Insights and Commentaries

Insights and Commentaries

G7 and the role of the European Union ahead of COP21 in Paris

15th June 2015

Topic(s): Carbon capture, Carbon markets, Economics, Energy efficiency, law and regulation, Policy, use and storage (CCUS)

Several important events are taking place in the months ahead of the international climate change negotiations at the 21st Conference of the Parties (COP21) in Paris in December. In separate events world leaders have demonstrated their support for a climate change agreement and commitment to technology development at the G7 Leaders meeting and the Bonn climate change conference. In this Insight the Global CCS Institute's Principal Manager - Policy and Regulatory, Silvia Vaghi discusses some relevant observations from these meetings and the position of the European Union (EU) ahead of COP21.

The United Nations climate change conference in Bonn is an important event in preparation for Paris. Picture: UNFCCC.

This week Germany hosted two significant events that will have profound influences on the international climate agenda leading to the Conference of the Parties (COP21) in Paris at the end of the year. Notably, the meeting of the Group of Seven (G7) Governments in Bavaria which discussed the issue of climate change (among other things) and the United Nations Framework Convention on Climate Change (UNFCCC) negotiations in Bonn (1-11 June).

On 8-9 June 2015, Heads of State from Canada, France, Germany, Italy, Japan, the United Kingdom (UK), the European Commission and the United States (US) met to discuss progress on a number of topics, including climate change and energy security of G7 countries and beyond. In the joint leaders’ declaration following the G7 summit, leaders affirmed their determination to adopt a legal instrument, the so-called “2015 Agreement”, to ensure that global temperature increase stays below 2 degrees Celsius.

On climate change, the declaration affirms that “Urgent and concrete action is needed to address climate change, as set out in the IPCC’s Fifth Assessment Report and outlines the G7 commitment “ doing our part to achieve a low-carbon global economy in […] deploying innovative technologies striving for a transformation of the energy sectors by 2050 and invite all countries to join us in this endeavour”. This complements the recent G7 Energy Ministers meeting, which was also recently held in Germany, encouraging countries to make use of CCS and to collaborate on large-scale demonstration projects; and the 2014 Brussels G7 Summit declaration promoting the use of low carbon technologies including both renewables and CCS.

Why is the G7 Heads of State declaration relevant on the Road to Paris?

From a mitigation perspective, the declaration encourages action on two key elements of the 2015 agreement discussed in Bonn by the 196 Parties of the Convention:

  • Intended Nationally Determined Contributions (INDC) and
  • Climate Finance, with specific reference to the Green Climate Fund (GCF) and the role of Multilateral Development Banks (MDBs).

Interestingly, the background report prepared for the G7 meeting specifically addresses long-term climate finance and provides an updated overview of trends that could impact global climate finance flows predominately to developing countries.

What is the vision of the European Union for the global climate change agreement?

The vision of the EU on the global climate change agreement can be found in the European Commission’s communication “The Paris Protocol - a blueprint for tackling global climate change beyond 2020” released earlier this year. This is a detailed guiding document aimed at building a resilient Energy Union and preparing the EU for the last round of negotiations before the Paris conference.

According to the communication, the EU approach is embedded in the conventional framework seeking a durable and dynamic 2015 agreement that should be in the form of a Protocol under the UNFCCC. Expectations from the EU are that it would contain clear, understandable, quantifiable, fair and ambitious commitments from all Parties based on the evolving global economic and geopolitical circumstances.

One critical aspect for the effective implementation of the agreement is the participation of all major emitters, including major emerging economies, where advancement of a low carbon technology market is of utmost importance to address the increasing level of Greenhouse Gas (GHG) emissions. Such commitments should result in new nationally determined contributions (INDCs).

Where does the European Union stand on Intended Nationally Determined Contributions (INDC)?

INDCs detail the post-2020 climate actions that countries intend to take under the new international agreement. They reflect each country’s ambition to reduce emissions, taking into account national policy-setting towards a low carbon future. Therefore, if prepared according to sound and consistent accounting methodologies, they will form a clear view of what Parties are collectively doing in relation to the 2 degree objective.

In preparation for COP21, countries have agreed to communicate their steps to address climate change and make them publicly available in the INDCs Portal. The European Union and its 28 Member States submitted its INDC on 6 March 2015. In the submission, the EU contribution to the 2015 agreement is a binding, quantifiable wide domestic reduction target of “at least” 40% in greenhouse gas (GHG) emissions by 2030 compared to a 1990 base year.

The 40% target was agreed by the European leaders last October in the Council Conclusions. By doing this the EU stepped up its efforts to reduce domestic emissions and this pledge provides a basis for a longer-term policy framework for Europe to reduce energy-related carbon dioxide (CO2) emissions in the coming decades.

How is the EU mobilising Climate Finance Support?

Climate finance is an important part of the 2015 agreement. Means of implementation are crucial to mobilising innovation to accelerate climate action.

Post-2020, the financial landscape is likely to be different from today, as it has radically changed since the economic crisis in 2007/2008. Since then, two trends have emerged as key elements of the post-2020 financial architecture:

  • The need to leverage public climate funding with private finance to achieve the wider transformation necessary to meet the 2 degree target.
  • Enhanced access to financial flows from emerging economies to developing countries (for instance from China or India to African countries), with the increasing importance of the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (formerly called BRICS development bank as founded by Brazil, Russia, India, China and South Africa)

The European Union (EU) has built upon this context to design policy to enable climate finance mobilisation both domestically and at the international level. The approach taken by the EU in the new Investment Plan for Europe is instructive: every Euro of public money is expected to be used to generate additional private sector funding and remove obstacles to investments, with the European Investment Bank (EIB) acting as the European Commission’s implementing partner. The Investment plan will include progress towards the Energy Union, including investment on strategic projects ensuring secure, affordable and climate-friendly energy.

Internationally, on top of climate finance coming from bilateral and multilateral cooperation, the EU Member States have pledged about half of the initial capitalisation of USD 10 Billion to the Green Climate Fund (GCF), which is the operating entity of the Financial Mechanism designed to support projects, programs, policies and other activities in developing countries Parties to the UNFCCC.

Next steps:

With the view to creating a political space where INDCs can be consulted, assessed and discussed before their formal inscription as Party to the 2015 agreement, the European Commission is seeking to organise a special event to improve mutual understanding of the range of INDCs and facilitate an open exchange of views by Parties of the Convention. It is likely that alternative sources of finance could play an important role post-2020 and that discussion will continue in this regards in view of the 2015 agreement.

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