G7 to demand wealthy developing nations pay up on climate change

G7 leaders are set to call for richer developing countries such as China and Saudi Arabia to pay up for climate change, after UN negotiations failed to make progress on a new funding target to help poorer nations deal with global warming.

The move by the leaders of the richest countries of the world as they meet in Italy this week will put them on a collision course with countries including China, Saudi Arabia and India, who argue developed nations should have to pay for the effects of historical emissions.

The UN discussions in Bonn, held over two weeks and attended by hundreds of national delegates, concluded on Thursday and were marked by divisions and entrenched positions, resulting in little progress on a new deal.

The pressure to take climate action now falls on G7 leaders who are meeting in Italy. The UN has to replace the $100bn annual goal to fund poorer nations at the next UN COP29 climate summit in Baku.

A G7 draft communique, seen by the Financial Times, indicates the world’s largest economies will agree they need to provide financing for poorer nations, but will also call on states that are classed as developing but are more advanced economically to pay up.

“We emphasise that the G7 countries intend to be leading contributors to a fit-for-purpose [climate finance] goal, underlining the importance of including those countries that are capable of contributing in any international public finance mobilisation,” the draft says.

The existing $100bn annual goal was set more than a decade ago but was finally reached two years late in 2022, according to the OECD, only after including reclassified loans.

The G7 draft communique said a new goal would be “a unique opportunity to strengthen the international climate finance landscape in this critical decade to keep 1.5 within reach”, in reference to the Paris Agreement to limit global warming. The world has already warmed by at least 1.1C in the industrial era.

The discussions in Bonn were fraught as distressed developing countries maintained that the developed world, which historically had caused the greatest emissions, should be held financially responsible for the damages from climate change.

Richer, western countries counter that wealthier developing nations, including China, Saudi Arabia, the United Arab Emirates, India and Brazil, should also contribute towards a global fund to address climate change.

In April, German Chancellor Olaf Scholz said many emerging economies had become major emitters with increasing economic clout. Countries “that have made a significant contribution to emissions over the past 30 years must also contribute to public finances” if they are in an economic position to do so, he said.

During the talks in Bonn, Saudi Arabia, on behalf of the Arab group, argued that developed countries led by the US and EU needed to provide $441bn annually in climate financing for developing countries. That could then be leveraged to raise more than £1tn, it said, arguing new taxes could help provide the funding.

“Military emissions represent 5 per cent of historical emissions and one, for example, potential idea is to have a tax on defence companies in developed countries,” a Saudi negotiator said during the talks. “We also realise a financial transaction tax could generate a lot of revenues as well.”

Countries also clashed over the pledge for the world to transition away from fossil fuels — a critical aspect of the agreement at COP28 in Dubai last year — with one observer saying that negotiators had struggled to even agree on which track of talks to discuss it under.

On the critical issue of rules to govern trade in carbon credits, designed to incentivise countries to reduce their emissions, minor progress was made.

Negotiators agreed on draft text that ruled out the admission of credits based on so-called “avoidance” projects, for the time being. These projects claim to “avoid” emissions, for example by protecting land from planned deforestation, and face criticism for a lack of credibility.

On agriculture, Action Aid International observer Teresa Anderson said the outcome was “surprisingly sensible” with an agreement on workshops to discuss sustainable approaches, and the finance flows to implement them.

“Thankfully the talks also did some decent damage control, rejecting big agribusiness’ greenwashing efforts to get name-checked as climate solutions,” Anderson said.

UN climate change chief Simon Stiell said the talks had taken “modest steps forward” but “too many issues were left unresolved” ahead of Baku.

A low bar for the tone of negotiations was set in Bonn last year, when the Stiell was forced to issue a stark warning about the harassment and bullying of negotiators. One negotiator from a large western country said this year there were “much better dynamics”.

Alden Meyer, senior associate at climate-focused think-tank E3G, said the Bonn discussions underscored how challenging it would be to meet the agreement by countries at COP28 on the need to cut global emissions by 43 per cent by 2030.

The G7 text also confirms plans to phase out coal where emissions are not captured by 2035, as well as expand electricity storage six-fold by 2030.

The draft also says countries will eliminate inefficient fossil fuel subsidies by 2025 and make “intensive efforts to reduce demand for and use of fossil fuels” — but it did not set a timeline.