CHAIRMAN’S STATEMENT

T20 Energy Conference, Feb 24-25, 2017

Shanghai Institutes for International Studies (SIIS), Shanghai

Options for G20 Climate Action

Despite some progress on climate response over the past two decades and renewable energy costs approaching parity with fossil fuel, we are certain to overshoot the 2-degree target if we stay on the current pathway. The consequences may be catastrophic and irreversible. A decisive transition to a low-carbon pathway requiresaction on sustainable infrastructure, financial flows consistent with a low-carbon transition, promotion of targeted R&D, demand-side management, and some form of carbon pricing.

  1. Climate risks are systemic and may lead to contagion or knock-on effects that could destabilize the global financial system. Questions should be framed as macro-economic and public finance policy issues. In consequence, energy should no longer be left primarily to the Group of Twenty (G20) “Sherpa track,” but should be included prominently in the “finance track” as a matter for finance ministers and central bank governors.
  • Climate finance: The G20 should request the GCF and other climate funds to develop priority-setting criteria for climate mitigation and adaptation projects. MDBs and the Global Infrastructure Hub should build pipelines of accredited project proposals to help persuade donors to provide funding to priority projects.
  • Green finance: The G20 should ask the FSB and the Task Force on Climate-related Financial Disclosures to develop model legislation on financial disclosure, including state-owned as well as private-sector carbon assets. Legislation could require risk management strategies for scenarios (e.g., BAU, Intended Nationally Determined Contribution, and 2-degree target).
  • Unburnable carbon and stranded assets: The G20 should invite the OECD, IEA, IMF, IRENA ,AIIB and other institutions to develop a common methodology to assess fossil fuel subsidies and build a database, similar to agricultural subsidies. The G20 members should set a target date (e.g., 2022) for eliminating fossil fuel subsidies, including production as well as consumption subsidies. The G20 should ask FSB and TFCD to assess and report on the impact of stranded assets (both physical and resource assets) on financial markets.

2,Climate Protection and Energy Transformation:

  • Anchor climate protection and energy transformation to XX% renewables by 2025 in their annual Summit agenda, and ask Ministers of Energy (transformation) to provide annual updates on energy-sector innovation and their compatibility with climate goals (with IRENA).
  • Ensure that energy transformation to XX% renewables by 2025and climate change are included in Finance Track work streams, with annual reporting and follow-up.
  • Pledge to phase out, by 2022, 100% subsidies and privileges for fossil energy exploration, extraction, processing, trade and consumption, and establish strict liability for environmental damage and legacy costs.Call on multilateral and national development banks to align investment with climate and energy transformation goals and report annually.
  • G20 Ministers of Development and Energy should work with IRENA to assess the potential of smart low-voltage direct-current energy systems to provide off-grid access to electricity. Existing initiatives to assist developing countries in low-carbon development should be supported, such as the Africa Renewable Energy Initiative and the NDC Partnership.
  1. Sustainable infrastructure: The G20 should invite MDBs to develop standards for tender calls and rating and establish replicable and scalable platforms for infrastructure development. MDBs should establish infrastructure as an asset class to facilitate the use of different financing instruments based on the risk profile of infrastructure investment. MDBs should also formulate energy efficiency and environmental standards for infrastructure as part of their loan conditions to encourage their adoption by borrowing countries.
  2. Targeted R&D: Thanks to dramatic cost reductions over the past decade, renewables have become competitive with fossil fuels in electric power generation, especially when externalities are considered. More R&D needs to be done to lower the cost of renewables and improve energy storage and efficiency as well as transmission technology. The G20 should promote a R&D collaborative on low-cost, clean, and efficient energy services. The G20 should elicit pledges from G20 members to fund low-carbon R&D (e.g., as a certain proportion of national R&D) and disseminate findings. The G20 could follow up its “Mission Innovation” and the “Breakthrough Initiative” by asking G20 Energy Ministers to translate the Consultative Group on International Agricultural Research model from agriculture into the green energy field and to report on how the Advanced Market Commitments mechanism might be applied to clean energy.
  1. Demand-side management: Improving energy efficiency is the most cost-effective way of addressing climate challenges. The G20 should invite the World Bank, IEF, OECD,the IEA, IRENA ,AIIB and other institutionsto report on best practices in improving energy efficiency, ranging from fuel efficiency standards to low-carbon urban planning (e.g., mass rapid transit in combination with ride sharing).
  1. Carbon pricing: Mindful of the politics as well as social impacts of carbon pricing, G20 countries should commit to develop nationally appropriate carbon pricing mechanisms suited to their local context (e.g., carbon fine/tax, cap-and-trade). Specifying the use of carbon revenue to facilitate a low-carbon transition (e.g., targeted income transfers, R&D programs, investment in renewables) could enhance the political acceptability of custom-tailored carbon pricing mechanisms.
  1. Climate engineering: Some believe climate engineering may be required to offset the potential consequences and future costs of global warming. However, the prevailing current view appears to be that geoengineering is a “cure worse than the disease.” Given that an insurance policy may be prudent, the G20 could ask G20 Science Advisors for proposals for processes to govern future research experiments in climate engineering and potential large scale deployment.Issues include consideration of realistic forecasts of the scale and impact of mitigation efforts, how to constitute the body to assess research proposals and outcomes; the criteria for decision-making; and transparency and accountability provisions.