The world is waiting for the G20 to firm up its stance on climate change
Climate change is causing wildfires, extreme rainfall, and droughts, which pose a serious global challenge. The G20 should reach a consensus on climate change
Up until recently, it was hyperbolic to say that climate change would burn up the world, but it’s actually happening today. The string of wildfires in Hawaii, Spain, Canada and Greece this year has destroyed entire settlements, but climate change is not merely about wildfires. It is also the primary reason behind the torrential rainfall and landslides in Himachal Pradesh and Uttarakhand, Beijing’s worst flooding in 140 years and strangely enough, August 2023 was India’s driest August for 122 years despite the monsoons. The pattern is clear: Under the business-as-usual attitude, we have the makings of a serious challenge to organised life under runaway climate change. It will disturb sowing patterns, diminish crop yields, upend livelihoods and destabilise human development indicators. Excessive human-induced CO2 emissions are squarely responsible.

There is new political salience for climate change which goes beyond emission reductions and environment conservation alone, and it is tied to every political and policy decision-making of strategic importance to countries. Climate policy is ‘everything policy’ now. This also explains why international climate diplomacy is no longer limited to the annual UN-led climate meetings but has seeped into key international summits. The current G20 summit is one of them.
Despite long-drawn negotiations on energy transition and finance, as the G20 meets in New Delhi over the weekend, the obvious solution to slash global fossil fuel use remains elusive. Consensus on committing to the reduction in fossil fuel use has been difficult to achieve as each member nation follows its unique development pathway, and coal, oil and gas are seen as instrumental to predictable growth. Member nations, however, are simultaneously pledging carbon neutrality, net-zero emissions and low-carbon development, which could likely turn new fossil fuel investments into stranded assets in less than ten years if the net-zero trajectories are pursued in earnest.
That’s a heavy economic burden to take on and yet, an investor sentiment survey we collaborated on shows that global investment firms have evinced strong interest in natural gas both in terms of a bridge fuel to decarbonisation and as a fallback for energy security through the various geopolitical battles. Social licence for gas might not stay for much longer though as winds of change sweep through the energy sector. Coal is no longer king even as its use remains significant, but overall it will decline over the next decade and beyond.
A recent analysis by Ember, a data analytics group which analyses global trends of fossil fuels, shows that two heavily industrialised nations, Australia and South Korea, have reported the G20’s highest per capita emissions from coal. Another analysis by the International Institute for Sustainable Development reveals that despite the knowledge of how fossil fuels affect the climate system, G20 members provided a record USD 1.4 trillion in public money to support fossil fuels in 2022. That amount – which includes fossil fuel subsidies (USD 1 trillion), investments by state-owned enterprises (USD 322 billion), and lending from public financial institutions (USD 50 billion) — is more than double the pre-Covid-19 and pre-energy crisis levels of 2019. Global investment in renewable energy reached a record high of USD 500 billion in 2022 but was still only around half of the investment in fossil fuels (USD 950 billion). Oil and gas drillers too had their best year in 2022 with the highest-ever profits of USD 219 billion in spite of the urgent calls to walk away from the fuels.
There are cleaner solutions which decouple emissions and industrial growth, but they hinge upon speedy and stable financing to be unlocked. To be at the forefront of the clean industry sectors of solar, wind, electric vehicles, and green hydrogen requires changing attitudes to multilateral and bilateral negotiations, and shedding the orthodox attitudes while looking into growth and development. India’s development trajectory is not the same as that of the United States or the West but today it commands significance in global supply chains, making it attractive to investors.
The climate change negotiations have hinged on finance as the central pillar to inspire global climate action but the G20 has to bring about realistic and transparent discussions on the topic.
One outcome from the G20 meet being reported is that the group will aim to triple its renewable energy capacity by 2030. Making this possible through more commercial capital in renewable energy in emerging markets across G20 will reduce the cost of capital to set clean energy projects, but will also de-risk the projects to allow for improved leverage of further funding. Solar PV is the cheapest source of electricity today. If the G20 leaders can infuse confidence and amplify their joint intentions to support renewable energy by committing to tripling targets, the markets will respond.
The mode in which the clean energy funds are delivered matters as well. The emerging markets and developing economies (EMDEs) must modernise their economies by building affordable housing, less carbon-intensive power plants, expanding the share of sustainable transport and building infrastructure that is climate-resilient. The latter is key to seeking private and commercial investments as the projects’ resilience against extreme weather will be essential to the financiers’ exit strategies.
The World Bank and the International Monetary Fund are suspending debt repayments during the severest periods of the climate crisis. But extreme weather events are likely to get a lot worse and the situation calls for re-strategising the flow of the funds. In the aftermath of climate change, major insurers in the US not offering coverage to homeowners goes to show that those affected will bear the double loss of both their homes and their lifelong investments into arguably their biggest asset. This is a recipe for social disaster unless political will demonstrates unity on climate policy and action on all fronts.
Making it workable for public finance as well as institutional investors is a complex puzzle. For instance, the average cost of capital to finance solar PV projects in the US is reported to be as low as 3 pc, while the same in high-risk sub-Saharan Africa may be at least two to three times higher. Yet, these regions are the ones that are most in need of financing and clean energy investments here must be derisked.
The role of multilateral banks which could promise more money (up to three times the currently available funds) for developing countries to grow their clean energy capacities is primary. They should also double the concessional finance they usually sanction and provide more substantial guarantees for private investors to feel confident about clean asset classes in the developing world. Such lending reforms are essential to the G20 bloc addressing its vicious cycle of needing more investments in adaptation and mitigation measures but being overlooked as worsening climate impacts drive away Western investors.
The global climate discourse needs an urgent solution to turn the developing world into a destination for bankable investments. It is hoped that the G20 meeting this weekend will lead to the much-needed outcomes, and a race to the top that offers better jobs and livelihoods, more innovation, cleaner cities, and a new industrial era.
Aarti Khosla is director, Climate Trends and Aniruddha Bhattacharjee is researcher, Climate Trends. The views expressed are personal
