Leaders of the G7 nations descended on Cornwall over 11-13 June to discuss a uniform approach to meeting the challenges of the coronavirus pandemic and to "build back better". While responses to the pandemic were clearly high on the agenda, the G7 summit presented a pivotal opportunity to further develop a multilateral consensus on mobilising a green revolution which would protect the planet for future generations.
G7 leaders reaffirmed their commitment to the Paris Agreement and to accelerating efforts toward achieving net zero by 2050 at the latest. The G7 agreed to lead a "technology-driven transition to net zero", which would encompass the following policy areas.
Domestically, each G7 nation has committed to achieving an "overwhelmingly decarbonised power system" in the 2030s. Internationally, commitments were made to align international financing with the global achievement of net zero by no later 2050, with deep emissions reductions in the 2020s. To this end, any new government support initiatives for carbon-intensive energies would be phased out.
G7 leaders committed to rapidly scale up technologies that would accelerate the transition away from unabated coal capacity. This transition would be mindful of the impact on affected persons and sectors to avoid anyone being left behind. The G7 stressed that international investment in coal, and any new direct government support for international coal power generation, must stop now. The efforts of Climate Investment Funds and their donors were welcomed in accelerating this transition, and the G7 called on major economies to adopt similar commitments in scaling up technologies and infrastructure to facilitate the transition. Finally, the G7 reaffirmed its commitment to eliminate inefficient fossil fuel subsidies by 2025.
Though never explicitly mentioned, in making these commitments the G7 was attempting to pressurise coal-intensive economies to adopt a similar approach.
G7 committed to scaling up zero emission vehicle technologies, including the roll out of charging and fuelling infrastructure, accelerating the transition away from petrol and diesel cars, and promoting the uptake of zero emission vehicles.
Industrial and innovation sectors
G7 will take action to decarbonise areas of manufacturing and chemicals in order to reach net zero. In doing so, members will harness their collective strengths in science, technological innovation, policy, financing and regulation, which includes the launch of the G7 Industrial Decarbonisation Agenda to amplify the ambition of existing initiatives. The G7 committed to further action on public procurement standards to define and stimulate the demand for green products and enhance energy efficiency within industry. Finally, the G7 promised accelerated progress on electrification, batteries, hydrogen, carbon capture utilization and storage, zero emission aviation and shipping, and nuclear power.
Homes and buildings
The G7 recognised the need for "an urgent step change" in deploying renewable heating/cooling and reducing energy demand, as well as shifts in building design and the use of sustainable materials and retrofits. The G7 welcomed the goal of the Super-Efficient Equipment and Appliance Deployment initiative in doubling the efficiency of lighting, cooling, refrigeration and motor systems sold globally by 2030.
Agriculture, forestry and other land use sectors
The G7 committed to ensuring policies encourage sustainable production, the sequestration of carbon and the protection, conservation and regeneration of ecosystems. The G7 looked forward to opportunities at COP26 and the UN Food Systems Summit to discuss these issues.
The vaunted green revolution was described in the communique as "the greatest economic opportunity of our time" to support the levelling-up agenda while tackling the threat of climate change. To meet this challenge, the G7 acknowledged that finance and investment needed to be mobilised at record pace from all available sources.
The collective goal of jointly mobilising $100 billion per year in green finance for developing countries through to 2025 was reaffirmed. This target was first agreed in 2009, with a view to it being met by 2020. Due to the coronavirus pandemic, however, this target was not reached. At the G7 summit in 2021, leaders agreed to raise contributions in order to meet this target, although specific actions on this subject have not been agreed.
Events such as the G7 are always likely to produce fairly broad statements, and we look forward to more detailed statements and policy initiatives following COP26.
That said, it is good to see the focus switching to the more difficult areas of net zero. In many ways, the roll-out of renewable electricity generation is the easy part and the area where, in the UK, we have made excellent progress. Heavy industry, transport and domestic heating are going to prove more difficult to address. We expect our clients to be particularly interested in, for example:
- the forthcoming government procurement process for carbon capture and hydrogen clusters, with two UK priority clusters to be announced in August 2021. There will be investment opportunities across the supply chain
- the application of smart technology to electric vehicles. We have recently seen eye-catching valuations for energy supply companies that have invested in smart grid technology linked to electric vehicles, for example. We expect this trend to continue, with interest from private equity investors
- further government announcements on how they will support the switch away from the use of natural gas in domestic heating, as well as improving the energy efficiency of the UK's ageing housing stock. The government recently cancelled its "Green Homes Grant" and it remains to be seen what will substantively replace it, and catalyse much needed private sector investment.