Four Ways the G7 Can Show Leadership on Fossil Fuel Phase-Out

The G7 Ministers’ Meeting on Climate, Energy, and Environment is fast approaching, with ministers due to gather in Sapporo, Japan, at the end of this week, ahead of a leaders-level gathering next month in Hiroshima. At these meetings and throughout the rest of the year, G7 ministers and leaders have a key opportunity to make concrete progress on fossil fuel phase-out, which could in turn encourage other economies to follow suit.

The need for fossil fuel phase-out has never been clearer. Last month’s Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Synthesis Report highlighted the need for a rapid, global phase-out of unabated fossil fuels and a near-term peak in their consumption if the 1.5°C temperature guardrail under the Paris Agreement is to remain in reach. The G7 meetings, coming so soon after this authoritative statement from the scientific community, need to make political progress on this issue. Meanwhile, the ongoing Russian war in Ukraine continues to underscore how fossil fuel dependence leaves countries vulnerable to geopolitical risk and market volatility.

Bringing together several of the world’s advanced economies—namely, Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, as well as the European Union—the G7 meetings are a chance to set the tone for the rest of the political year. Preparations are already well underway for this year’s G20 leaders’ summit under India’s presidency, taking place in early September. UN Secretary-General António Guterres will hold a Climate Ambition Summit that same month. And all eyes will be on COP 28 in Dubai as the first Global Stocktake under the Paris Agreement reaches a political conclusion—and pressure will intensify on world leaders to make a strong statement about fossil fuel phase-out. By securing a robust agreement in the coming weeks on fossil fuel phase-out, the G7 could set the bar high for other political processes to follow. 

There are four ways the G7 can step up and demonstrate leadership in this crucial year.

Set a Date for Coal Phase-Out

In 2022, G7 leaders took a real step forward by committing to decarbonizing their electricity systems by 2035. Although the G7 leaders did not specify how this goal was to be achieved, the ministers’ communique contained more detail. Ministers stated that the G7 would prioritize “concrete and timely steps towards the goal of an eventual phase-out of domestic unabated coal power generation.” Coal phase-out is key, in other words.

What remains missing is a phase-out date. The Powering Past Coal declaration, which the United Kingdom, Italy, Germany, and Canada have already signed, reaffirms the need to phase out coal by 2030 among the Organisation for Economic Co-operation and Development (OECD)’s 38 member economies, as well as the European Union, and by 2040 in the rest of the world. The International Energy Agency’s Net Zero Emissions by 2050 Scenario (NZE), the agency’s core 1.5°C pathway, backs this up, envisaging that by 2030 advanced economies would end all power generation by unabated coal-fired power plants. With this in mind, the G7 should commit this year to phasing out coal by 2030 at the latest. As it stands, the European Union, the United States, and Japan reportedly still oppose such a pledge.

Make Real Progress on Ending Fossil Fuel Subsidies

The G7 has pledged to phase out “inefficient” fossil fuel subsidies every year since 2009. In 2016, they specified a timeline, committing to phase out subsidies by 2025. What has been missing so far is implementation. Indeed, globally, subsidies today are not lower than they were in 2009, but have rather reached an all-time high of more than USD 1 trillion in 2022, in the face of high energy prices.

In 2022, G7 ministers took a small step forward, committing to make a progress report in 2023 and further stating that they would consider options for developing joint public inventories of fossil fuel subsidies.

In 2023 the G7 needs to show leadership on urgently implementing their commitment to phase out subsidies. At a minimum, they should deliver the promised progress reports and inventories, which should demonstrate the delivery of their pledge. The G7 should submit their inventories annually through the formal reporting process for Sustainable Development Goal (SDG) indicator 12.c.1 (fossil fuel subsidies)—a process that hardly any countries have completed so far. Consistent and comprehensive compliance from the G7 can encourage improved data transparency from all parties to the SDGs.

Moreover, the G7 should drop the qualifier “inefficient,” which only creates uncertainty about which subsidies need reform. Rather, exceptional cases should be specifically named, and alternative reform pathways identified—for example, in the case of subsidies that are essential for energy access, targeting subsidies in the short term while developing clean alternative technologies. They should also support global commitments to fossil fuel subsidy reform, particularly in least developed countries, by committing to align relevant official development assistance flows with the need for technical and financial assistance in this area.

Implement the End of International Public Finance for Fossil Fuels

In recent years, the G7 has made progressive steps forward on ending international public finance for fossil fuels. In 2022, following a commitment to end direct government support for unabated international thermal coal power generation in 2021, G7 leaders extended this to the entire international unabated fossil fuel energy sector, except in “limited circumstances clearly defined by each country consistent with a 1.5°C warming limit and the goals of the Paris Agreement.”

The first thing G7 ministers and leaders should do is reiterate this commitment. But, more importantly, they should ensure that this commitment is fulfilled. Doing so could potentially shift USD 24.3 billion per year from fossil fuels to clean energy, and influence even bigger volumes of private finance. While the United Kingdom, France, and Canada have implemented policies ending international public finance for fossil fuels, Germany, Italy, the United States, and Japan have yet to publish such policies. Fulfilling this commitment this year is key to ensuring the G7’s credibility.

Moreover, the G7 can ensure that their policies on multilateral development banks (MDBs) match the ambition of their commitment. The 2022 G7 ministers’ communique stated that the commitment to end new direct public support for the international unabated fossil fuel energy sector would also “guide [their] approach” on the boards of MDBs. Yet only the United States has published official guidance for voting at MDBs. Other G7 countries should step up.

End New Oil and Gas Development

Finally, ministers and leaders should not open the door to international public finance for gas. Last year’s leaders’ statement left room for public investment in the gas sector as a temporary response, in the “exceptional circumstances” of the Russian war in Ukraine. Despite assurances on avoiding “lock-in effects,” this move was worrying. Far from being an appropriate response to the energy crisis, new investment in gas cannot contribute to resolving the crisis in the short term, while in the long term perpetuating price volatility, exacerbating the climate crisis, and risking stranded assets.

This year, Japan has proposed that G7 ministers recognize the need for upstream investments in liquefied natural gas (LNG) and natural gas. The G7 should oppose this language and confirm G7 economies’ domestic efforts to reduce gas demand as a key step toward more energy security.

Going beyond this, the G7 should make a positive statement about the need to end new oil and gas production. The International Energy Agency’s NZE found that, in a 1.5°C world, there is no room for new oil and gas fields. IISD research confirms that all major 1.5°C scenarios agree: there can be no more new oil and gas production if the world is to limit global warming to 1.5°C, and indeed production must decrease by at least 65% by 2050. The G7 must follow the science and affirm the need to stop new production.

In conclusion, the G7 has a key opportunity to step up on fossil fuel phase-out this year. At this time of ever-escalating climate impacts, ever-clearer science, and an ongoing energy crisis, the G7 must take this opportunity. Now is the time for action.