In focus: G7 puts fossil fuel financing in crosshairs, commits to electricity sector decarbonization

The latest meeting of the G7 ministers for climate, energy, and environment has resulted in further commitments from the world’s most developed countries to curb the rise in global temperatures to 1.5°C and assist the countries affected the most by climate change.

One of the commitments that stands out the most is a unanimous decision to end direct international public financing of the fossil fuel energy sector starting from the end of this year.

This marks the first time Japan has joined Germany, Italy, France, Japan, the UK, the U.S., and Canada in making this commitment.

The G7 ministers have also affirmed the commitment ”to ending inefficient fossil fuel subsidies by 2025.”

The G7 has recognised for the first time that these subsidies are inconsistent with the goals of the Paris Agreement, the ministers said in a communiqué.

The ministers intend to report on this commitment in 2023 and will consider options for developing joint public inventories of fossil fuel subsidies in an effort to increase transparency.

The new commitments come in the midst of an upheaval in the global energy market caused largely by Russia’s invasion of Ukraine and the effects and after-effects of the global pandemic.

Just this week, the EU has decided to ban almost 90 per cent of Russian oil imports by the end of the year.

This follows the EU’s decision in early March to make the member states independent from Russian fossil fuels well before 2030, starting with gas, and the EU’s proposal in early May to ban all Russian oil imports, aiming to phase out Russian crude oil within six months and refined products by the end of the year.

The G7 ministers have also made a first-time commitment to the goal of predominantly decarbonized electricity sectors by 2035.

Another first was the commitment to phasing out coal-fired power generation; however, the ministers provided no deadline for when they would do so.

Other efforts will include increased renewable energy targets, setting non-CO2 sub-targets on, for example, methane, or accelerating the implementation of nationally determined contributions (NDCs) for 2030.

Offshore wind is projected to play a major role in decarbonizing the electricity sector, with four EU countries, Belgium, Denmark, Germany, and the Netherlands, committing to develop 150 GW of offshore wind capacity by 2050.

This capacity is expected to contribute to the large-scale onshore and offshore production of green hydrogen, one of the focal points of the European Commission’s recently launched REPowerEU strategy.

Green hydrogen was also on the agenda of the G7 ministerial meeting. The G7 Hydrogen Action Pact (G7-HAP) is a joint initiative on low-carbon and renewable hydrogen, and its derivatives such as ammonia.

The ministers have identified Power-to-X, low-carbon and renewable hydrogen, and its derivatives such as ammonia, as key in achieving net-zero emissions and energy security.

The six-point action plan includes the commitment to accelerate the development of low-carbon and green hydrogen, and other Power-to-X value chains both domestically and at a global scale, notably in hard-to-abate sectors.

To achieve this, the G7 ministers have pledged to speed-up the shaping of regulatory frameworks and common standards, and confirmed their financial commitments for the market ramp-up.

Under the G7-HAP, the seven countries will also help identify and close existing gaps for the ramp-up of green hydrogen supply chains beyond G7, exchange best practices on low-carbon and renewable hydrogen production based on sustainability criteria and facilitate dialogue on the geopolitical implications of an emerging global hydrogen market.

Some of the G7 countries have already started working on joint initiatives to cooperate in sectors such as offshore wind and green hydrogen, including the recently signed joint declaration between U.S. and Germany.

To continue the momentum, the German industry representatives behind the Offshore-Wind-H2-Achter initiative have published a joint agenda paper calling for the development of 10 GW of offshore hydrogen production capacity by 2035.

The green hydrogen produced offshore could be used to produce sustainable alternative fuels such as ammonia and methanol and help decarbonize the hard to abate industry sectors such as shipping, ports, aviation, heavy road transport, and others.

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