Statement by G7 Finance Ministers and Central Bank Governors on Climate Issues
Washington DC, October 12, 2022
At our climate economics meeting, we underscored our commitment to ambitious climate action and to promoting an orderly and just global transition to net-zero greenhouse gas emissions. We were delighted to be joined by Nicholas Stern, Amar Bhattacharya and Hans Peter Lankes for our discussion.
- As noted in our separate statement issued today, Russia’s war of aggression against Ukraine continues to disrupt the global economy and has caused further substantial increases in commodity prices, including energy and foodstuffs. It also has serious repercussions on global energy markets and supplies, threatening energy security, increasing food insecurity and causing social and economic repercussions in many countries around the world.
- In the face of these challenges, we will not compromise, but rather intensify our efforts to achieve our climate goals, including an accelerated, clean, just and sustainable energy transition that also strengthens energy security. Many countries have been hit by significant natural disasters related to climate change in recent months, underscoring the most recent findings of the Intergovernmental Panel on Climate Change (IPCC) on the urgency of act during this decade to maintain a temperature increase limit of 1.5°C. at your fingertips and avoid the worst consequences of climate change. We therefore reaffirm our unwavering commitment to the full and effective implementation of the Paris Agreement and the achievement of net zero emissions by 2050 or earlier.
- Given the high volatility and high prices in international energy markets, we will continue our effective, temporary and targeted support for those most affected by rising energy prices, while maintaining price signals sufficient to further encourage energy savings, investments in energy efficiency and clean energy transition.
- An efficient, orderly and just transition of our economies to a net zero world is at the heart of long-term sustainable global economic growth. We appreciate the independent report “Collaborating and Delivering on Climate Action through a Climate Club” by Nicholas Stern et al. commissioned by the G7 Presidency, which provides valuable analysis on how international cooperation mechanisms could help the global community achieve such a positive growth agenda. We underscore the substantial net positive effects of mitigating the wellbeing impacts of climate change and reaffirm our commitment to intensify efforts to facilitate a transition to net zero that positively impacts jobs, growth, equity, health and the environment, both within our own economies and globally.
- We reaffirm the potential of high integrity carbon markets and carbon pricing to drive cost effective reductions in emission levels, drive innovation and enable a transformation to net zero emissions, through the optimal use of a range of policy levers to set the price of carbon. Recognizing that the risk of carbon leakage may increase with more divergent climate policy ambitions and actions, we reaffirm our commitment to cooperate on possible WTO-compatible mechanisms to mitigate this risk and support trade relations. An orderly global transition has the potential to save trillions of dollars from global GDP. We welcome the progress made by the OECD Inclusive Forum on Carbon Mitigation Approaches (IFCMA).
- We recognize the significant impact of climate change and the transition to net zero on macroeconomic outcomes and fiscal sustainability and acknowledge the unequal impacts for many low- and middle-income countries and for vulnerable groups in all countries. We will continue our work to reflect these impacts in our analyzes and consider the impact on our economic, financial and monetary decisions, in accordance with our mandates. We welcome the work of various institutions, including international organizations and central banks, on the effectiveness of mitigation policies, their economic impact, and the implications of heterogeneous policy mixes in different economies. We recognize that different policy levers can have different impacts on mitigation effectiveness as well as different economic impacts, for example through transboundary effects and spillovers. We commit to further improve our understanding of the macroeconomic effects of climate change and to continue our intensive technical collaboration, in particular between the G7 central banks, on the integration of climate risks and aspects into our analysis and macroeconomic modelling. We commit to continue these efforts also in collaboration and with the support of other partners, including the G20, the Coalition of Finance Ministers for Climate Action (CFMCA) and the Network for Greening the Financial System (NGFS).
- We look forward to COP 27 in Sharm el-Sheikh and fully support the Egyptian Presidency to make substantial progress towards achieving the goals of the Paris Agreement. We remain firmly committed to achieving the collective goal of mobilizing climate finance of US$100 billion per year from a wide variety of sources as soon as possible and through 2025 to meet the needs and priorities of developing countries. development in the context of meaningful mitigation and adaptation. actions and transparency on implementation. We also reiterate our commitment to work with others to respond to COP26’s call to collectively double the provision of climate finance for adaptation from 2019 levels by 2025. adaptation and we are committed to strengthening the synergies between climate finance and biodiversity. We welcome the progress made under the Just Energy Transition Partnerships (JETP).
- We call on all Multilateral Development Banks (MDBs) and other Development Finance Institutions (DFIs) to align their financing and operations with the objectives of the Paris Agreement, including with its Article 2.1c, and to finalize and make publicly available robust methodologies for Paris alignment of all their activities as soon as possible, in particular for indirect and policy-based lending. Recognizing the critical importance of private capital mobilization to accelerate the transition to net zero, we call on MDBs and other DFIs to intensify their cooperation with the private sector to increase their private finance mobilization ratios and upstream interventions that facilitate the mobilization of private capital such as project preparation and support for reforms that improve the enabling environment. We also call on MDBs to support climate-related policy reforms in partner countries as part of MDB lending operations.
- We welcome progress in international work and encourage further action to implement the G20 Roadmap for Sustainable Finance and the Financial Stability Board (FSB) Roadmap for Addressing Climate-Related Financial Risks and will take steps to operationalize their recommendations and principles in our own jurisdictions, as appropriate. We reiterate our commitment to move towards mandatory climate-related financial disclosures that provide consistent and decision-useful information for market participants and welcome the global baseline of sustainability reporting standards currently being developed. developed by the International Sustainability Standards Board (ISSB). Supporting the global baseline has the potential to improve information and therefore mobilize finance for needed investments, particularly in emerging and developing economies, and we call on the ISSB to work closely with regional standard setters and all relevant local stakeholders and to provide guidance and capacity. Support. We salute the ISSB’s “jurisdictional working group”. We consider it essential that the global benchmark builds on the framework of the Task Force on Climate-Related Financial Disclosures (TCFD) and encourage all participants to pursue more constructive cooperation towards a practical, flexible and interoperable global benchmark that can also be incorporated into a more ambitious disclosure. terms.
- We are already experiencing risks to lives and livelihoods from climate change with increasing frequency and magnitude and recognize that these risks will increase further in the future. We actively support work on climate and disaster risk finance and insurance and will work to advance climate resilient debt covenants and the Global Climate Risk Shield.