Evaluating the Italian-led G7's climate and energy strategy (II/II)

This article is part two of a two-part series about the G7. You can find part one here.

Former Italian Minister Corrado Clini's assessment of the Italian-led G7's recent communiqué on climate change and energy security priorities reveals both positive strides and critical gaps.

The reaffirmation of objectives from the UAE Consensus achieved at CoP28 is a positive step, particularly in light of concerns about the EU's stance in Baku on “transitioning away” from fossil fuels. This specific wording is, in fact, noticeably absent from the most recent EU submission to the UNFCCC. As Clini emphasized, multilateralism remains crucial in addressing the climate crisis and energy security amidst geopolitical tensions. While the G7's efforts are commendable, their efficacy is limited without broader global cooperation. 

Including nuclear energy in decarbonisation efforts is seen as a milestone for global competitiveness. However, it's also acknowledged that the EU's 2030 climate goals heavily rely on renewable expansion due to the time-intensive nature of nuclear projects.

Similarly, while the G7's focus on reducing carbon intensity in hard-to-abate sectors is laudable, the feasibility of some proposed solutions, such as hydrogen for heating and road transport, and carbon capture, remains to be determined due to technical challenges and cost considerations. 

Phasing out coal by 2035 for G7 countries is a commendable objective, but it risks having limited effects on the global coal balance. China and India currently account for almost 70% of coal consumption for electricity production, compared to just 13.5% for the USA, Japan, and Germany combined.

The other question is what will replace coal. According to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA), planned LNG storage facilities in 2030 will exceed expected gas demand in Europe by over 76% if renewable sources were actually tripled. But if this does not happen, LNG from the USA - and Qatar - will be readily available, disregarding commitments to reduce methane emissions. The G7 communique does not address this issue and highlights a fundamental contradiction between climate neutrality proclamations and the hard reality of climate-killing infrastructure.

We also applaud initiatives such as the “G7 Adaptation Accelerator Hub”, recognising their potential in addressing climate challenges in vulnerable regions. This goes hand in hand with progress in the UNFCCC process on the Loss and Damage Fund, with work being led by another long-serving Italian UN officer.

The G7's commitment to tripling the amount of energy from renewable sources by 2030 means nearing China's current level of expansion within the next five years. In 2023, China had renewable capacity five times that of the USA and four times that of the USA and Australia combined. If we consider Brazil and India, the gap is even wider.

But by 2030, China, India, and Brazil won't wait for the G7 and will be rapidly moving towards breaking new records in renewable capacity. India aims to become the world's largest economy, with the highest percentage of energy from renewable sources. The United Arab Emirates (UAE) and Saudi Arabia are building extensive infrastructure for renewable energy use in collaboration with major Chinese companies.

This also means that the availability of critical minerals and rare earths will be decisive in the next five years. Looking at 2023 data on rare earths, China's production is five times that of the USA and four times that of the USA and Australia combined. Europe imports 98% of rare earths from China, not to mention other critical materials. 

The G7 document emphasises the urgency of diversifying the supply chain, reducing dependence on supplies from China. Still, the urgency of developing renewable energy sources and electric cars in the next five years is not realistically compatible with the timelines for potential increased extraction and processing of critical minerals and rare earths by G7 country companies.

In light of escalating climate risks, the necessity of green reindustrialisation is underscored, contingent upon international collaboration and technological exchange. The EU's role is crucial for meaningful progress, particularly in engaging with key players like China. Drafting commonly agreed standards and climate Key Performance Indicators (KPIs) for more balanced trade agreements could mitigate industrial competitiveness issues, which the EU Ambassador in China has identified as "politically and economically unsustainable."

Ultimately, the G7's climate and energy strategy must reflect a broader global perspective to effectively address the pressing challenges of climate change and energy security. Clini concludes by underscoring the importance of incorporating perspectives from countries like China, India, Brazil, the UAE, and Saudi Arabia to prevent the G7 from being perceived as a minority group dictating rules to the majority of the world's economies. Without convergence, there's a risk of further destabilisation and insecurity, potentially leading to new fault lines. A recent report showed that approximately 20% of global oil payments were settled in local currencies instead of the US dollar in 2023.