Finance ministers from the G7 countries are meeting in Italy this week to discuss the urgent need to take action on inefficient fossil fuel subsidies. Despite multiple pledges over the years to phase out these subsidies, they have continued to increase, reaching $1.5 trillion globally in 2022. The International Monetary Fund predicts that while subsidies may decline in the near-term, they will rise further by 2030, hindering efforts to keep global temperatures from rising beyond 1.5C as outlined in the Paris Agreement.
To meet the goals of the Paris Agreement, emissions must halve by 2030 and reach net zero by 2050. Increasing fossil fuel subsidies is not compatible with reducing reliance on coal, oil, and gas, and transitioning to clean technologies. The G7 countries have previously committed to phasing out inefficient fossil fuel subsidies by 2025, but more urgent action is needed to ensure a just transition to a clean energy economy without disproportionately affecting the poorest in society.
The G7 finance ministers meeting this week have the opportunity to align financial commitments and investments with the ambition to transition away from fossil fuels. Governments, especially those in the G7 countries historically responsible for greenhouse gas emissions, must set targets and timelines for phasing out unabated fossil fuels in alignment with a 1.5C trajectory. It is crucial to support countries in the Global South in diversifying their economies and developing net-zero pathways through finance and capacity-building for a fair and inclusive transition.
Closing coal power plants as part of the transition to clean energy will have a significant impact on jobs in affected communities. Governments and companies need to invest in upskilling and reskilling to ensure a fair transition for workers. Ambitious plans for a clean energy transition require proper planning and financing, which the G7 finance ministers can help steer the world towards. Without a conscious redirection of financial flows away from fossil fuels and towards clean technologies, promises to phase out fossil fuel subsidies and emissions reductions will not be achieved.
Christine Shearer from Global Energy Monitor emphasized the need for concrete plans to retire coal plants in line with the 2035 phaseout target, especially in the US, which is home to a significant portion of the G7’s coal plants. Proper planning and investment are essential to ensure a just transition to clean energy that works for affected communities. The G7 finance ministers have a crucial role in ensuring that financial commitments align with the ambitious goals of the Paris Agreement and facilitate a fair transition to a clean energy economy for all.
