to be effective emission reduction tools to advance decarbonisation across sectors. Some countries also consider utilising hydrogen to convert electricity surplus from renewable energy. Japan wants to start co-firing ammonia and hydrogen in its coal-fueled power plants to reduce CO2 emissions and is seeking the endorsement of other G7 countries for this plan. Japan’s has also introduced the new “Green Transformation” (GX) policy aiming to deploy these non- clean technologies all over Asia. The approach has prompted concern on environmental and economic grounds. Using ammonia to generate power with less carbon dioxide emissions is financially burdensome, inefficient, and releases other greenhouse gases instead. As a result, other group of seven nations have not endorsed the deployment of technologies to support fossil fuels for power generation.

Trade and market measure related concerns. The G7 environment ministers commit to transforming global value chains towards net-zero, climate-resilient, pollution-free, more circular and nature positive ones. While also ensuring their security, respect for human rights and responsible business conduct. There are lots of dualities in these commitments. G7 countries are heavily reliant on energy suppliers that are not aligned to human and labour rights and practice monopoly measures. Whereas there are responsible, competitive, declining carbon emitting suppliers within themselves. Some of the G7 countries’ promotion of LNG fired electricity plants or shell gas expansion do not support these goals. A valid commitment should enable funding and investments for expansion of renewable energy for developing countries like Bangladesh.

Expectations of Bangladesh from G7 Summit’23: Against the urgent expectations of Least Developed Countries (LDCs), developing and vulnerable countries, G7s are responding to those expectations which are inadequate. As a graduating developing country, Bangladesh expects to receive proper guidance, assistance, support, and funding to prevent, mitigate, counter and adapt climate change to ensure the clean energy transition without risking domestic energy security.

Ending support for fossil fuels. G7s will each provide an update on their approaches to eliminate fossil fuel supports by 2023. They should stop international funding to all types of fossil fuel with or without the carbon capture technology. Not only coal, but the investments in LNG by G7s also need to be phased out in developing countries like Bangladesh. The G7s are emphasising the usagae of LNG as a transitional fuel within their own geographicalterritory and overseas. As a result, Japan is promoting to make Bangladesh LNG heavy. Summit Corporation Ltd of Bangladesh has signed a memorandum of understanding with Japan’s Jera Asia Pte Ltd to collaborate to supply liquefied natural gas (LNG) and other fuels and develop on-shore and off-shore regasification and storage infrastructure for Bangladesh. Such investments signal that G7 is not much committed to fulfil it’s global fossil fuel commitments. Not only LNG is one form of fossil fuel, it is also economically burdensome for LDCs and developing countries like Bangladesh. Hence G7 should immediately stop all the direct and indirect support towards financing the LNG fuel and infrastructure as it does not align with the commitment to phase out fossil fuel.

Support to accelerate the transition to renewable energy. G7s can help Bangladesh achieve the goal of 40 per cent of renewable by 2041 through providing financial and technological assistance to ensure a smooth energy transition without the risk of energy security. Bangladesh has already received $6.71 billion in the renewable energy sector from national and international sources between 2016 to 2022. The received investment is not adequate and would require an investment of $1.53 billion to $1.71 billion yearly during the timeline of 2024- 2041 to achieve its ambitious 40 per cent renewable energy target in total generation capacity. In comparison to the amount G7s have committed as climate finance of the developing countries, this required investment is insignificant. G7 members should work together with other developed country Parties to help developing and vulnerable countries to meet their renewable energy targets through directly financing renewable and clean energy projects such as constructing renewable energy (solar, wind) power plants, help transforming diesel based irrigation systems to solar energy irrigation system, building solar PVs on the rooftops of the community infratsructures etc. Under the provisions of article 8 of the TRIPS agreement, developing countries like Bangladesh should be allowed to use renewable energy technologies to achieve critical energy security and sovereignty.

Discourage non-clean technologies as a mean to achieve clean energy targets. The promotion of the usage of technologies such as CCS/CCUS, ammonia co-firing with coal and hydrogen co-firing with gas will linger the use of fossil fuels and may create a negative spill over effect in Bangladesh and hamper the goal of net zero emission. The new Intregrated Power and Enegrgy Master Plan (IEPMP) includes the detailed plan on how these technologies (31 per cent) can be used to attain the 40 per cent clean energy target by 2041. Such technologies are new, yet to be tested and expensive for developing countries like Bangladesh. Latest analysis shows retrofitting Asian coal plants to run on Ammonia would be an immense waste of capital that could do more harm than good. These untested techonologies generated concerns for even other G7 7 The financial promises for renewable energy of G7 are not fully clarified. There will be a meeting in June 2023 where the targets will be declared. Power from renewable energy sources are much cheaper comparaed to those of technologically heavy fuels such as ammonia and hydrogen. G7 should stop advocating for these expensive non- clean technologies and must stop deploying it in the LDCs, developing countries and V20s specially in Bangladesh.

Creating a meaningful carbon market with the participation of LDCs. High integrity carbon markets can play in achieving net-zero emissions by 2050, in enhancing the implementation and ambition of 2030 NDCs. The use of carbon markets cannot be a substitute for the deep emissions cuts necessary. Utilisation and design of high integrity carbon markets with robust safeguards can play an important role in mobilising public and private sector finance, including results-based climate finance, unlocking social and environmental co-benefits, deploying clean, safe, and sustainable decarbonisation technologies, in LDCs and developing countries. The G7s are steering clear of the issue of integrating developing countries in the global carbon market. The discussion should not proceed without considering the importance of establishing carbon markets in countries like Bangladesh.

Non-trade barriers. G7 countries are aiming to promote a sustainable, nature based, circular supply chain to achieve the net zero targets. It needs to be emphasised that Bangladesh supports the sustainability goals of the G7 countries. But at the same time, the path towards sustainable future and circular economy should not exclude developing countries like Bangladesh. Future goal of circular supply chain should keep in mind that the circularity needs to be for the global supply chain. Non trade barriers should not be used in the name of circular economy to abandon the free trade principles and restrict access of developing countries to the G7 markets.

Inclusive and just transition. G7 Countries should continue to support and prepare workers and communities, including through inclusive social dialogue, skills development and transfer, social protection, education, re-skilling and training, at local, regional and national levels, in line with the International Labour Organization (ILO)’s 2015 Guidelines for a Just Transition. G7 countries need to recognise that just transition is a key element for climate, energy and environmental action not only at the national level, but also at the international level. It should be remembered that the just transition implies a gradual transition – not a disrupting rapid transition and includes easy access to technologies, capacity building and funding.

Concluding Note: Every G7 summit begins with a set of goals and intentions and concludes with a set of pledges. In the ministerial communiqués of the G7 Summits in 2022 and 2023, it was mentioned that the triple global crisis needed to be addressed. This repetition could be a sign that these discussions and pledges have not yet been accomplished and may be waning over time. In other words, the current position of G7 and their previous commitments are on a standstill with some moving in opposite directions.