In response to the Paris Agreement, G20 members were requested to set out Nationally Determined Contributions (NDCs) to demonstrate their commitments to reducing greenhouse gas (GHG) emissions. The objective is to limit the increase in the global average temperature to 1.5°C above pre-industrial levels.

The Climate transparency report 2021 makes six observations and provides commentary on each.

Firstly, there is raised ambition, but the G20 is not on track to limit the global temperature rise to 1.5°C. Members’ current targets and policies are predicted to fall well short of this objective.  There is an urgent need for G20 countries to update their NDCs, with clear laws and policies that reflect near-term targets to reduce GHG emissions.

Secondly, fossil fuels continue to be subsidised throughout the recovery from the COVID-19 pandemic.G20 countries missed the opportunity to shift away from fossil fuels through recovery investments. Only 2% of G20’s total stimulus spending since the beginning of the COVID-19 pandemic was allocated for the green recovery. Meanwhile, subsidies for fossil fuel continued, with total  subsidies about the same as that spent on the  green recovery. Most fossil fuel subsidies were unconditional, meaning no climate targets or pollution reduction requirements were attached.

Third, the vulnerability of G20 members highlights the need to adapt now. Increasing climate risk is being observed already through the consequences of global warming: extreme weather, droughts, and wildfires. Most G20 members could face the risk of global food insecurity.  There is an urgent need to strengthen social, economic and governance readiness to accelerate the implementation of adaptation plans.

Rebounding emissions signal a return to business as usual. Due to the impact of COVID-19, energy-related CO₂ emissions declined by 6% in 2020 from 2019 levels, but is projected to rebound by 4% across the G20 with the return to demand for fossil fuels. To drastically cut CO₂ emissions from the energy sector, the share of renewables must rapidly grow.

Transformative policies are urgently needed in key sectors to curb rising emissions. The power generation, industry and transport sectors produce the majority of GHG emissions in the G20. Rapid phase-out of fossil fuels and increasing energy and material efficiency through electrification are needed. Actions to maintain and expand critical global carbon sinks such as forests are pivotal to achieving net-zero CO₂

Finally, financial regulations are improving, but public fossil fuel finance continues. Financial actors, from central banks to export credit agencies, are integrating climate into their operations. Some G20 countries made noticeable regulatory and policy developments in 2021. For example, the European Central Bank included climate change considerations in its monetary policy framework. However, removal of tax exemptions for fossil fuels and implementation of effective carbon pricing schemes are needed along with fiscal policies to enable the transition.

Developing countries face greater challenges, with higher vulnerability to climate change and lowest readiness. Developed countries therefore need to ramp up climate finance contributions to support developing countries’ climate action.

1. Most G20 nations have increased their ambitions in reducing Green House Gas (GHG) emissions. However, there remains a gap between countries’ Nationally Determined Contributions (NDCs) and what is required to restrict global temperature increase to 1.5°C.
2. The G20 members urgently need to align their targets and policies to create a pathway that limits global warming to 1.5°C. By 2030, global CO2 emissions need to be 45% lower than 2010 levels, reaching net-zero by around 2050.
3. G20 members that are still supporting fossil fuel industries need to redirect subsidies towards sector transformation and investments in renewable energy and other green sectors. To reach net-zero emissions by 2050, investments of US$1 trillion per year from 2021-2023 are needed across the power, industry, transport, and building sectors, where only 35% of these investment needs are currently being met.
4. Allocating resources and planning to reduce vulnerability to the effects of global warming and strengthen resilience is of importance to all G20 members. From 2020-2030, it is estimated that an investment of US$1.8 trillion in five areas – early warning systems, climate-resilient infrastructure, dryland agriculture, mangrove protection, and water generation – would result in net benefits of US$7.1 trillion.
5. CO2 emissions from the energy sector make up 78% of all GHG emissions, so transforming the energy sector is key to a low-carbon economy. While energy-related emissions in 2020 dipped across the G20 by 6%, emissions in 2021 are projected to rebound by 4%.
6. While the use of renewables for energy supply is increasing among G20 members, coal consumption is projected to rise by 5% in 2021, concentrated in China (61%), USA (18%), and India (17%). The average natural gas consumption increased by 12 percent between 2015-2020 and is projected to remain at similar levels in 2021. However, switching from coal to natural gas poses a risk of stranded gas assets. G20 members need to prioritise investment in renewable energy and accelerate coal phase-outs.
7. There has been encouraging progress with respect to restricting public spending on fossil fuels through public finance institutions. In May 2021, G7 nations made a commitment to end the use of public finance for new, unabated international coal power plants. The US Treasury has announced a significant step away from international coal and gas projects through multilateral development banks.
8. While progress is being made on members’ financial policies and regulations, overall significant subsidisation of fossil fuel finance continues. This hinders the transition to low-carbon economies by creating incentives to prolong the life of fossil fuel assets. G20 members need to introduce conditionality or “green strings” and reinforce policy regulations and incentives that align with near-term climate targets.
9. Most countries now have some form of carbon pricing. In 2020, such schemes generated total revenue of US$47 billion in the G20. As of 2021, 13 G20 members have explicit national carbon pricing schemes such as carbon taxes and emissions trading schemes (ETS). However, the coverage varies and the price of carbon remains too low. Coverage and carbon pricing need to be increased.