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Analysis

The Riyadh G20 and the Glasgow COP:
Climate Change Governance in 2020–21 and Beyond

Elizabeth Carey, Research Associate, G20 Research Group
December 2, 2020

COVID-19 and the postponement of COP 26 highlight the importance of G20 support for the COP process

The COVID-19 pandemic has placed a spotlight on the G20 as an instrument of global governance by a "club" of leading economic powers, representing two thirds of the world's population and around 85% of global gross domestic product (GDP). The G20, as the premier international forum for global economic cooperation and crisis management, has an important role in coordinating international responses to the crisis and in providing the impulse for a more resilient post–COVID-19 global economic order.

This year's G20 summit hosted virtually from Riyadh was set to be dominated by the key priorities of managing the current global health crisis and helping the global economy recover as swiftly and comprehensively as possible from the impacts of the pandemic. These include a dramatic fall in GDP, trade and employment, with the International Monetary Fund (IMF) projecting global growth at −4.9% in 2020.

The rescheduling of the 26th Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change from December 2020 in Glasgow to 2021 as a result of the pandemic further highlights the value of the G20 summit as a flexible form of governance able to operate in spite of unprecedented circumstances. The postponement raises the issue of the role of the G20 at a time when the COVID-19 crisis is deepening the need to rethink the implications of globalization and the relationship between humans and their natural environment.

This postponement is thus occurring at an important moment. Negotiations to complete the rulebook for Article 6 of the Paris Agreement, on international collaboration, were set to be concluded at COP26 in 2020, with the pandemic thus further delaying finalization of what represents an essential part of the agreement and a path to a more sustainable future.

G20 support for the Article 6 process can help deliver critical clean technologies to reach carbon neutrality

Article 6 of the Paris Agreement sets out provisions for voluntary cooperation whereby the parties to the agreement can meet their commitments more cost effectively, providing for higher levels of overall emissions mitigation than would otherwise be achieved. It provides for market-based mechanisms in the form of cooperative approaches referred to in Article 6.2 with internationally traded mitigation outcomes as well as Article 6, paragraph 4 activities that include a sustainable development mechanism. Non-market approaches under Article 6.8 are brought in as an alternative to market mechanisms, thereby creating a holistic, balanced and complementary approach to global cooperation to help meet the agreement's climate objectives.

The value of Article 6 lies in its potential to accelerate the transition to low-carbon energy systems and economies. The market mechanisms in effect lay the foundations for the development of a future global carbon market, building on the experience of the Kyoto Protocol's Clean Development Mechanism and of Article 6 pilots. These mechanisms build on each country's comparative advantages in terms of natural resources and expertise, with a well-designed framework having the potential to accelerate the deployment of critical clean energy technologies, such as carbon capture and storage (CCS), an emission reduction process that is designed to prevent large amounts of carbon dioxide from being emitted into the atmosphere.

CCS plays a critical role in meeting the climate objectives of the Paris Agreement. Those objectives include limiting the rise in temperatures to well below 2°C compared with the pre-industrial era (1850) and reaching carbon neutrality in the second half of the century or a "balance between anthropogenic emissions by sources and removals by sinks" (Article 4). Reaching carbon neutrality in particular will require the deployment at scale of critical technologies that enable the utilization of geological sinks, such carbon capture utilization and storage (CCUS), a subset of CCS in which the carbon stored in geological reservoirs can be put to use for instance to decarbonize certain industrial processes such as the production of ammonia.

The extent to which CCS technology needs to be scaled up in order to meet these objectives is clearly recognized in scenarios such as the International Energy Agency's 2°C Scenario and Beyond 2°C Scenario and Shell's Sky scenario, which charts a pathway to meet the objectives of the Paris Agreement (see Table). By 2030, greenhouse gas emissions need to be cut by at least 12 gigatonnes in order to meet the two degrees objective, according to the United Nations Environment Programme's 2019 Emissions Gap Report.

Table: Required Carbon Dioxide Emissions Reductions from CCS in Different Scenarios Studies.↩

The G20 can help support the development of a high-value market using a common Article 6 blueprint

Designing a set of effective rules under Article 6 is key to incentivizing the deployment of CCS globally, building on public policy momentum in countries such as the United States, currently the global leader in putting new CCS facilities in place. New market-based global mechanisms under Article 6 need to operate alongside these public policy drivers, connecting emissions trading schemes, tax incentives, low carbon fuel standards and international offsetting mechanisms worldwide, thereby creating a global, high-value market for CCS and other clean energy technologies.

This global, high-value market could come to represent very significant economic and business opportunities over the next decades. According to research from the Joint Global Change Research Institute at the University of Maryland, the emissions trading market value of Article 6 could reach $222 billion in 2030, $572 billion in 2050 and as much as $1,430 billion in 2100 (in 2015 U.S. dollars). Around half of the signatory parties to the Paris Agreement intend to generate a contribution from international market mechanisms to meet the pledges they made in their nationally determined contribution.

Realizing the full potential of Article 6 will, however, require that sufficient political will exists to engage in widespread participation in the collaborative approaches of Article 6. Support from the G20 would provide a vital political impulse for the successful conclusion of Article 6 negotiations at COP 26 in Glasgow and for effective implementation, with of course a degree of flexibility as the market-based mechanisms take shape over time.

Following on from this year's G20 summit hosted by Saudi Arabia, future G20 summits can highlight the role of progressive supply-side climate policies and help shift the narrative on climate change in favour of a more inclusive, multilateral approach that also takes into account the contribution of oil-producing countries.

An effective Article 6 market-based framework would be technology neutral and include innovative, technology-specific mechanisms. It would thereby encourage the participation of new entrants such as oil-producing countries, thus contributing to a more inclusive and multilateral approach to solving the climate change problem.

Designing such a framework can in particular create incentives for the deployment of CCUS in oil-producing countries. These countries are endowed with large-scale capacity to store carbon dioxide in oil reservoirs that can be traded as a mitigation outcome under the market mechanisms of Article 6. Given the important role that fossil fuels will continue to play in meeting global demand for energy over coming decades, the Paris Agreement, through its inclusive membership, can thus encourage the development of progressive supply-side policies that can benefit parties such as oil-producing countries, while contributing to higher levels of cost-effective global emissions outcomes. It could thereby also contribute to shifting the current debate on global warming by recognizing the contribution that oil-producing countries can make to solving the climate change problem.

In the context of Saudi Arabia's 2020 G20 presidency, progressive supply-side policies (i.e., that mark a departure from previous policy, for instance by further developing CCUS in the context of new or innovative policy frameworks) and the vital contributions that these can make to solving the climate change problem are more than ever relevant. With its plan to launch its own emissions trading scheme, Saudi Arabia can participate in and benefit from the development of a global carbon market. The latter can open up significant opportunities at the intersection between CCS and negative emissions technologies, such as with the deployment of CCUS to deliver carbon-neutral or carbon-negative oil, that will support the Kingdom's strategy of economic diversification.

Conclusion

The decision by the Trump administration to withdraw the United States from the Paris Agreement (which became effective on November 4, 2020) represented a complex challenge that required skilled diplomacy to preserve and advance the multilateral effort on climate change at the level of the G20. The G20 Leaders' Declaration at the Riyadh Summit, which took place shortly after the US presidential election, reiterated the commitment of the G20 to the Paris Agreement. The incoming administration will provide renewed momentum for the Paris objectives, with the commitment made by President Elect Joe Biden for the US to rejoin the agreement on day one of his administration. The climate objectives of the Agreement could thus come within striking distance, with support from the G20. By promoting international collaboration under Article 6 and an inclusive approach to solving the climate change problem, with oil-producing countries contributing to the carbon-saving effort with critical technologies, support for the COP process by the G20 going forward would be a hopeful signal of resilience in a stressed global economic and financial architecture.

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Eilzabeth Carey is a Research Associate with the G20 Research Group and Associate Research with the Centre Thucydide d'Analyse et de Recherche en Relations Internationales at Université Paris II Panthéon-Assas. Her work focuses on security studies, international climate policy and international climate agreements. She has published on the EU's 2020 Energy Climate Package and is a co-author of the forthcoming report "A New Global Framework for Clean Technology Deployment under the Paris Agreement: The Role of CCS in a Future Global Carbon Market" to be published by the King Abdullah Petroleum Research and Studies Centre (KAPSARC). She has spent the past three years working on issues relating to the United Nations Framework Convention on Climate Change at KAPSARC in Riyadh, Saudi Arabia.