The evaluations of the results of the G20 in Rome highlight, on the one hand, the doubts of some of the observers generated by the lack of a precise deadline for the realization of carbon neutrality and, on the other, the conclusions of Mario Draghi, widely shared by American President Biden, who consider the G20 in Rome a great success. In reality, it was difficult to expect more consistent results from this meeting, in which, among other things, the leaders of two of the great world powers, Russia and China, were absent. And, in fact, the most important concrete result, namely the introduction of a global minimum corporation tax, had already been anticipated on 8 October in the OECD, with a global agreement signed by 136 of the 140 member countries, between which all those of the EU and the G20. But, while the novelty elements that emerged in Rome should not be underestimated, the other point on which to focus the attention of the political class, but also of public opinion, concerns the strategy that Europe must implement in the COP26 underway. in Glasgow, to prepare the ground so that COP27 (in Egypt) can take the strategic decisions necessary to achieve the goal of a substantial reduction in emissions in 2030 and carbon neutrality in 2050.
In the Final Declaration approved by the G20 in Rome, an important paragraph concerns the help that G20 members undertake to provide to the weakest countries: “We welcome the new general allocation of Special Drawing Rights (SDRs), decided by the Fund International Monetary (IMF) on August 23, 2021, which made available the equivalent of $ 650 billion in additional global reserves. We are working on workable options by members with strong external positions in order to significantly amplify its impact through the voluntary channeling of part of the SDRs allocated as aid for vulnerable countries, based on national laws and regulations ”. On this point, the European Union could lead the way by allocating its share of SDR to the countries of the African Union, in order to facilitate the financing of an increased volume of trade in the framework of the internal market recently launched at continental level and of a policy that favors an effective and socially just ecological transition.
The second important point concerns the reaffirmation of the objective “to keep the increase in the global average temperature well below 2 ° C and to implement the necessary efforts to limit it to 1.5 ° C above the pre- industrialists ”, as strongly requested by the scientific community, even if the date for achieving this objective is still indicated in rather vague terms (“ within or around the middle of the century ”). But the decisive point concerns the tools that must be put in place to achieve this goal. The concrete commitment undertaken by the G20 concerns the fact that the countries that are part of it “[porranno] an end to the provision of international public funding for the new energy production from coal-fired power plants abroad by the end of 2021 “. And as regards the tools to be used to achieve the goal set in the Paris agreements, there is an innovative – and extremely important – reference to setting a price for carbon: “this policy mix must include a wide range regulatory, market and fiscal mechanisms to support clean energy transitions, including, where appropriate, the use of carbon pricing mechanisms and incentives, while offering targeted support to the poorest and most vulnerable ”. And it does not seem accidental that the day after the closing of the G20, in the opening ceremony of COP26, Angela Merkel proposed the introduction of carbon pricing at a global level.
If this happens, finance can play an important role more easily, having the certainty of a defined reference framework for investment decisions. One hundred trillion dollars (100 “trillion” dollars) is generally considered the minimum amount of funding needed for the energy transition over the next thirty years. An impressive figure, but which can be considered achievable if the interventions that will be implemented by international financial institutions, and also by the private sector, are added to public resources.
This point is underlined by Jean Pisani-Ferry in a recent article in Le Monde which, on the one hand, highlights the enormous amount of investment needed (“The International Energy Agency estimates that the annual energy investment must pass from 2,000 billion dollars (1,720 billion euros) in recent years to 5,000 billion in 2030, before gradually decreasing “) and, at the same time, the need to guarantee a framework of certainties to ensure that public investments are accompanied by a growing flow of private investments for the development of renewable energies. This is the main task of COP26; and, in this perspective, a central role belongs to the European Union which, with NextGenerationEU and Fit for 55, has launched an extremely demanding program to promote the ecological transition, also indicating the tools to be activated to achieve a 55% reduction in CO2 emissions in 2030 and carbon neutrality in 2050.
But to play a decisive role in COP26, the Union must be able to build a system of strong alliances with the most vulnerable countries, and in particular with Africa. A recent volume edited by the CSF bears an emblematic title: Europe and Africa: a Shared Future. In essence, the ecological transition, and in particular the transition from fossil fuels to renewable energies, is only possible if the Union is able to carry out the technological and financial transfers to ensure the development of new sources of green energy in African countries. On the other hand, this energy production will favor the promotion of an endogenous development process in the African continent – within the framework of the process already started for the creation of a common market which will have to be strengthened by the progressive creation of a payments Union similar to that realized in Europe following the Marshall Plan – which in Africa will be favored by the transfer to African countries of the European share of SDRs that will be distributed by the IMF. The importance of this decision was underlined on 1 October in Addis Ababa by the African Finance Ministers, who met with the Director of the IMF Kristalina Georgieva and, on that occasion, also asked for the introduction of a global carbon price. This is a complex strategy that will require a large commitment of political capital from the Union. But on this ground, Europe will finally be able to demonstrate its ability to be a global player.
* Emeritus Professor of Finance at the University of Pavia and Vice President of the Center for Studies on Federalism; in 2020 he published the volume Carbon pricing – The new European taxation and climate change, il Mulino (the translations in the text are by the author)