Tuesday, June 9, 2015

G7 Makes Historic Climate Pledges Including the Phase Out of Fossil Fuels

With three bold commitments the G7 just got serious about combating climate change. In a move that can only be described as historic, some of the wealthiest nations in the world have agreed to phase out fossil fuels. They have also agreed to keep temperatures from rising no more than 2 degrees and provide $100 billion in annual climate finance.

Much of the credit goes to the German leader, Angela Merkel who has previously been referred to as the green chancellor, and is now being heralded as a climate hero. In an announcement at Schloss Elmau as G7 talks wrapped up, she said the G7 has pledged to, “decarbonise the global economy in the course of this century”.

Merkel succeeded in convincing Japan and petroleum obsessed Canada to sign on to the agreement. While the news is a very positive step forward the leaders gathered in Bavaria denied Merkel's request to set immediate binding emissions targets.  Nonetheless, Tom Burke, the environmental adviser to Shell, Rio Tinto and Unilever, described the chancellor's efforts as a “big play”.

Although the seven wealthiest developed nations on earth are giving themselves until the end of the century to phase out fossil fuels, this still represents the most serious commitment ever made by the G7 to reduce climate change causing greenhouse gases (GHGs).

The 17-page communique released at the end of the summit titled "Think Ahead, Act Together", referenced IPCC recommendations to reduce GHG emissions by up to 70 percent by 2050 below 2010 levels. This means that some of the wealthiest nations in the world are now clearly committed to a low carbon future, which is an absolutely essential step towards mitigating climate change.

What may prove even more meaningful is their pledge to stay within the internationally agreed upon upper threshold limit of 2 degrees Celsius above pre-industrial times. Staying within 2 degrees may force the G7 to accelerate the phasing out fossil fuels. This is intimated in one of the most important clauses in the communique which allows for, “increased ambition over time”.

Merkel also announced the G7 was committed to raising $100 billion in annual climate financing by 2020 from both public and private sources. In addition to phasing out fossil fuels, keeping temperature increases within 2 degrees and climate finance the G7 agreed to work towards reducing extreme poverty and hunger.

The announcements from the leaders of the developed world sends a signal that will reverberate in markets and state capitols around the world. It also injects optimism into the forthcoming COP21 climate talks scheduled for Paris at the end of the year. The total phase out of fossil fuel is now on the agenda.

This is far more than political rhetoric, this announcement lets the oil and gas sector know that the end is neigh. It will also further stimulate the growth of both efficiency and renewable energy sectors.

Investors will undoubtedly take note. The fossil fuel industry has reason to be nervous while the cleantech sector has reason to rejoice. 

The bottom line is that current and future generations will benefit from the historic green commitments announced by the leaders of the G7.

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