Task Force 4: Refuelling Growth: Clean Energy and Green Transitions
Abstract
G20 countries not only account for a significant share of global population, but also contribute massive amounts of greenhouse gas emissions. They must, therefore, take concrete actions to phase out fossil fuels from their economies. However, such an energy transition needs to be just. The imperatives are: to tackle the dominance of fossil fuel-dependent regimes, diversify economies, provide transition finance, and improve international coordination. This Policy Brief makes three recommendations for the G20: improvements in governance to shift energy regimes towards a low-carbon pathway; pursue strategies to diversify economies, using an appropriate mechanism for transition finance; and coordinating and synchronising global efforts on just energy transitions. All three strategies can help in achieving just and inclusive transitions away from fossil fuel-based economies.
The Challenge
To limit the rise in global temperature to 1.5oC above pre-industrial levels, the world must halve CO2 emissions and achieve net-zero by mid-century.[1] For this, 93 countries that contribute more than three-quarters of global greenhouse gas emissions have declared their net-zero targets.[2] With 78 percent of emissions coming from the energy sector, it is critical to phase out fossil fuels—i.e., coal, oil, and gas—to meet this goal.[3],[4] Yet, governments worldwide are planning on producing more than twice the amount of fossil fuels in 2030—this would be inconsistent with the 1.5°C target.[5]
Moreover, decarbonisation efforts in the energy sector are often solely focused on reducing carbon emissions and neglect socio-economic issues.[6] A paradigm shift on just and inclusive energy transition needs to take place at the local, national, and global levels. Realising a just energy transition will mean that the move towards a low-carbon energy system, and the distribution of its costs and benefits, must be done fairly and equitably.[7] Such a shift could drive the post-pandemic recovery in a more sustainable and inclusive way.
Countries face several barriers to a just energy transition. First, the current energy regime still caters to the fossil-based economy, with unclear mandates and policy incoherence for a just energy transition.[8] Second, fossil phase-out will mean a significant shift in economic structures, especially for fossil-dependent countries and regions, due to loss of revenue and jobs and changes in the structure of the labour market.[9],[10] Finally, at the international level, efforts and goals are not sufficiently harmonised, which makes it challenging to monitor progress and synchronise policymaking.[11]
The G20’s Role
The G20 countries contribute more than 83 percent of global greenhouse gas emissions, and 19 of the 20 member countries have net-zero pledges in place.[12] Since 76 percent of their emissions come from the energy sector,[13] it is clear that to achieve their net-zero ambitions, G20 countries must phase down and phase out fossil fuels in a timely manner. This is especially crucial as, globally, the G20 countries produce 85 percent of coal, 64 percent of crude oil, and 65 percent of fossil gas.[14] At the same time, G20 countries have shown a degree of commitment to a shift towards clean energy, with 29 percent of their energy mix coming from renewable energy sources in 2021, an increase from 19 percent in 2010.[15]
Moreover, during Indonesia’s Presidency in 2022, the G20 adopted the Bali Energy Transition Roadmap which laid out key priorities for a just energy transition, including clean energy technology, energy access, and finance and investment. To implement these priorities, the G20 countries pledged to adopt principles and guidelines to move towards just and inclusive energy transition. The recommendations in this Policy Brief feed directly into that mandate, whereby G20 countries can take a lead on the pathway to a just energy transition.
Recommendations to the G20
To address the challenges outlined above, we highlight three areas that G20 countries should consider when planning and implementing a just energy transition. The recommendations are geared towards:
- improving the governance process at the national and local levels;
- investing in economic diversification in fossil-dependent countries and regions; and
- streamlining international efforts to realise just energy transitions.
Recommendation 1: Improve the governance process for just energy transition at the national and local levels.
While some may argue that sustainability transitions can take decades, if not centuries, to materialise,[16] it is possible to accelerate the process.[17] Political will and commitment is key to doing so, alongside instituting appropriate governance system.[18] In the case of energy transition, the current governing structures in the energy sector must shift, because many of them are designed for utilising fossil fuels that are carbon-intensive and undermine the deployment of low-emission energy solutions.[19]
For instance, despite the 2021 Glasgow Climate Pact that commits signatories to phasing out inefficient subsidies, countries still spend huge sums on fossil subsidies, particularly in 2022 when fossil fuel prices became volatile due to geopolitical conflict and the demands of post-pandemic recovery.[20] Although such measures could help cushion the impacts of a crisis, governments should target the interventions to the groups and sectors that most need them, such as through direct cash transfers for the most vulnerable and tax reductions for small enterprises.[21],[22]
The shift of an energy regime can take the form of a collaborative governance structure that holds the main authority to lead and coordinate efforts towards transition.[23] Depending on the country context, G20 states could establish a specific multi-ministerial task force or joint working groups between government and non-government stakeholders that will be mandated to coordinate just energy transition efforts. Establishing a clear governance structure and process can help clarify the roles and responsibilities of the actors involved in the transition, and avoid working in silos. With a specific mandate, this new regime would need to be explicit about the rules, modes of engagement, and decision-making processes—all developed through collaborative dialogues.[24]
To ensure inclusion and accountability, the entire governance process must be democratic and transparent. Governments should involve diverse stakeholders, such as civil society groups, academics, private sector actors, and international organisations. Taking an example from labour issues in just transition, the International Labour Organisation recommends tripartite social dialogue between governments, employers and workers.[25] This is often led by government entities, which establish or appoint task forces to coordinate and monitor performance.[26]
Once a governance structure has been defined and a mandate established, the next step is to develop concrete action plans of action to create comprehensive enabling environments. These planning documents must be time-bound, with clear and measurable outcomes to allow for monitoring and evaluation of progress. Coordination and synergies between central and local governments are also important, because local governments often have their own just transition plans and programmes that cater to their specific contexts.[27]
For example, South Africa has developed a just transition framework led by the Presidential Climate Commission (PCC). The purpose of this Commission was to advise the country on climate change and drive a transition towards a low-carbon economy. This framework became the first step on the road to a just transition in South Africa, and will eventually require concrete implementing regulations and action plans. In doing so, it needs to carry out further consultation and collaboration with other stakeholders under the coordination of PCC.[28] G20 countries can learn from this approach to accelerate their own just energy transitions by developing concrete frameworks, roadmaps, or action plans.
Recommendation 2: Invest in economic diversification beyond fossil fuels.
As the global energy transition gathers pace, there is a need for economic diversification in regions and countries that produce fossil fuels, to create decent jobs and sustain local economies, while ensuring national macroeconomic stability. For this process to be just and sustainable, policymakers and investors need to consider a few points in particular.
There are significant risks to energy transition goals with the continued promotion of fossil gas production or downstream investments as a long-term diversification strategy.[29] Such an approach increases dependence on carbon-intensive economic activities,[30] and thus, the risk of stranded assets.[31],[32] This is on top of the health, social, and environmental costs associated with fossil fuels and carbon-intensive industries.[33],[34] It is also likely to generate more resistance to the transition, thus risking delaying it and increasing its cost.[35],[36] The G20 should thus further explore strategies and raise national ambitions for fiscal and economic diversification away from fossil fuel production, for instance under the G20 Framework Working Group.
Renewable energy can play an important role in economic diversification, and comes with an array of co-benefits, including strengthening energy security and improving energy access and environmental health.[37] However, its geographical feasibility and associated employment potential are not necessarily located in the same geographical area.[38] Therefore, it is essential that G20 countries pursue other sustainable economic activities in their diversification strategies, such as energy efficiency, and buildings and environmental remediation. For example, environmental rehabilitation of fossil fuel and heavy industry production sites not only provides land for new economic activities, but also generates employment and skill development, which can then be mobilised for further economic diversification.[39],[40]
Such diversification efforts require collaboration between various policy stakeholders. The G20 is well-placed not only to support knowledge sharing between countries regarding economic diversification in fossil-fuel-producing regions, but also to enable more interactions between traditional policy silos. The latter can be done, for instance, through strengthening exchanges between G20’s energy transition, development, and employment working groups.
Furthermore, G20 should enable the financial sector to support economic diversification. Financial institutions need to urgently align their investments with the imperatives of climate science, firstly by phasing out fossil fuel financing to free up resources, and then shifting financial flows towards renewable energy. While both could happen either in parallel or sequentially, it is noteworthy that only adding renewable energy to the energy mix is not enough for energy transition as phasing out fossil fuel should be at the core.[41] Multilateral development banks and development finance institutions can support the drive for energy transition through blended finance and by de-risking smaller-scale renewable energy projects to attract private capital.[42]
For this, there is a critical need for G20 to develop a transition finance framework that will incentivise the acceleration of investments that support both the energy transition and economic diversification. This framework should include a taxonomy that considers relevant country contexts, robust disclosure and reporting mechanisms, and methodologies to measure transition progress and milestones in line with science-based targets and the G20 Sustainable Finance Roadmap. Policy incentives to scale up sustainable financial instruments to support start-ups, small and medium enterprises, and the overall scale-up of renewable energy projects and initiatives will be highly supportive of green jobs creation.
Overall, phasing out fossil fuels and driving the energy transition and economic diversification will have substantial social, environmental, and financial impacts on the most marginalised and under-resourced populations, unless these impacts are addressed. Diversification strategies and transition finance must be calibrated to ensure that mitigation mechanisms are in place to address the adverse environmental and social impacts of transitioning to renewables.
During this year’s India Presidency, we call on the G20 to ensure that land rights and free, prior and informed consent are respected; to put in place clear policies to mainstream gender-responsive and community and civil society participation in the development of energy projects; protect worker rights; mainstream human rights due diligence in all energy project implementation; and finally, ensure the active and meaningful participation of women in the energy transition.[43]
Recommendation 3: Streamline international efforts towards just energy transitions.
International cooperation and solidarity are essential to enable a global just transition. Countries with less dependence on fossil fuel production and greater capacity to navigate the transition should take the lead in phasing out fossil fuel production, while providing support to those countries with high fossil fuel dependence and low capacity.[44] The G20 is well-placed to show leadership in this regard.
International cooperation, such as in the G20, could be motors of change as potential ‘climate clubs’ to drive the climate and energy agenda internationally, complementing other international bodies such as the UNFCCC.[45],[46] There are several areas where the G20 could help set energy transition agendas on the international level.
For instance, the G20 could strengthen its leadership on transparency and accountability when it comes to fossil fuel subsidies internationally to supplement and/or harmonise national efforts. For the time being, this voluntary reporting within the G20 is limited to direct subsidies, but indirect support, including environmental exemptions for fossil fuel development or below-market price contracts and leases of land, should be reported as well.
Another important way to strengthen transparency and accountability is for the G20 to encourage fossil-fuel-producing countries (inside and outside the G20) to provide current, comparable and reliable information about their plans and projects for oil, gas and coal production, and how these align with international climate goals.[47] This could be done, for example, through their progress reports on implementing and achieving their NDCs and net-zero targets.[48] Another option would be to strengthen existing initiatives, such as the Extractive Industries Transparency Initiative by persuading non-signatories within the G20 to join, and by disclosing future fossil fuel development plans in greater detail.
In addition, the G20 could show leadership and cooperate more closely on phasing out fossil fuels. While there are several innovative ideas such as a fossil fuel non-proliferation treaty,[49] even a less formalised agreement of cooperation on fossil fuel phase-out might be a promising way forward and would signal to other countries a greater willingness to reduce emissions more swiftly in line with climate science.[50] Moreover, through the energy transition working group, the G20 could cooperate on supporting countries and/or sub-national regions highly dependent on fossil fuel revenues by facilitating knowledge transfer and the exchange of best practices in the areas of fossil fuel phase-out, economic diversification, or job creation in the renewable energy and sustainability sector.
Attribution: Dimas Fauzi et al., “Achieving a Just Energy Transition in the G20,” T20 Policy Brief, May 2023.
Endnotes
[1] IPCC, “Summary for Policymakers,” Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge, UK and New York, NY, USA: Cambridge University Press, 2022).
[2] Net Zero Tracker, “Net Zero Stocktake 2022: Assessing the Status and Trends of Net Zero Target Setting across Countries, Sub-National Governments and Companies,” 2022.
[3] SEI et al., “The Production Gap Report 2021,” 2021.
[4] IEA, “Net Zero by 2050,” International Energy Agency, 2021.
[5] SEI et al., “The Production Gap Report 2021”
[6] Thilagawathi Abi Deivanayagam and Rhiannon Elizabeth Osborne, “Breaking Free from Tunnel Vision for Climate Change and Health,” PLOS Global Public Health 3, no. 3 (2023): e0001684.
[7] Darren McCauley and Raphael Heffron, “Just Transition: Integrating Climate, Energy and Environmental Justice,” Energy Policy 119 (August 2018): 1–7.
[8] Muhammad Ichsan, Matthew Lockwood, and Maghfira Ramadhani, “National Oil Companies and Fossil Fuel Subsidy Regimes in Transition: The Case of Indonesia,” The Extractive Industries and Society 11 (September 2022): 101104.
[9] Lola Nacke, Aleh Cherp, and Jessica Jewell, “Phases of Fossil Fuel Decline: Diagnostic Framework for Policy Sequencing and Feasible Transition Pathways in Resource Dependent Regions,” Oxford Open Energy 1 (January 2022): oiac002.
[10] Tara Laan and Andréa Giulio Maino, “Boom and Bust: The Fiscal Implications of Fossil Fuel Phase-out in Six Large Emerging Economies,” International Institute for Sustainable Development, 2022.
[11] Andreas Corcaci, “The Dynamics of Multilevel Administration. Coordination Processes between National, Supra- and International Administrations in Energy Policy,” Zeitschrift Für Politikwissenschaft (April 2022).
[12] Net Zero Tracker, “Net Zero Stocktake 2022”
[13] Net Zero Tracker, “Net Zero Stocktake 2022”
[14] IEA, “Energy Statistics Data Browser,” International Energy Agency, 2022.
[15] Climate Transparency, “Climate Transparency Report: G20 Response to the Energy Crisis: Critical for 1.5oC,” 2022.
[16] Jochen Markard, Rob Raven, and Bernhard Truffer, “Sustainability Transitions: An Emerging Field of Research and its Prospects,” Research Policy 41, no. 6 (2012): 955–67.
[17] Benjamin K. Sovacool, “How Long Will it Take? Conceptualizing the Temporal Dynamics of Energy Transitions,” Energy Research & Social Science 13 (March 2016): 202–15.
[18] Florian Kern and Karoline S. Rogge, “The Pace of Governed Energy Transitions: Agency, International Dynamics and the Global Paris Agreement Accelerating Decarbonisation Processes?” Energy Research & Social Science 22 (December 2016): 13–17.
[19] Karen C. Seto et al., “Carbon Lock-In: Types, Causes, and Policy Implications.” Annual Review of Environment and Resources 41, no. 1 (2016): 425–52.
[20] IEA, “Fossil Fuels Consumption Subsidies 2022,” International Energy Agency, 2022.
[21] Jun Rentschler and Morgan Bazilian, “Reforming Fossil Fuel Subsidies: Drivers, Barriers and the State of Progress,” Climate Policy 17, no. 7 (2017): 891–914.
[22] Harro van Asselt and Jakob Skovgaard, “Reforming Fossil Fuel Subsidies Requires a New Approach to Setting International Commitments,” One Earth 4, no. 11 (2021): 1523–26.
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[24] C. Ansell and A. Gash, “Collaborative Governance in Theory and Practice.” Journal of Public Administration Research and Theory 18, no. 4 (2007): 543–71.
[25] ILO, “Guidelines for a Just Transition towards Environmentally Sustainable Economies and Societies for All,” International Labour Organization, 2015.
[26] Romo Molina, “The Role of Tripartite Social Dialogue in Facilitating a Just Transition: Experiences from Selected Countries,” ILO Working Paper 76, 2022.
[27] C40, “Why a ‘Just Transition’ Is Essential for Advancing Ambitious City Climate Action,” Policy Brief, 2021.
[28] PCC, “A Framework for a Just Transition in South Africa.” Presidential Climate Commission,” 2022.
[29] Aaron Sayne, “Framework for Countries Evaluating Gas-to-Power Pathways,” Natural Resource Governance Institute, 2022.
[30] Grzegorz Peszko et al., “Low-Carbon Transition, Stranded Fossil Fuel Assets, Border Carbon Adjustments, and International Cooperation,” The Changing Wealth of Nations 2021: Managing Assets for the Future (Washington D.C.: World Bank, 2021).
[31] K. Bond et al., “The Future’s Not in Plastics: Why Plastics Demand Won’t Rescue the Oil Sector,” Carbon Tracker Initiative, 2020.
[32] Gregor Semieniuk et al., “Stranded Fossil-Fuel Assets Translate to Major Losses for Investors in Advanced Economies,” Nature Climate Change 12, no. 6 (2022): 532–38.
[33] J. Lee et al., “Managing Upstream Oil and Gas Emissions: A Public Health Oriented Approach,” Journal of Environmental Management 310 (May 2022): 114766.
[34] Montse Marquès et al., “Health Risks for the Population Living near Petrochemical Industrial Complexes. 2. Adverse Health Outcomes Other than Cancer,” Science of The Total Environment 730 (August 2020): 139122.
[35] Aaron Atteridge and Claudia Strambo, “Seven Principles to Realize a Just Transition to a Low-Carbon Economy,” SEI Policy Report, 2020.
[36] Benjamin M. Sanderson and Brian C. O’Neill, “Assessing the Costs of Historical Inaction on Climate Change.” Scientific Reports 10, no. 1 (2020): 9173.
[37] IRENA, “World Energy Outlook 2022”
[38] IRENA and ILO, “Renewable Energy and Jobs. Annual Review 2022,” 2022.
[39] Gert-Jan Hospers, “Restructuring Europe’s Rustbelt,” Intereconomics 39, no. 3 (2004): 147–56.
[40] Corinne Unger, “Legacy Issues and Abandoned Mines,” Mining in the Asia-Pacific: Risks, Challenges and Opportunities (Cham: Springer International Publishing, 2017).
[41] Richard York and Shannon Elizabeth Bell, “Energy Transitions or Additions?,” Energy Research & Social Science 51 (May 2019): 40–43.
[42] FFA and SEI, “Financing the Just Transition: Powering Asia’s Sustainable Energy Future,” Phnom Penh: Fair Finance Asia, 2022.
[43] J. W. Van Gelder et al., “A Future without Coal: Banking on Asia’s Just Energy Transition,” Fair Finance Asia, 2021.
[44] Greg Muttitt and Sivan Kartha, “Equity, Climate Justice and Fossil Fuel Extraction: Principles for a Managed Phase Out,” Climate Policy 20, no. 8 (2020): 1024–42.
[45] Robert O. Keohane and David G. Victor, “The Regime Complex for Climate Change,” Perspectives on Politics 9, no. 1 (2011): 7–23.
[46] William Nordhaus, “Climate Clubs: Overcoming Free-Riding in International Climate Policy,” American Economic Review 105, no. 4 (2015): 1339–70.
[47] SEI et al., “The Production Gap Report 2021”
[48] SEI et al., “The Production Gap Report 2021”
[49] Peter Newell, Harro van Asselt, and Freddie Daley, “Building a Fossil Fuel Non-Proliferation Treaty: Key Elements,” Earth System Governance 14 (December 2022): 100159.
[50] IPCC, “Summary for Policymakers”
