The G20 meeting in Hangzhou, China, this September brings together leaders of the world’s largest economies for the first such gathering since the 2015 Paris Agreement on climate. G20 Leaders Summits traditionally focus on economic growth and financial stability, but since more than 190 countries collectively agreed to greatly enhance mitigation of the causes and impacts of climate change, the need to tackle a changing climate and foster clean energy has become a clear economic and business reality.
Now business leaders, civil society and the public are looking for evidence that world leaders understand that Paris was indeed a game-changer. As the G20’s current and incoming presidents, China and Germany need to demonstrate leadership to prove that the top 20 largest economies are prepared to galvanize strong action on climate and clean energy.
Collectively, G20 countries represent roughly 80 percent of global GDP and roughly 80 percent of greenhouse gas emissions.
That means that if they hit their emissions reduction targets, these 20 countries can bend the global emissions curve downward, meeting their responsibility to their citizens, as well as to the smaller economies that are most vulnerable to climate change.
Practically and symbolically, the G20 is well-placed to show that climate action goes hand in hand with robust and equitable growth. The Global Commission on Economy and Climate — a group of former heads of state, finance ministers, CEOs of major companies and banks, and economic leaders — has gathered evidence on how climate action can deliver jobs, help reduce poverty and boost development. Leaders in the business and investment communities are already starting to take action to seize these opportunities.
So what specific messages from the G20 meeting would indicate that world leaders are actively embracing the new post-Paris era? To begin with, the concluding Summit Communiqué could put climate and clean energy at the top, rather than buried near the end, to show its new importance.
The communiqué could also include the following:
1. A commitment to phase out fossil fuel subsidies no later than 2025
Leaders should acknowledge that fossil fuel subsidies and tax breaks cost an estimated $550 billion per year globally and encourage inefficient investments in further fossil fuel exploration and production, discouraging energy innovation and efficiency. They also come at huge cost to the subsidizing governments — often more than is spent domestically on health or on education, as is the case in Indonesia and was previously the case in Mexico. At the 2009 G20 Summit in Pittsburgh, countries committed to phase out inefficient fossil fuel subsidies over the “medium term,” a major achievement despite its ambiguity. This year, G7 countries and the North American leaders of Canada, Mexico and the United States have defined “medium term,” committing to a 2025 phase-out at the latest. Now is the right time for the G20 to make its own target date for phase out crystal clear, in a way that aligns with the commitments made in Paris and the 2030 Sustainable Development Goals.
2. A push for green finance
A truly sustainable global economy will have incentives to shift and scale up financing, moving away from polluting, inefficient activities towards climate action that is integrated into the economic core, instead of depending upon the small, discrete pots of “green” money seen in the past. One way the G20 can incentivize low-carbon investment is by pushing comprehensive climate-related financial risk disclosure.
When businesses and investors assess risk, they use particular tools and standards. Updating these to reflect climate-related risks — such as more frequent extreme weather events and the potential for stranded fossil fuel assets as countries implement the Paris Agreement — and requiring businesses to disclose those risks, would lead to better, more sustainable long-term investments, not to mention increased trust and confidence. In a welcome move, an industry-led task force, established under the Financial Stability Board at the request of G20 finance ministers, will offer recommendations this year for voluntary disclosure of business climate risks. In the meantime, some countries are leading the way on transparency: France is already implementing mandatory disclosure of climate-related risks, and other countries are discussing doing so.
China is leading by example. Under its G20 presidency, China set up a Green Finance Study Group to identify institutional and market barriers and opportunities to mobilize private low-carbon investment. The findings of their analysis of actions on the ground need to inform the G20’s 2017 agenda, as evidence that G20 countries truly see incentives for low-carbon and climate-resilient investment as a global priority.
3. Affirmation that the Paris Agreement is the way forward
Another significant indicator of the post-Paris era would be if all G20 parties agreed to ratify the Agreement before the end of the year, ensuring its entry into force before the upcoming political transitions in the U.S. and China. Countries should also reiterate their efforts to meet or exceed their existing national emissions targets.
Such affirmations would encourage even more actors in the private sector to take advantage of the business opportunities that emissions reductions create. Many businesses have already committed to programs that will reduce emissions, such as Science Based Targets and 100-Percent Renewables. Divestment from fossil fuels by investors such as the Rockefeller Brothers Fund creates yet another constituency whose business goals are aligning with the Paris Agreement.
Economic growth has historically come at the expense of environmental sustainability, but that is changing drastically in the post-Paris world, where sustainability is increasingly seen as essential to economic growth. The last two years have brought increased economic growth with flat energy-related carbon dioxide emissions. The next step is to ensure that climate and clean energy action can stimulate growth. September’s G20 meeting is the perfect opportunity to acknowledge what is already happening, to further narrow the gap between political and economic reality, and to inspire all sectors to actively harness these forces for the global benefit.
Helen Mountford is the Director of Economics at the World Resources Institute and the Program Director for the New Climate Economy (NCE) initiative.
Lead image: Hangzhou, China, is the site of the G20 Leaders Summit, September 4-5, 2016. Photo by xiquinhosilva/Compfight cc
This article was originally published by the World Resources Institute under a Creative Commons license.