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Analysis

The G20's Performance on Energy and Prospects for the 2021 Rome Summit

Ella Kokotsis,
Director, Accountability, G20 Research Group, October 22, 2021

Presentation for "G20 Summitry: Performance, Prospects, Proposals for Rome 2021," sponsored by the Bill Graham Centre for Contemporary International History and the G20 Research Group, University of Toronto, October 21, 2021.

Italy's G20 presidency has established energy as one of its key summit priorities as it prepare to host its first G20 summit in Rome in nine days from now.

Broadening the energy security concept in line with the evolving energy transition has been slated as particularly important for the Italians.

Energy-related issues have appeared on every G20 agenda since the leaders first met in 2008. But for the first-time ever in July this year, in Naples, Italy, we saw the convergence of G20 energy and climate ministers – where the ministers adopted a joint final communiqué that clearly acknowledged the climate-energy nexus, emphasizing that inextricable link between energy production, greenhouse gas emissions and climate change.

Furthermore, because of the COVID-19 crisis, the climate and energy ministers reinforced the importance of using science as a compass to guide the development of energy and climate policies.  The joint ministers concluded their meeting by clearly acknowledging the G20's significant role in ensuring a clean energy transition, reducing global emissions and enabling the achievements of the Paris Agreement.

What has transpired since this ministerial in July, however, is this dramatic convergence of international events that have worked together to elevate global energy issues to what many are calling an "energy crisis" and the first "great shock" of the global energy transition.

So what is happening?

Energy prices around the globe are surging. We see it here in Canada, at the pumps, where gasoline has reached an historic high of almost $1.50/litre, and over $3/gallon in the United States. Gas stations are running dry in the United Kingdom; electricity prices are spiking across Europe – where the cost of natural gas has tripled over the last year; power outages have cascaded across China's industrial heartland; shortages of coal are on the rise in India; and gas disruptions are happening across Russia.

To make matters worse, most energy analysts believe the crunch will not end till after winter – and if it is a particularly cold winter, energy prices will only continue to soar.

What are some of the underlying factors?

What we are witnessing is an almost a perfect storm. Energy demand has surged over the past year, due in large part to the rapid economic recovery in 2021. Severe weather events have ravaged many parts of the world this past year. Once again today we learned of power outages cascading throughout France due to extreme high wind conditions. An exceptionally cold winter in Europe followed by a particularly hot summer in Asia also boosted energy demand to extremely high levels. Fires at a Siberian processing plant caused gas disturbances across a number of regions in Russia. Maintenance issues at energy facilities were delayed because of COVID-19, causing outages in many countries. And shortfalls in renewable energy – including hydro and wind – led to an increased demand for fossil fuels in many regions of the world

What does this energy panic tell us?

It is a stark reminder that modern life needs abundant energy. It also tells us that the world remains ill prepared for such volatility in energy prices.

The timing of this energy shortfall is unfortunate, as the United Nations' climate conference in Glasgow kicks off the same day the G20 ends – on October 31. This COP26 meeting is exceptionally significant as it represents the deadline for countries to announce their updated climate plans.

Climate advocates from around the globe even imagined that this meeting could sound the death knell for fossil fuels and the greenhouse gas emissions they produce.

As a result, energy analysts fear – and perhaps rightly so – that the current shortage will cast a very dark shadow over Glasgow's COP negotiations – and may even discourage large emitters – including India and China – from committing to reduce their own fossil fuel consumption.

Prior to COP, however, we have the G20 convening on October 30–31 in Rome.

What can we expect coming out of the Rome G20 on energy issues?

To answer this question, it is helpful to take a step back and understand how the G20 has performed on energy issues historically.

Energy has appeared on the G20's agenda since the first leaders-level meeting in Washington in 2008, albeit to varying degrees. Since 2008, the G20 has generated 185 discrete energy commitments, placing energy fourth among all G20 subjects in terms of the overall number of commitments generated.

Compliance studies compiled by the G20 Research Group at the University of Toronto have found an average of 70% compliance, ranking energy higher than gender, climate change, trade and development, but lower overall than macroeconomic policy, health, food security, financial regulation and reform of the international financial institutions.

Causes for higher energy compliance are linked to the degree of politically binding language within the text of the leaders' final communiqués, as well as hosting G20 ministerial meetings that recognize energy and climate-related shocks.

If, however, we consider the energy situation currently unfolding around the world, what specific policy recommendations should the G20 consider when they meet in Rome?

A few suggestions are proposed here, in no particular order.

Energy efficiency should be scaled up significantly – as conservation efforts, energy-saving initiatives and related behavioural changes globally have been far too sluggish.

Renewables are key: the Net Zero Roadmap relies on the rapid scale-up of solar and wind power over the next decade to approximately four times the current levels.

Renewable deployment will require significant regulatory and policy shifts, as well as market design changes.

Accelerated decarbonization is also critical, beginning with the phase-out of inefficient fossil fuel subsidies by a specified date.

Increased investment in energy storage would ease problems related to generation intermittency, particularly with wind and solar power.

Resilience will need to be boosted against new and more frequent threats, including cyberattacks and extreme weather events.

Reliable and dependable supply chains will also be vital, as the pandemic has revealed over the past 18 months.

Digitalization is also key, as it supports energy planning, real-time monitoring and faster responses to critical situations.

Additionally, existing energy infrastructure could be retrofitted for low-carbon biofuels and synthetic fuels; gas pipelines could be repurposed to carry hydrogen or bio-methane.

And the G20's commitment to mobilize $100 billion annually is key in enabling energy and climate mitigation efforts across the developing world.

These policy recommendations present significant challenges for many G20 members, particularly in countries where fossil fuels dominate the supply mix. Transitioning existing energy infrastructure and enabling renewable deployment will be very difficult and costly, but necessary in order to make the shift to next zero a reality.

Tough times call for tough measures, and the G20 was born out of crisis. For this reason, the G20 is well suited not only totackle a number of these energy issues, but also to lay a solid foundation for when most of these same G20 leaders convene in Glasgow for COP26 at the beginning of November.

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Ella Kokotsis, director of accountability for the G20 and G7 Research Groups, has written broadly on various aspects of summitry and global governance, directed the research and publication of numerous analytical documents, and spoken extensively at summit-related conferences worldwide. Her scholarly methodology for assessing summit compliance continues to serve as the basis for the annual accountability reports produced by the G20, G7 and BRICS Research Groups. She is the author of Keeping International Commitments: Compliance, Credibility and the G7 Summits and co-author of Reconfiguring the Global Governance of Climate Change, with John Kirton and Brittaney Warren..