Climate coalition: from G-7 to G-3

From Longitude

By Corrado Clini, former Italian Minister for the Environment 


If Donald Trump announced that the US would pull out of the Paris Accord, it was also in large part because European countries refused to negotiate with the US, thus shooting themselves in the foot


 The G-7 Energy Ministers meeting held in April failed to agree on a common statement, due to six countries rejection of the United States request to amend the Paris Accord on climate change. This should come as no surprise. 

It is a well-known fact that former US president Barack Obama did not ask the US Senate to ratify the Paris Agreement, his questionable strategy being instead to consider the agreement a “technical” implementation of the Framework Convention on Climate Change ratified by the US Senate in 1994, rather than an international treaty. In 2015, the US Senate expressed its opposition to Obama’s approach as well as to the content of the Accord. This was due, in particular, to the latter’s failure to address the economic and geopolitical impact of the Paris Accord on the US economy. 

Prior to the G-7 meeting, the US requested that talks be reopened in order to integrate the Paris Accord with measures and mechanisms that would correct any distortions caused by the agreement itself. This request was encouraged by the major US energy companies, which envisaged a progressive and realistic cut in fossil fuels that would not damage the competitiveness of the American economy. 

US oil companies, for instance, recommended introducing a global carbon tax that would directly impact source selection and energy end-use efficiency without causing any distortion. A carbon tax could also “stimulate investments in the ‘right’ low-carbon technologies”. This view was also shared by US Secretary of State and former ExxonMobil CEO Rex Tillerson. 

Last but not least, a revised and integrated Accord would have greater chances of being ratified by the US Senate; thus, the US would be held to the common carbon-cutting commitments.

Apparently, though, the Italian G-7 presidency, France and Germany decided the US was simply scheming to make the Paris Accord fall through. Hence, they hurriedly issued a statement claiming that in no way was the agreement negotiable. Perhaps they hoped that by sticking to their guns, they could coax Trump into treading more lightly. 

In fact, the position taken up by Italy, France and Germany turned out to be a golden ticket for climate change deniers such as White House Chief Strategist Steve Bannon and staunch Paris Agreement opponents such as EPA Administrator Scott Pruitt, who became the de facto “winners” in America’s internal discussion on climate change, as highlighted by The New York Times. 

Once the Taormina G-7 had been wrapped up, Bannon and Pruitt had easy pickings convincing Trump there was no room for negotiation, thus thrashing the hopes of Tillerson, Ivanka Trump and National Economic Council Director Gary Cohn. 

In so many words, the Italian G-7 presidency and the other participating European countries shot themselves in the foot. Furthermore, after the Trump’s decision, Canada, Japan and the United Kingdom softened their support for the European position; as a matter of fact, Canadian premier Trudeau – in view of the Hamburg G-20 slated for July – recommended freezing the climate controversies for the time being to focus instead on global energy policies. 

As German Der Spiegel suggests, after the Taormina G-7 the “climate coalition” dwindled from a G-6 to a G-3. So why is the Paris Accord non-negotiable? The a priori refusal to negotiate with the US is frankly unfathomable, particularly in view of the fact that the US Senate’s position was known since 2015 and that the other six countries were well aware of Obama’s unlikely strategy to bypass ratification. 

Insisting that the Paris Accord is “irreversible and non-negotiable,” quite frankly, makes no sense. At the end of the day, the Accord is simply a very weak, preliminary platform for reducing global carbon emissions. Obama himself had already reduced it from international treaty to mere technical agreement; most notably, the Accord does not lay out any concrete measures and mechanisms to keep the global temperature rise within 2°C. 

There are numerous challenges with respect to decarbonization. The International Energy Agency (IEA) has repeatedly stressed that for the Accord’s objectives to be fulfilled, the weight of fossil fuels in the world energy portfolio must be cut from 86% to 50% by 2040, with the following breakdown: coal from 30% to 13%, oil from 32% to 22% and natural gas from 24% to 15%. At the same time, global energy consumption is expected to rise by 35%, particularly in India, China, Africa and the Middle East. 

An unprecedented challenge of this magnitude calls for common and coordinated worldwide measures and policies, none of which have been identified – let alone negotiated – in the Paris Accord. 

So what are the distortive effects on the US economy? Clearly, the concerns expressed by the US on the distortive effects have fertile ground. Indeed, were the Accord to be implemented as it stands, the lion’s share of the decarbonization burden would fall on the more mature and developed economies, where energy demands are either consistent or even decreasing. 

The key question left unanswered by the Paris Accord is very simple: Is there a way to cut back on fossil fuels while ensuring that the increased energy demands from emerging and developing economies do not penalize the developed economies? 

This is a topical issue not only in the US but also in Europe, Canada, Japan and Australia. In spite of a per-capita GDP five times lower than the US and 3.5 times lower than Germany, in 2016 China invested twice as much as America in clean energy ($110 billion versus $56 billion) reaching a 4% decarbonization rate, twice that of the G-7 countries. China has also promoted and is pumping funds into the first concrete technological and industrial project aimed at decarbonizing the world economy, namely the Global Energy Interconnection. 

But can China realistically drive the world economy while paying the highest per capita price for decarbonization? In this regard, China delivered a very clear message in Brussels last month, when Chinese Premier Li Keqiang declined to sign a common declaration on climate change with the EU due to the latter’s rejection of China’s market economy status. 

To meet the India’s massive growth and energy demand, coal consumption is expected to increase fourfold in the next 25 years, in spite of major investments in renewables and nuclear power. 

The ongoing programs in Africa, South-East Asia, and the Gulf countries coming out of war or sanctions (Iraq and Iran) are finalized to the full exploitation of new oil and gas deposits, to support the growth of developing countries. 

The medium- and long-terms strategies of oil and gas economies such as Saudi Arabia, Russia, the United Arab Emirates, Azerbaijan, Qatar, Nigeria and Venezuela, do not seem oriented towards a reduction of the carbon intensity. 

Norway is committed to reducing its own carbon emissions by 40%, while the national oil company STATOIL is leading the race for Arctic and Barents Sea oil: the oil exports in 2017 will be ten times as much as Norway’s domestic carbon emission. 

The Paris Accord hopes to handle this complex puzzle, made even more intricate by the symmetrical arguments of the involved parties, thanks to each country’s Intended Nationally Determined Contributions (INDCs).

In the best of cases, these INDCs are individually binding policy documents. Assuming that all the existing INDCs are complied with, the amount of fossil fuel in the global energy portfolio would drop to 70% by 2070. 

This is a far cry from the 50% objective set out by the IEA. Furthermore, the IEA has also stated that achieving this goal alone would require investments for at least $15 trillion in the next 20 years in low-carbon technologies and infrastructures, particularly in emerging and developing economies where energy demands are rising. 

In addition the World Bank has estimated that facing the effects of extreme climate events will require a further $70-100 billion yearly. The Paris Accord does not provide for specific measures such as overcoming barriers to investments and low-carbon technology transfer; nor does it lay out market mechanisms such as a carbon tax; and it does not promote insurance coverage systems that can be funded by the market and by international financial institutions in order to cope with extreme climate events. 

The only mechanism set in place is the Green Climate Fund, which should receive $100 billion by 2020 – far too little to drive investments, and coming from a mechanism that is far too similar to other old, inefficient aid plans. Is there enough data here to suggest that a new negotiation phase is called for in order to deal with the economic and geopolitical issues left on the sidelines by the Paris Accord? 

Does anyone really still believe that labeling the Paris Accord as non-negotiable is enough to ensure a low-carbon future? On July 7 and 8, 2017, the G20 will meet in Hamburg under a German presidency. Angela Merkel has announced a paper called “Action Plan on Climate Energy and Growth” that should foster talks with the US and, above all, with China, India, Saudi Arabia and Nigeria. 

It is hard to know what to expect. The G-7 experience and Europe’s disappointment at the failed agreement with China should suggest that it is better to leave aside all the “non-negotiable” rhetoric and focus instead on the real issues at hand if global decarbonization is to be truly achieved. 

Let’s hope Germany succeeds where Italy’s G-7 presidency fell short.