Leaders in Rome strike climate deal that leaves COP26 a lot to do

Rome

THE Group of 20 (G-20) countries struck a climate deal that fell well short of what some nations were pushing for in a compromise accord that gave leaders little to take to the COP26 summit in Glasgow this week.

In a copy of the final communique seen by Bloomberg from the G-20's two-day summit in Rome, the language mirrors prior pledges made in the 2015 Paris climate accord. Leaders said they "remain committed to the Paris Agreement goal to hold the global average temperature increase well below 2 degrees Celsius and to pursue efforts to limit it to 1.5 degrees Celsius above pre-industrial levels".

As expected, Sunday's (Oct 31) statement agrees to phasing out investment in new offshore coal power plants, something China already said it would do. "We will put an end to the provision of international public finance for new unabated coal power generation abroad by the end of 2021," it said.

On domestic coal, the statement only contains a general pledge to support those countries that commit to "phasing out investment in new unabated coal power generation capacity to do so as soon as possible". COP26's UK hosts had aimed to "consign coal to history".

Negotiations over the past week saw continuous clashes over both objectives and timelines on climate, with several officials pointing the finger at holdouts China, Russia and India.

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The G-20's statement offered little in the way of concrete action. It committed to "significantly reduce" greenhouse gas emissions "taking into account national circumstances".

The summit rowed back on commitments to phase out domestic coal use in just a few days of haggling over draft statements. A version last Thursday (Oct 28) seen by Bloomberg contained a pledge to "do our utmost to avoid building new unabated coal power generation capacity". Saturday's (Oct 30) draft pushed that to "in the 2030s".

By agreeing a watered-down communique on climate change, the G-20 opted to keep the group united ahead of the crucial talks in Glasgow. A failure in Rome to agree would have represented a serious setback for prospects of success at COP26.

A day earlier, G-20 leaders formally backed an ambitious plan to overhaul the way countries tax multinational companies (MNCs) in a bid to stem competition for the lowest rates.

All of the leaders at the summit in Rome endorsed the new rules on Saturday, "including a global minimum tax that will end the damaging race to the bottom on corporate taxation", US Treasury Secretary Janet Yellen said.

The pact won support in principle from 136 governments in October under the auspices of the Organization for Economic Cooperation and Development (OECD). G-20 finance ministers endorsed a framework for the agreement in July.

The tax pact has two sweeping objectives. It intends first to halt the effort by MNCs to shift profits into low-tax havens through a new global minimum tax of 15 per cent for MNCs. It also attempts to address the increasingly digital nature of international commerce by taxing companies, in part, on where they do business instead of where they book profits.

While the deal has overcome some major impediments, it faces several potential snags before it comes into force and proves effective.

Signatory countries must also follow through by enacting domestic legislation to implement the new tax rules and by formally approving a multilateral convention, to be drafted by the OECD. BLOOMBERG