G20 Finance Ministerials and World Bank/IMF Spring Meetings: Expert comment

April 16, 2024 — Finance ministers and central bank governors of the G20 major economies are meeting in Washington on Thursday on the sidelines of World Bank and IMF spring meetings. High on the agenda for these events is the need to mobilize trillions of dollars of investment in the transition to clean energy.

“Following the historic outcome at COP 28 to transition away from fossil fuels, triple renewables, and double energy efficiency, we need investment to match,” says Farooq Ullah, senior policy advisor at the International Institute for Sustainable Development. “G20 finance ministers need to show leadership and lay the groundwork for an ambitious new climate finance package.”

IISD experts are available to comment on how fiscal reform, reform of multilateral development banks, and engagement with national oil companies can move the needle.

Fiscal reform

In 2009, the G20 governments agreed "to phase out and rationalize over the medium term inefficient fossil fuel subsidies while providing targeted support for the poorest." They have not done so. Indeed, the latest complete data set shows public financial support for fossil fuels at a record high, both in the G20 and globally.

"We’re seeing hundreds of billions of dollars still being poured every year into fossil fuel subsidies, financing, and investments by state-owned energy companies," says Tara Laan, senior associate at IISD. "Instead, these funds could be used to support vulnerable consumers and businesses in other ways and to bridge the funding gap for tripling renewable energy."

Removing fossil fuel subsidies and increasing environmental taxation can raise revenues for poverty alleviation, development, and the energy transition, IISD experts say. Countries urgently need to re-align their fiscal policies with a low-carbon and equitable future. Initiatives such as the taskforce for international taxation for climate action and sustainable development can guide countries on how best to raise funds while sending signals to consumers and investors to change their behaviour.

Multilateral development bank reform

At the last G20 summit, leaders agreed to triple global renewable energy capacity by 2030 and achieve global net-zero emissions by mid-century. Achieving these goals will require a substantial scaling up of investment and climate finance, IISD experts warn. Multilateral development banks (MDBs) like the World Bank have a key role to play in closing the finance gap.

"G20 countries, as major shareholders in the MDBs, can accelerate the investment in clean energy the world needs," says Paola Yanguas-Parra, policy advisor at IISD. "There is no time to lose."

They can start by redirecting finance away from all fossil fuels. While the major MDBs have stopped funding coal projects, most still back gas as a 'transition' fuel, or finance oil and gas through intermediaries. There is no room for any new fossil fuels under a 1.5°C warming limit.

There is an urgent need for investment in clean energy systems in developing economies, particularly in Africa. Initiatives like the Clean Energy Transition Partnership can help to target support where it has the most impact.

National oil companies

At the last UN climate summit, COP 28, governments agreed to transition away from burning coal, oil, and gas for energy. Yet many national oil companies (NOCs), including in the G20, are planning to expand production. NOCs have control over two thirds of global hydrocarbon reserves.

"Support for oil producing countries taking bold steps to transform their economies is a blind spot of discussions around climate finance," says Yanguas-Parra. "But this will be key to enable a global transition away from fossil fuels."

MDBs should engage with NOCs and their host governments to align their plans with the Paris Agreement. They can provide fiscal and regulatory assistance to plan and implement the transition. For those countries leading the way in reducing their economic dependence on oil and gas production, MDBs need to create targeted finance lines. MDBs can also help with strategies to keep countries creditworthy while they cut oil and gas production.

Notes to editors:

1. Leaders’ Statement at the 2009 Pittsburgh summit
2. Fanning the Flames: G20 provides record financial support for fossil fuels
3. Burning Billions: Global government support for fossil fuels topped $1.7bn in 2022
4. European Climate Foundation press release on launch of taxation task force
5. G20 New Delhi Leaders’ Declaration
6. Navigating Energy Transitions: Mapping the road to 1.5°C
7. Assessing National Oil Companies' Transition Plans: An essential tool for banks, investors, and regulators

For more information or to request an interview, contact:

Megan Darby, Senior Communications Officer, IISD (London): mdarby@iisd.org
Tara Laan, Senior Associate, IISD (Melbourne): tara.laan@iisd.net