G7 leaders must show leadership in the race to competitive clean economies
Andrew Prag, Managing Director of PolicyThis article first appeared in Business Green
World leaders meeting in Italy this week should take a proactive approach to climate action that promises both economic resilience and environmental stability, writes Andrew Prag from the We Mean Business Coalition
This week, G7 leaders converging in the southern Italian region of Puglia have a historic opportunity to redefine global leadership, reaffirming the G7 nations’ intent to spearhead the world’s race towards competitive clean economies. It’s a chance not merely to discuss but to initiate decisive action on climate change — an endeavour critical to the future health of our planet and economies.
Climate change isn’t a distant threat, it’s a pressing challenge that demands urgent action. By stepping up their climate ambitions and backing them with concrete commitments, the G7 can catalyse a surge in global investment and reinvigorate their economies.
G7 countries make up approximately 38 per cent of the global economy and were responsible for 21 per cent of total greenhouse gas emissions in 2021. They collectively aim to achieve a 40-42 per cent emissions reduction by 2030, but research indicates that existing policies are on track for only a 19-33 per cent fall in emissions by the end of the decade. The analysis suggests this shortfall would lead to greenhouse gas emissions in 2030 exceeding a 1.5C compatible level.
But it’s not just about cutting carbon emissions – it’s about driving innovation, creating jobs, and ensuring sustainable economic growth. Genuine leadership by the G7 in fulfilling the UAE Consensus agreed by 192 countries at COP28 last year can galvanize climate action worldwide. Leadership also means stepping up much-needed support for countries in the Global South, already bearing the brunt of climate impacts.
Under Italy’s presidency, G7 leaders must regain the momentum lost after a muted display of leadership from their finance ministers last month. The communiqué from that meeting neither recognised the urgency and dangers of the climate challenge, nor fully embraced the economic and social benefits to be gained from taking action.
Instead, finance ministers and central bank governors agreed only a menu of policy options for a just transition to net zero emissions. These were set out as non-binding and strongly oriented around short-term costs and the burden of the transition, ignoring increasing evidence of the economic benefits of rapidly accelerating transition.
However, the G7 has often shown its capacity to lead on climate change. As recently as April this year, the group’s climate, energy and environment ministers agreed a communique that showed real progress, including reiterating their commitment to phase out fossil fuels and scale up clean energy, and their recognition of the need for supportive finance to enable a global transition in line with the Paris Agreement’s goal of limiting global warming to 1.5C.
In 2023, the group showed true leadership by committing to phase-out unabated fossil-fuels, paving the way for breakthrough language on transitioning away from fossil fuels, adopted by all UN nations in Dubai. And as early as 2016, the G7 set itself a deadline to eliminate inefficient fossil fuel subsides “by 2025 or sooner”.
But those deadlines are swiftly approaching. Now, more than ever, the world needs the G7 to honour its promises by setting clear timeframes and conditions for phasing out fossil fuels from the economy as part of its transition to clean energy. By doing so, they would not only uphold their commitments but also align themselves with the scientific and economic consensus on the immediate need to transition to cleaner energy sources.
In making such a move, governments will not be acting alone. Major international corporations are advocating for this leadership. These businesses have recognised the profound economic and competitiveness benefits that can be gained from such a transition. More than 260 businesses have urged governments to phase out fossil fuels. These businesses – with $1.6tr combined annual revenue – understand that a sustainable future means stable investments, vibrant market opportunities, and a resilient economy.
At the Bari summit, G7 leaders must demonstrate their commitment to delivering actionable policies by setting clear targets and timelines in their new national commitments, the nationally determined contributions (NDCs) that are due by early next year. These plans should not only ensure a just transition for affected workers and communities but also outline how national targets will support the tripling of renewable energy capacity and doubling of energy efficiency improvements by 2030, with progress reports included. Key within that will be a commitment to immediate action to reform fossil fuel subsidies and redirect these towards energy efficiency and renewable energy initiatives – because the G7’s 2025 goal for phasing out fossil fuel subsidies is literally around the corner. Improving on what the climate and energy ministers achieved in April, another crucial ambition for the G7 must be to show how they will ultimately achieve a fully decarbonised power system by 2035.
Additionally, the G7 nations must extend their support to developing countries, supporting diversifying their energy systems and devising 1.5°C-aligned economic pathways without adding to sovereign debt burdens, thus fostering sustainable and equitable development. Signalling this financial support from the G7 is essential for building trust towards global action.
The integration of nature and biodiversity targets into NDCs is paramount, with commitments to halt and reverse deforestation and forest degradation by 2030 being essential. Acknowledging the interconnectedness between nature and climate is crucial for achieving the Paris Agreement objectives.
Italy and the G7 have an opportunity to show global leadership by fulfilling their commitments and accelerating the transition to a sustainable future based on scientific principles. Despite existing challenges, a proactive approach promises both economic resilience and environmental stability.
By embracing bold actions now, the G7 can establish the groundwork for a sustainable and prosperous future for future generations.