Policy Briefs

B20 Brasil Policy Paper:What are the key recommendations for energy transition & climate?

Sustainable development paths, climate change mitigation, energy transition and decarbonization have increasingly been among the top-most priorities for successive G20 Presidencies, an imperative that has been mirrored and internalized by Business 20.

B20 Italy in 2021 initiated a task force on energy and resource efficiency along with an action council on sustainability, followed by B20 Indonesia’s recommendations to G20 on energy, sustainability and climate. B20 India worked on energy, climate change and resource efficiency and provided detailed action points for businesses through its action council on ESG. Under B20 Brasil, a task force was established on energy transition and climate, maintaining the continuity of B20 focus on this key imperative for businesses.

Taking note of the fact that carbon emissions must be reduced by 40% by 2030 if the world is to meet its target of keeping global warming under 1.5 degrees, the policy paper stressed on the acceleration of renewable energy, doubling the energy efficiency global improvement average rate by 2030, and promoting natural climate solutions to converge climate change and enhance biodiversity. It also highlighted the importance of biofuels like sugarcane ethanol, biodiesel and biomethane which are readily available and competitive to the climate change action.

Extreme weather events have doubled in 1990-2020, with casualties of close to 700,000 people, and poorer populations suffering more than higher income populations. At the same time, there is need for ensuring secure, decarbonized and affordable energy for all. Financing the distribution of accessible and sustainable energy is crucial to achieve a fair and inclusive energy transition.

With this backdrop, the B20 policy paper makes 3 recommendations with 6 policy actions.

Accelerate the development and use of renewable and sustainable energy solutions portfolio

This recommendation aims to boost decarbonization in the short term to 2030 and long term to 2050 while ensuring energy security. Given the extent of greenhouse gas emission reductions and renewable energy capacity required for net zero, coordinated energy infrastructure is necessary along with green skills.

The policy paper calls for policies that will encourage renewable energy, regulations and investments for energy infrastructure and storage technologies, and strategies and incentives for electrification. While key technologies for decarbonization are available, implementation costs are high. There is need to triple renewable energy capacity to over 11,000 GW by 2030. The paper outlines a range of specific measures for these areas, including tax credits, updating regulations to incentivize grids, doubling investments in expansion of transmission and distribution grids, and fiscal programs to support businesses in meeting high investment costs of electrification and electric transportation.

The second policy action under this recommendation calls for establishing mechanisms for sustainable bioenergy and biofuels. This would include blending mandates, global and diversified bioenergy supply chains and regulations to scale new bioenergy applications such as biomethane and sustainable aviation fuel.

Third, expansion of other ways for energy transition must be enabled including carbon capture, utilization and storage (CCUS), clean hydrogen and nuclear power. This would require CCUS hubs development, incentives for clean hydrogen, and safe nuclear power generation. CCUS capacity needs to go up by 100 times by 2050 and bioenergy with carbon capture and utilization or storage (BECCUS) offers an alternative solution. Challenges such as high costs and long lead times as well as access to finance and regulatory frameworks would need to be addressed.

Double the average annual rate of global energy efficiency improvement

This is the target the policy paper sets as its second recommendation for 2030 along with resource efficiency and circular economy. The rate of energy efficiency improvement should go up for the world as a whole from 2% in 2022 to over 4% every year until 2030. Policies on technical efficiency and higher investments will be critical to achieving the target. At the same time, the entire materials life cycle must be addressed and awareness programs are also necessary.

Considering that investments in energy efficiency can boost decarbonization, the policy paper suggests that policies should be encouraged to build technical efficiency, reduce inter-country disparities, and disseminate information for promoting awareness as the first policy action. This would be the best solution for affordable abatement. Energy efficiency appliances, improving industry use of energy, ensuring transportation efficiency, etc would work towards greater energy efficiency. Behavior changes to reduce energy demand and clean energy for cooking are additional ways to reduce energy use.

The world would need to spend about USD 1.9 trillion annually on energy efficiency by 2030. It is important to de-risk the investment environment and provide incentives for energy efficiency. In particular, emerging and developing economies need 3.5 times higher investment levels than current rates.

The second policy action suggested under this recommendation is to promote resource efficiency and circular economy by taking into account the entire materials life cycle and providing adequate finance. The policy paper notes that a circular economy for steel, cement, aluminum and plastics can reduce annual emissions by 40%. Eliminating waste and keeping materials in use can help.

The financial measures would include pricing measures, funding support, and financing and insurance products as well as schemes for green savings.

Promote effective Natural Climate Solutions (NCS)

Natural Climate Solutions and biodiversity can protect the world from extreme weather events and reduce carbon emissions. The destruction of natural capital including tropical forests, marine reefs and wildlife populations due to human actions is extremely alarming. Border limits are being approached in many critical systems which will lead to loss in the earth’s capacity to sustain human life.

Sustainable management of ecosystems is thus vital as a policy imperative. The biomass with the highest impacts are forests, peatlands and coastal wetlands. Building and protecting NCS has the potential to abate 20-50% of the required reduction for net zero. The policy paper highlights environmental degradation and suggests that a thriving NCS global market can be enabled, along with more protection and restoration projects and expanding the international carbon market.

For this, it is important to accelerate Article 6 of Paris Agreement to develop a carbon market, improve infrastructure and protocols, facilitate investments and set up a global endowment fund. Targets under the Kunming-Montreal Global Biodiversity pledge for protecting 30% of land and sea by 2030 will require an additional USD 66 billion annually and the global endowment fund can support funding from developed to developing countries. Similarly, the Global Biodiversity Framework’s target 19 requires governments to mobilize USD 30 billion per year. Governments should also leverage the Global Risk Assessment Framework to assess NCS project risks. While securing biodiversity, it is critical to involve local communities and Indigenous People whose lives are at risk due to environmental degradation.

B20 India had proposed an initiative for financing decarbonization that would align sectoral decarbonization pathways and establish mechanisms for financing, technology support, and knowledge transfer to encourage emissions abatement regulations. The B20 Brasil recommendations for energy transition and climate take forward the B20 agenda on sustainability and place a renewed focus on critical actions that the world must take at a time when the gap between required policies and actual implementation is growing, pitching the world into an era threatened by climate change and environmental destruction.