Global overheating and its devastating impacts will be the main concern around the world when this Covid-19 pandemic subsides during 2021. Cutting emission of methane, carbon dioxide, and other greenhouse gases needs speeding up. So does adaptation to the inevitable consequences of what some – euphemistically – still call "climate change". The urgency of action will be underlined again, like every summer in the Northern hemisphere, by the inescapable effects of rising heat, rising seas, and ferocious weather systems inflicting damage.
The G20 should help with international policy coordination and the promotion of good practice in climate protection across policy fields. It should continue to prepare economic and fiscal policies as well as the regulation of financial markets for the challenges ahead, but it needs to do more. Blinded by incumbent interests and path-dependent on pro-fossil policies, many governments find it hard to develop effective policies, budgets, and laws. The T20 think tanks should therefore be prepared to lead.
When the restrictions designed to slow the pandemic are lifted, one of the priorities for finance ministers will be to restore the fiscal space needed to fight the next crisis. They need to reduce spending, raise taxes and improve tax collection quickly but carefully. They must avoid killing the resumption of economic and social activities, but they must also steer production, trade and consumption away from the carbon-intensive patterns and structures of the dirty past and shift them towards a carbon-neutral future. Because of the spill-over effects in the globalised economy, there is a clear policy coordination challenge that only the G20 can meet.
It may be easier than often assumed, for the G20 already has much of what is needed:
The first step would be to end – as soon as possible – all subsidies and privilege to fossil energies. The G20 Leaders meeting in the Pittsburgh Summit in 2009 requested the OECD and other international organisations to provide an analysis of the scope of energy subsidies, which they did on a regular basis up to the Cannes Summit in 2011. The intention was to set in motion a process of review of such subsidies on the way to their elimination. The process started in Pittsburgh failed: It fizzled out before the work was done, and the scope of the exercise was too narrow, by focussing only on those fossil fuel subsidies that the G20 members deemed “inefficient” – which in turn invited protracted debates on defining inefficient fossil fuel subsidies.
The G20 under the leadership of Italy should do better. A new initiative is needed, perhaps jointly with the US if they engage constructively again, to provide a full inventory of all subsidies and privileges that promote the extraction, processing, transportation, storage, trade or use of any fossil commodity, infrastructure or fuel. All of these are inefficient, because they contribute to global overheating, and should be stopped. Governments tend to under-report, so the stock-taking and evaluation of subsidies and privileges should be carried out with the support of and the critical scrutiny by non-governmental organisations.
The end of the pandemic will provide an enormous economic opportunity as a very large savings surplus, accumulated during the pandemic, of hundreds of billions of dollars, Euros or pounds can be spent. The resulting boom will provide the perfect backdrop to an end to the – as they say in the jargon – "perverse subsidies" for fossil energies.
Another first step, which should be taken in parallel with ending these subsidies, is to ensure that the public funds that will be spent as the pandemic ends make sure that economic activities are directed towards sustainability, the fight against global overheating and the loss of life under water, on land and in the air. The decline of biodiversity and integrity of ecosystems can already be felt by a reduced capacity of natural ecosystems to provide services we humans depend on. The Covid-19 pandemic may be just one of the consequences of encroaching too much on the spaces that should be left to nature.
The pent-up demand represented by cash in current accounts and significantly reduced household debt will act like an economic stimulus provided by monetary expansion: It triggers indiscriminate expansion of all sectors, roughly in line with the previous economic patterns. Which are not sustainable. They are taking us beyond the planetary boundaries to the brink of extinction. Luckily, governments have already lined up programmes that address the risks of unreformed growth.
Even before the pandemic, the European Union had launched its Green Deal. In response to the pandemic, that deal is now complemented by the massive Recovery and Resilience Facility to make the EU fit for the next generations. Other countries are launching programmes with similar ambition, with details yet to be determined especially in the US. These programmes should be used to steer production, trade and consumptions patterns towards sustainability. They must do so forcefully to counter the tendency of the expected spending spree by households and some businesses to lock in unsustainable patterns.
The good news is that many of the technologies needed for a more sustainable economy are already here, and many of them ripe for investment and ready to be deployed at scale – in fields such as renewable energy generation; electricity storage and smart grids; energy efficiency in buildings, appliances and machinery; electric mobility and redesigning the urban landscape beyond car-centred concepts; nature-based and resilient solutions for urban areas; and the roll-out of a green hydrogen infrastructure for industrial applications.
And further good news is that, across the G20, the private sector and civil society are ready for such change, in effect demanding it. The climate strike movement and the French Convention Citoyenne pour le Climat show that citizens are upset not because their governments are moving too fast on climate change – but because they are not living up to the challenge. From finance to industry, entrepreneurs have realised the huge opportunity that the transformation to climate neutrality represents, and are willing to embrace it.
With Italy in the presidency and supported by the European Union, the G20 can coordinate the necessary shift in industrial, economic and trade structures. The G20 has done that sort of thing before with the Task Force on Climate-Related Financial Risk Disclosure. The purpose of the TFCD was to make the world's financial system and financial service providers resilient to effects of global overheating on their capital assets.
It is now even more important to protect the planet's natural capital or ecosystem assets from the effects of destructive financial investments. In that respect, the EU is developing its Sustainable Finance Taxonomy, a detailed and criteria-based checklist to help guide capital flows away from the destructive and towards the sustainable. The taxonomy is not perfect, because too many unsustainable incumbents had their voice and weakened the instrument, but it is a foundation for the G20 to build on.
The pandemic and the structural changes that are needed to save civilisation from overheating will produce losers as well as winners. Bankruptcies and unemployment will affect some sectors and some regions even as others are enjoying a quick and robust recovery. Bankruptcy reform throughout the G20 is now needed to avoid zombie fossil firms from rising again after death, free from not only debt but often also all obligations to remedy environmental harm they have caused, and still in control of their fossil assets. In most countries, the purpose of insolvency procedure is to help companies survive and resume their activities with a stronger balance sheet. Allowing fossil energy businesses to resume activity would be a violation of sustainability conditions, an effect that bankruptcy reform should address.
As G20 governments prepare to coordinate their climate responses, there are a few things they should do and some they should most certainly not do. Two stand out among the suggestions for the G20. The first is energy efficiency, for which a G20 Energy Efficiency Hub was announced as a "new platform for global collaboration". It has yet to start work. The G20 leaders need to prod their administrations again into action to get the hub going, perhaps with the International Renewable Energy Agency (IRENA) and the support of a voluntary group of countries from the G20 and beyond.
Another focus should be on the ocean. If it were a country, it would be the 7th largest economy in the world, about as many people live in or by the ocean and depend on it as there are in China. The ocean covers over 71% of the planet's surface and – because it is also deep – supports more life than all the continents and the atmosphere combined. There can be no stopping of global overheating unless the ocean is allowed to heal itself, and there can be no stopping the decline of ocean ecosystems with a halt to greenhouse gas emissions. The ocean ecosystems have enormous capacity for absorbing carbon from the atmosphere, provided they are conserved, protected, restored where necessary and managed. The G20 countries are all coastal states with 45 percent of the world’s coastline among them, and jurisdictional responsibility over 21 percent of exclusive economic zones. Individually and collectively, the G20 countries have a special responsibility for the ocean and should direct investment there.
In contrast, G20 governments should not invest in or regulate in favour of private investment in fossil methane infrastructure. Methane is a powerful greenhouse gas, 26 times worse than carbon dioxide, and very much a part of the problem and no part of any long-term solution. Methane leaks are bad even if the methane is from biomass or synthesised from renewable energy. The same goes for most of hydrogen. As an energy carrier it is only as clean as the energy is made with, and it can serve to lock in dependency of fossil methane when it is mixed in with it and used a complement to methane rather than as a substitute. Most proposals for hydrogen-related research, development, and investment today are not sustainable. Similarly, carbon capture and storage (CCS) is most likely to lock in fossil energy infrastructure rather than helping in the transition towards sustainable, renewable energy supply with smart management systems and energy storage.
For all the above to work, the G20 might have a institutionalised "G20 Climate Crisis Centre" (as a secretariat) in order to ensure there is monitoring, reporting, verification, data exchange and analysis, evaluation and review, policy learning, exchange with parliamentary delegation, and policy contestation by a group of independent think tanks. G20 initiatives in the past failed because there was no institutional support for systematic follow-up. Recognising that some G20 countries will either refuse to engage or engage only to delay and weaken climate action, a flexible "G20 Climate Crisis Group" of countries and international organisations might be formed.
T20 think tanks need to coordinate even more. This might involve establishing and jointly raising funds for a T20 Climate Alliance that shadows the work of the G20, the G20 Climate Crisis Group, and the G20 Climate Crisis Centre. This T20 Climate Alliance also needs to engage with the other groups, such as B20, to ensure that all groups support robust and ambitious action by the G20.
Such an institutional structure would be a fitting legacy for the G20 and T20 Presidency of Italy.