Comparing the G7 and UN talks on climate change

09 June 2015

Jonathan Grant examines the significance of the G7 pledges in the context of the Bonn climate negotiations, as we edge slowly towards a global climate deal in Paris.

It's encouraging that there has been so much emphasis on climate change at the G7 meeting. The G7 call for an ambitious and inclusive Paris agreement which should track progress towards targets and promote increased ambition over time. Carbon markets get a welcome nod of approval as does the role of the private sector in mobilizing climate finance. The G7 also pledged to increase support for vulnerable countries and committed to eliminate fossil fuel subsidies.

The G7’s call for decarbonisation of the global economy this century was significant, but their own emissions targets for Paris fall short of this. Keeping to a two degrees budget requires average annual reductions in carbon intensity (or emissions per unit of GDP) of over 6% each year according to the PwC Low Carbon Economy Index. This compares with Paris targets equivalent to 3.1% for Japan, 3.9% for Canada and the EU and 4.3% for the US.  As emissions from the G7 represent an ever-decreasing portion of the global total, major emerging economies now need to declare their targets for Paris.

The climate negotiations here in Bonn feel a world away from Schloss Elmau where the G7 leaders met. Government representatives in Bonn are making little progress slimming down the unwieldy draft Paris agreement. The major divisions are not within the G7 countries – as their statement shows – but between the rich countries and the poorest, most vulnerable countries and the newly emerging economies. With over five months before Paris, there is little reason to compromise and a lot of brinkmanship at this stage.

This frustrating phase of the negotiations is typical in advance of a major summit. Everyone is operating under the pretence that editing and streamlining for long enough will actually produce a coherent and short text with clearly defined alternatives for ministers to review. The discussions quickly got bogged down last week in line by line review of different sections of the 80-plus pages of text. Many countries vented their frustration at a progress meeting yesterday (Monday), and called on the co-chairs of the talks to get out the red pen and slim the text down to a more manageable size

The G7's emphasis on private finance is also encouraging.  But the reality is that much of the regulation post 2008 - particularly Basel III and Solvency II - has made it harder for the private finance sector to invest in long term infrastructure, particularly in developing markets, as the capital requirements are too high. Financial regulators and politicians will therefore need to be mindful of any unintended consequences of further regulatory reform on the ability and willingness of private finance to invest in low carbon infrastructure.

 Follow PwC Sustainability & Climate Change on twitter @pwcclimateready or Jonathan Grant @jg_climate