VENICE – In a formal communique released on Saturday (July 10), G20 finance leaders acknowledged carbon pricing as a potential instrument to combat climate change for the first time, taking a preliminary step toward pushing the idea and coordinating carbon reduction measures. The move was a significant departure from the previous four years, when former US President Donald Trump’s administration consistently resisted the inclusion of climate change as a global danger in such multilateral pronouncements.
The communique, released on Saturday following a meeting of the Group of 20 finance ministers and central bank governors in Venice, Italy, which is threatened by rising sea levels, included carbon pricing as part of a “wide set of tools” on which countries should coordinate to reduce greenhouse gas emissions.
Investing in sustainable infrastructure and new technologies to promote decarbonization and clean energy, “including the rationalization and phase-out of inefficient fossil fuel subsidies that encourage wasteful consumption and, if appropriate, the use of carbon pricing mechanisms and incentives, while providing targeted support for the poorest and most vulnerable,” according to the report.
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The announcement came only days before the European Union was set to introduce a divisive carbon-adjustment border tax on imports from high-carbon-emitting countries.
“This is the first time these two words ‘carbon pricing’ have been offered as a strategy for the fight against climate change in a G20 declaration,” French Finance Minister Bruno Le Maire told reporters. “We’ve been fighting tooth and nail to get these two words… into a G20 communique.” Those efforts were met with strong US opposition for the majority of Trump’s presidency, during which time the US quickly exited the Paris climate agreement. Then-US Treasury Secretary Steven Mnuchin agreed to a G20 reference to climate change, but not as a downside risk to global economy, at a summit in Saudi Arabia in 2020. Instead, it was incorporated in a reference to the Financial Stability Board’s work on the financial stability implications of climate change.
The Biden administration, which quickly rejoined the Paris Agreement in January and has set strong carbon reduction targets as well as sustainable energy and transportation investment plans, has had an impact on the carbon pricing mention on Saturday.
Despite her support for emissions reductions, US Treasury Secretary Janet Yellen urged for better international coordination on carbon-cutting policies on Friday to avoid trade conflicts.
The EU’s carbon border adjustment mechanism would levy tariffs on imported goods based on their carbon content in order to prevent “carbon leakage,” or the movement of production to countries with less stringent emission regulations. Critics of the idea are concerned that it will create yet another trade barrier while doing nothing to reduce emissions./n
