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G7's climate strategy: Multilateralism is the only way forward

Arvea Marieni

The Italian-led G7's recent communique on climate change and energy security priorities presents both positive strides and critical gaps.

The reaffirmation of objectives from the UAE consensus achieved at COP28 is a positive step, particularly in light of concerns about the EU's stance in Baku, the capital of Azerbaijan, later this year on "transitioning away" from fossil fuels. This specific wording is in fact noticeably absent from the most recent EU submission to the United Nations Framework Convention on Climate Change (UNFCCC).

Multilateralism remains crucial in addressing the climate crisis and energy security amidst geopolitical tensions. While the G7's efforts are commendable, their efficacy is limited without broader global cooperation.

The inclusion of nuclear energy in decarbonization efforts is seen as a milestone for global competitiveness. However, it's acknowledged that the EU's 2030 climate goals heavily rely on renewable expansion due to the time-intensive nature of nuclear projects.

While the G7's focus on reducing carbon intensity in hard-to-abate sectors is laudable, the feasibility of some proposed solutions, such as hydrogen for heating and road transport, and carbon capture, remains uncertain due to technical challenges and cost considerations.

Phasing out coal by 2035 for G7 countries is certainly a commendable objective, but it risks having limited effects on the global coal balance. China and India currently account for about 70 percent of coal consumption for electricity production, compared to just 13.5 percent for the U.S., Japan and Germany combined.

The other question is what will replace coal. According to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA), planned liquefied natural gas (LNG) storage facilities in 2030 will exceed expected gas demand in Europe by over 76 percent if renewable sources were actually tripled.

But if this does not happen, LNG from the U.S. and Qatar will be readily available, disregarding commitments to reduce methane emissions. The G7 communique does not address at all this issue and highlights a fundamental contradiction between climate neutrality proclamations and the hard reality of climate-killing infrastructure.

We also applaud initiatives such as the "G7 Adaptation Accelerator Hub," recognizing their potential in addressing climate challenges in vulnerable regions. This goes hand in hand with progress being made in the UNFCCC process on the Loss and Damage Fund.

The G7's commitment to tripling the amount of energy from renewable sources by 2030 means nearing China's current level of expansion within the next five years. In 2023, China had renewable capacity five times that of the U.S. and four times that of the U.S. and Australia combined. If we consider Brazil and India, the gap is even wider.

But by 2030, countries such as China, India and Brazil won't wait for the G7 and are rapidly moving towards breaking new records in renewable capacity. India aims to become the world's largest economy with the highest percentage of energy from renewable sources. The UAE and Saudi Arabia are building extensive infrastructure for renewable energy use in collaboration with major Chinese companies.

This also means that in the next five years, the availability of critical minerals and rare earths will be decisive. Looking at 2023 data on rare earths, China's production is five times that of the U.S. and four times that of the U.S. and Australia combined. Europe imports 98 percent of rare earths from China, not to mention other critical materials.

The G7 document emphasizes the critical need to diversify supply chains and reduce reliance on China for key resources. However, the pressing urgency to develop renewable energy sources and electric vehicles within the next five years presents a challenge. This timeline does not align realistically with the potential increase in extraction and processing of critical minerals and rare earths by G7 countries, especially considering climate neutrality objectives.

Yet, political decisions hinge on risk perception and trade-offs. Acting together to manage climate change becomes increasingly complex when the conflict in Ukraine is perceived to pose an immediate and direct threat to the EU, contrasting with the climate crisis, which is also existential but manifests its impacts progressively.

Given the escalating climate risks and the imperative of green reindustrialization at an accelerated pace, there's a non-negotiable need to act swiftly. However, achieving this depends heavily on international collaboration and technological exchange with countries that are perceived as "hostile." How do we rebuild trust?

It's essential for G7 countries to work together to develop innovative solutions and share expertise to meet both the immediate demands for renewable energy and electric vehicles and the longer-term objectives of sustainability and climate resilience. This collaboration can help overcome the challenges posed by the mismatch in timelines and ensure that green reindustrialization progresses in tandem with climate objectives happens without exacerbating tensions.

The role of the EU, particularly in engaging with key players like China, is crucial for meaningful progress. One way forward could be drafting commonly agreed standards and climate key performance indicators (KPIs) for more balanced trade agreements to mitigate industrial competitiveness issues, which the EU Ambassador in China has identified as becoming "economically and politically unsustainable."

It is a fact, that derisking comes with a risk. As it goes both ways, it could ultimately further reduce Europe's options in maneuvering space. Without cooperation, European industries might struggle to keep up with global competitors, risking their own place in the market.

Along this line, Volkswagen CEO Thomas Schafer has warned the European Commission that higher tariffs on China-made electric car imports could backfire, hurting EU brands in China, such as Volkswagen, BMW and Mercedes-Benz. Instead, Volkswagen is working to close the technological gap it faces in electric mobility by partnering with Chinese smart electric vehicle manufacturer Xpeng.

Likewise, the Italian government is investigating opportunities to attract investment from the Chinese automotive group BYD.

Tariffs and trade conflicts would also make the green transition more costly for European consumers. An alternative approach would involve attracting Chinese investments in green sectors with local conditionalities, mirroring the strategic management model of foreign direct investments that China has pursued in joint ventures since 1978.

Hungary and Serbia are advancing along this path, aiming to take the lead in the green industrialization wave, facilitated by Chinese technology transfer. These two nations are boosting their production capacities significantly for battery and electric vehicle manufacturers, building green tech supply chains.

By carving gatekeeping measures, Brussels could strategically leverage its experience of constructive dialogue with Beijing by integrating climate, environment, energy, and economic security considerations. Building on progress made last year on initiatives such as the EU Carbon Border Adjustment Mechanism and the EU Emissions Trading System, the EU could propose gradual enhancements to market conditions for European companies.

Similarly, by presenting tangible proposals to address concerns raised in Brussels regarding market access and competition, China could effectively address and alleviate concerns. This could involve engaging in technical discussions on investments and standards, as well as incorporating green requirements into trade agreements.

For example, the EU and China, both with comparable deforestation laws, could collaborate on technical clauses pertaining to agricultural commodity exports, capacity-building measures, and alternative revenues for affected third countries.

Ultimately, the G7's climate and energy strategy must reflect a broader global perspective to address the pressing challenges of climate change and energy security effectively.

(I would like to express my gratitude to the former Italian Environment Minister, Corrado Clini, for his valuable insights, discussions, and contributions to the topics covered in this article.)

(Arvea Marieni, a special commentator on current affairs for CGTN, is the Belgian and Italian Climate Pact Ambassador of the European Commission. She is a partner and board member of the management consultancy Brainscapital and a shareholder of the French systems engineering company Beam Cube, where she co-leads the development of Ecological Transition Solutions. As a strategy consultant, climate policy expert and innovation manager, she specializes in EU-China environmental cooperation.)

Source:CGTN 2024-5-13
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