Nice pictures, not enough action. Despite a 25-page communique, the G7 Summit in Cornwall at the weekend came up with only small commitments on the most urgent issues facing the world. Gordon Brown’s damning judgement (“an unforgivable moral failure”) echoed the verdict of almost all development and environment NGOs.
Global Covid vaccinations. G7 leaders agreed to donate 1bn vaccine doses as a contribution towards the goal of “vaccinating the world” by the end of 2021. The UK committed to donate 100 million doses, the US 500 million.
Climate finance. With the G7 Summit taking place just five months before the UN climate conference COP26 in Glasgow in November, a key demand of climate-vulnerable nations was for the G7 to finally achieve the $100bn per annum in financial support for low-income countries originally promised in 2009 and reiterated in the Paris Climate Agreement. The most recent OECD estimate is that in 2018 financial flows were around $80bn. But while reiterating their ambition to reach the $100bn figure over the next four years, the G7 announced no new climate finance commitments.
~~A “Green Marshall Plan”? Prior to the Summit, Boris Johnson had proposed a climate "Marshall Plan” to help the Global South decarbonise, named after the postwar US lending scheme for European reconstruction. By the second day of the Summit this had mysteriously become President Biden’s “Build Back Better World (B3W) Partnership”, framed as a strategic Western initiative to counter China’s huge Belt and Road investment programme in the Global South. The White House press release was reproduced in the Summit communique.
Economic recovery and debt relief. The G7 committed to “build back better” from the Covid pandemic, promising recovery plans “that create jobs, invest in infrastructure, drive innovation, support people, and level up so that no place or person, irrespective of age, ethnicity or gender is left behind.” But on debt relief for low-income countries and the reallocation of an expected $650bn issuance of ‘Special Drawing Rights’ (new money) by the IMF, the Summit made no new commitments, merely reiterating existing policy. These issues will be revisited at the Annual Meetings of the IMF and World Bank in October.
~~The current debt package. The Jubilee Debt Campaign (JDC) summarised the key problems with the current debt package: too many nations are excluded from the Common Framework for solving unsustainable debt burdens and the Framework fails to include private creditors.
A new economic era? The Summit communique noted that a recovery focused on the above objectives “has not been the case with past global crises, and we are determined that this time it will be different”. This followed Boris Johnson’s pre-Summit urging that world leaders should not “repeat the mistake” of the 2008 financial crisis, when austerity response measures had exacerbated inequality. The G7 committed to maintain current fiscal support for their economies, with the long-term sustainability of public finances to be considered only “once the recovery is firmly established.” This was a clear repudiation of the previous policy orthodoxy adopted by all the G7 countries after 2008.
~~International tax cooperation. The Summit also emphasised the importance of the path-breaking agreement on corporate tax cooperation achieved at the G7 Finance Ministers meetings a week before. For more on this, see last week’s Digest.
~~The American Jobs Plan. The fact sheet also announced new details of the American Jobs Plan, including a $10 billion Community Revitalization Fund to support community-led civic infrastructure, through “implementation funds” in community-based organizations, non-profits, community development corporations and community investment trusts.
Digital currencies. The Bank of England set out its thinking on digital money, including the advantages and disadvantages of establishing its own Central Bank Digital Currency (CBDC).
~~The case for CBDC. Josh Ryan-Collins of the UCL Institute for Innovation and Public Policy explained the case for a central bank digital currency which, by reducing the role of private banks, could help ensure money flowed more directly to productive uses, including household incomes. He sets out the rationale behind regulating “systemic stablecoins" such as Facebook’s Diem.
Tackling financial sector greenwashing. The Treasury has announced a Green Technical Advisory Group to oversee the delivery of the UK’s ‘Green Taxonomy’ - a “common framework setting the bar for investments that can be defined as environmentally sustainable”.
Climate change and industrial strategy
Supply-side issues in the green transition. The Economist shone a light on the $30tn “green investment boom” and simultaneous supply-side shortages of commodities needed for the low carbon transition. The magazine criticised the prioritisation of local manufacturers and unionised jobs for “hobbling the necessary investment” and recommending limiting the role of the state to the easing of planning rules, de-risking private investment and expanding carbon pricing schemes.
Regional just transition. The New Economics Foundation released Powering the Just Transition, proposing a decarbonisation pathway for industry in Yorkshire and the Humber. Given that the green transition could destroy 250,000 high-emission jobs in the region, the report recommends co-designing decarbonisation plans and local industrial strategy with workers and communities to mitigate impacts. (Twitter thread summary / Yorkshire post coverage)