Istanbul to Goa: G20 nations avoid uniform approach in energy transition

Countries rarely agree on global policy, causing differences that have lingered on

Ministers of the 19 nations and the European Union that form the G20 bloc, which has India as its president this year, can’t agree on the diplomatic language to use about the Ukraine war. The energy sector is the only other issue where there are more substantive differences.

On labour, education, health, and even finance there is relative unanimity. But coming out of the final leg of discussions on energy in Goa last week, India’s power minister R K Singh said there were seven paragraphs of dissensions: the most among all G20 ministerial groups. The dissensions were on supposedly easy-to-reach consensus topics, like targets for renewable energy, and difficult ones, like scaling down the use of fossil fuels.

The differences have a substantial impact. G20 countries account for 84 per cent of the world’s electricity demand, according to Ember, an energy think tank in England. It matters how these counties scope out energy transition.

Talking about energy, diplomatically

Differences are in line with what has been happening in G20 ministerial meetings since Saudi Arabia’s presidency in 2020. A lot of it has got to do with how each host country wants to shape the direction of global energy policy.

“The G20 energy group has swung from talking about stabilising the oil market on high seas (Saudi Arabia), renewable energy (Italy), role of coal in providing energy security (Indonesia), to hydrogen and financing the energy transition (India),” said Kaushik Deb, senior research scholar at the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs.

Brazil will host the G20 next year: it is the leader in ethanol production and is vying for a global price and subsidy regime for the sector.

While countries in the G7 group have reached their peak energy intensity, India, China, Indonesia and South Africa in the so-called global south are far off. It matters for them if the energy spigot is turned off or becomes expensive. For energy suppliers like Russia and Saudi Arabia, favourable policy is important to keep their economies running.

As Alok Kumar, then secretary (power) in India's power ministry, noted after a meeting of G20 officials on energy in Bengaluru in February, “Participants, however, shared the view that the energy transition pathway should be different for each country depending on its energy base and potential. There emerged a clear understanding that fossil fuels would continue to be used more or less in most of the countries in the coming 15 to 20 years to increase the share of renewable energy”.

To understand how significant this is, examine the outcome document released in Goa. The document reflects what G20 nations had agreed upon. The chair’s summary – released separately – is the prerogative of the presidency, which India holds this year. The summary is what the G20 president wishes to say but could not get an agreed language among nations to put across.

The “role of renewables” does not appear as a subject heading in any paragraph of the outcome document. It is a paragraph in the chair summary instead, saying: “the role of renewables in the energy mix, as a solution contributing to universal energy access, and the need to enhance cooperation, collaborations, financing, capacity building, technical assistance, partnerships, and technology sharing on voluntary and mutually agreed terms, taking into account different national circumstances, are critical”.

In the language of global diplomacy, where a sentence appears and how it is framed is crucial. In this context, the language on renewable energy (RE) is significant.

Renewable energy and hydrogen are important for India, which could have only spent its diplomatic capital in pushing for either.

Goa G20 document

In the line-up of G20 nations, crude has its champions in Saudi Arabia and Russia, and coal in Indonesia and India. For hydrogen, the votaries are India, Japan, and even China. Consequently, the Goa outcome document said: “We recognize the importance of exploring, diversifying, adopting, and advancing sustainable biofuels and hydrogen produced from zero and low emission technologies, and its derivatives such as ammonia, for contributing towards the energy transitions, enhancing energy security, and addressing GHG emissions”.

Hydrogen figures six times in the document and renewable energy only half that. In the list of annexures, the first one is on “G20 High Level Voluntary Principles on Hydrogen”. The one on renewables is called “Voluntary Action Plan for Promoting Renewable Energy to Accelerate Universal Energy Access” and it numbers fourth in the same list.

The trend of host country-led emphasis on drafting the final outcome of energy ministers at G20 meetings largely with Saudi Arabia’s presidency. The words 'energy market' made their appearance at the Riyadh-led discussions.

“We emphasize the need to prevent supply disruptions and promote open, free, flexible, transparent, competitive, stable and reliable international energy markets and stress the importance of diversification of energy sources, suppliers, and routes. We endorse the G20 Energy Security and Markets Stability Cooperation,” said the Riyadh document in 2020.

For Saudi Arabia, the world’s top oil supplier, global crude prices during Covid-19, and tensions with Iran, the emphasis on ‘free, flexible’ energy markets was understandable.

The words 'energy market' almost dropped out of the G20 language in 2021, when Italy assumed the presidency. Italy twinned the ministerial declaration as one of “Energy Transition and Climate Sustainability”. The operative paragraph read: “We highlight the significant progress achieved in the development and deployment of renewable energies and clean technologies, benefiting from robust policy support, innovation and significant cost reduction and we support their further integration in energy systems”, among others.

Rome peppered the energy ministerial agenda with nine documents meant to be read along with the joint communique. Five of these were about net zero, renewable energy, phasing out subsidies for fossil fuel, and others.

During Indonesia’s G20 presidency in 2022, coal was talked about as 'clean energy'. “We will boost clean energy investment and financial flows, particularly for developing countries in accelerating energy transitions. In this regard, we support energy sector actions for unlocking and improving inclusive investments, including in upstream, through strengthening project pipelines, enhancing policy and regulatory frameworks including de-risking mechanisms, preparing high-quality bankable projects, and streamlining approvals,” the chair's summary noted.

Jakarta also introduced a document that attempted to set the future agenda for the energy ministers of G20 nations, till 2030. Named “Decade of Actions: Bali Energy Transitions Roadmap”, it identified the following three as the priority action positions for the decade. These were a) Securing energy accessibility b) Scaling up smart and clean energy technologies and c) Advancing clean energy financing. The emphasis on coal surrogacy was easily visible.

At Istanbul in 2015, when the first meeting of the energy ministers on the sidelines of the G20 was rolled out, the emphasis was more rounded. The critical issues identified matched those civil society campaigners identified with: strengthening research institutions on energy, a timeline to phase out fossil fuel subsidies, support energy efficiency and yet assure energy access for all.

Along with the ministerial “environmental groups, campaigners and researchers have come together to sign a joint statement that calls for governments to set a clear timetable to phase out fossil fuel subsidies as well as public finance for oil gas and coal production,” said a report by International Institute for Sustainable Development, a think tank in Canada.

Once it became apparent that what the energy ministers had decided upon would have a bearing on how the final leaders' declaration would turn out, countries became more emphatic about putting their positions in the communique. Of the eleven declarations in Istanbul, almost none, including those on climate change, survived as an original one by 2023.

Renewable energy

The agenda has become so divisive that global campaigners for renewable energy are not overtly keen on influencing the G20 ministerial on energy.

“Each communique now has been ringed with national priorities," said Deb. This is because nations have realised that energy strategy is far more complex instead of a boilerplate approach of just shifting from fossil fuels to renewable energy.

As Fatih Birol, executive director of the International Energy Agency, noted in a report in the run-up to the G20 meet in Indonesia, energy issues have to reckon with “evolving challenges of maintaining energy security in the context of clean energy transitions on the pathway to net zero emissions”.

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Differences between G20 members have increased: researcher Kaushik Deb
 
Kaushik Deb is a senior research scholar at the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. His research focuses on policies to achieve a just and efficient energy transition in developing countries, especially the role of oil and gas markets. He has worked with the King Abdullah Petroleum Studies and Research Center in Riyadh, and as Head, Global Gas Markets in Group Economics in BP. He spoke to Business Standard over video about G20’s connection with the energy sector.
 
To what extent does the G20 energy ministerial act as a direction finder for global investors?
 
Global investors look to forums such as G20 more broadly to assess where narratives are, rather than actually identifying investment opportunities. With private sector engagement limited to outside the formal meetings, G20 doesn’t allow for public-private cooperation for instance, which the World Economic Forum does. Other engagements such as the UNFCCC COP (United Nations Framework Convention on Climate Change) actually have meaningful targets and a process, albeit glacial, to meet those targets, and that provides investors with credible regulatory signals.
 
Why do the energy ministers spend so much of their effort every year to decide on an agenda in these meetings
 
G20 provides a platform for coordinated action in times of crisis, such as the first one in 2008 to deal with the financial crisis that was triggered by the collapse of Lehman Brothers, and in 2020 when the G20 energy ministers agreed that a production cut was needed to stabilise the oil market following the collapse in demand after the Covid pandemic. Outside of a crisis, G20 events are largely limited to discussions on coordinated policy development across members. That’s where optics becomes important, and that is where what the final communique includes becomes the focus. The negotiations then boil down to the exact phrase such as 'phase down' versus 'phase out', even (though) there is no regulatory mechanism to enforce these. So outside of a crisis, these meetings are more about perceptions and these ministers are here to manage that.
 
Is the scale of differences on energy issues increasing between the nations?
 
At its core, the differences between the G20 members have increased because of overall geopolitical tensions. The war in Ukraine and the subsequent G7 sanctions on Russia means that they are unlikely to agree on most things. Tensions between China and India make it difficult to get Chinese agreement on Indian proposals. This makes cooperation between countries on energy and climate issues nearly impossible, and countries are taking actions based on their self-interest such as the Inflation Reduction Act in the US and the Green Deal Industrial Plan in the EU. To the extent that such actions are moving these major emitters to take more aggressive action, it’s a good outcome. Again, to the extent that such actions address the extreme concentrations of production that globalisation caused, it will lead to a more robust pathway for decarbonisation. But if such 'friend shoring' and protectionist measures lead to higher costs and inflation, it will slow down the speed of change.