Energy security and climate finance at the heart of India’s G20 presidency

Accession to the G20 presidency on 1 December 2022 allows India to establish itself as a leader in the clean energy space, and to become a voice for the global south.

After December, for the first time, the G20 presidency troika (current, previous and incoming) will all be developing countries.

Many countries have faced global warming’s impact in 2022, including heatwaves in India and across Europe and floods in Pakistan and Puerto Rico. Countries in the global south are most vulnerable to the impacts of climate change. India should use the G20 platform to enhance climate ambitions and ensure countries can access technology and finance to meet their goals.

The G20, or the Group of 20, is a unique intergovernmental forum for both developing and developed countries and a rotating presidency. Its presidency allows a country to set an agenda that would further the G20’s objectives while mainstreaming country-level issues.

Energy and climate change have become focus areas for the G20. In 2015, the G20 called for the timely submission of countries’ Intended Nationally Determined Contribution (INDCs) and ratification of the Paris Agreement. Through its workstreams, such as the Sustainable Finance Working Group (SFWG) and Energy Transition Working Group (ETWG), and engagement groups, such as the Think 20 (T20), the G20 has championed enhanced mobilisation of capital for green energy and strategies for decarbonisation without compromising energy access goals.

The G20, or the Group of 20, is a unique intergovernmental forum for both developing and developed countries and a rotating presidency.

It is not, therefore, surprising that the Ministry of External Affairs (MEA) has indicated that India’s presidency will focus on climate finance, energy security and green hydrogen in the energy sector. These themes are actively under discussion in the G20 Indonesia presidency and were also pivotal during the 2019, 2020 and 2021 presidencies of Japan, Saudi Arabia and Italy, respectively.

Climate Finance

India’s G20 Sherpa Amitabh Kant reiterated that the developed world has taken limited climate action, including on climate finance, which will be a key discussion point during India’s G20 presidency.

Recently, some developed economies, such as Japan, the U.K., the U.S., Germany, Canada and the European Union, expanded their climate finance commitments until 2025. But there is a long way to go, and developed economies could set the right example. Emerging economies, except for China, will need about US$2 trillion by 2030 to meet their climate commitments.

During the Indonesian presidency, finance ministers and central bank governors held an exclusive meeting on climate mitigation in which they discussed policy and regulatory approaches to climate finance mobilisation as an extension to the G20 Sustainable Finance Roadmap mandated last year.

In addition to ensuring a green COVID-19 recovery, countries need financing to adjust to  increased climate vulnerability. This could require a higher allocation of funds for climate adaptation.

During its G20 presidency, India should thus emphasise finance delivery as per earlier commitments, an enhanced private sector partnership, access to a global pool of Environmental, Social and Governance (ESG) capital and the role of Multilateral Development Banks (MDBs).

Various global capital access risks like currency depreciation, monetary policy tightening, rising inflation, high interest rates, and sovereign guarantees need discussion, given the current geopolitical situation. Country case studies of innovative financing techniques, such as blended finance for derisking capital, especially for new technologies like battery storage, offshore wind, and green hydrogen, are important for a well-rounded discussion.

The developed world has taken limited climate action, including on climate finance, which will be a key discussion point during India’s G20 presidency.

Several countries have adopted different versions of green taxonomy, confusing investors and leading to greenwashing. Moreover, there are various disclosure methodologies for ESG ratings. There is a need for harmonisation and a common taxonomy framework, incorporating elements of climate justice and just transition, that works across all emerging economies.

India should also help countries adopt appropriate governance, strategy and risk management structures to manage climate risks. This can help in the greater flow of capital to climate adaptation and mitigation.

Energy Security

COVID-19 and the war in Ukraine exposed countries to fossil fuel price volatility, threatening energy security just as governments announced net-zero targets reiterating their commitment to combat climate change. India has a challenging role in steering the clean energy agenda without compromising energy security and sustainability. Having faced the conundrum for a long time, India must derive lessons from its experience in agenda setting.

The Bali Compact of the Indonesian presidency, a set of voluntary principles for smooth energy transitions according to national circumstances, has energy security and affordability as key tenets. It notes that countries should not use energy for political coercion and increase accessibility to technologies and materials.

From here, India must pivot discussions around knowledge and technology exchange, standardisation and political neutrality in energy.

Green Hydrogen

Hydrogen entered the G20 discussion during Japan’s presidency in 2019. The discussion has since evolved to focus on green hydrogen during the ongoing Indonesian presidency.

Green hydrogen is the new hope for decarbonising sectors such as refining, fertilisers, steel and cement.

India wants to become a green hydrogen/green ammonia export hub. It could use the G20 platform to discuss green hydrogen’s supply chain challenges, private sector participation in technology development and policy incentives for sectors to transition.

The article was first published in The Economic Times.