Research-based
policy recommendations
for the G7

Publications

The Think7 task forces will produce policy briefs on issues relevant to G7 policy-makers. On the basis of these policy briefs, one or two task force reports focusing on a limited number of key issues of relevance for the G7 process will be produced. This process is led by the Think7 co-chairs. The task force reports will provide a limited number of research-based policy recommendations for G7 policy-makers. The task force reports will be subject to an internal peer review process within each task force.

The finalized publications will be published below by summer 2022.

Global Public-Private Digital Utilities for MSME Recovery and Transition

A robust and equitable digital economy needs to promote the inclusive and sustainable recovery and growth of MSMEs (Micro, Small and Medium Sized Enterprises). Globally, these offer most of the formal employment, ranging from 53% to 86% (Kamal-Chaoui, L. 2017), providing the local infrastructure for capital circulation that most directly benefits communities. Today, the funding shortfall for formal MSMEs is approximately 55% of demand or an estimated $5.2 trillion dollars (International Finance Corporation, 2017). Drivers of global job creation, they suffer lower rates of digital adoption which constrains their growth. The opportunity exists for global leaders to nudge industry towards a profitable, inclusive, and self-sustaining future. A country-specific pilot defining global protocols, with configuration capability for national needs, is estimated to cost $2M and could be completed by 2023. Attractive markets for piloting a data utility have been identified, such as Indonesia, Puerto Rico, and Kenya. The pilot is intended to yield a self-sustaining model, and success metrics should include financial sustainability, adoption of the solution and impact on G7 priorities such as Net Zero transition. The initial use case proposed for pilot is in supporting access to finance and literacy programmes for communities that offer carbon sequestration potential, facilitating those communities in developing sustainable practices whilst supporting preservation and conservation activities. Success in these pilots could be readily transferred to other countries and expanded into other communities. By engaging local governments, traditional lenders, fintech firms, and larger pools of global capital, financial services firms will obtain the data transparency they need to facilitate funding for MSMEs and, through secondary markets, keep that capital in circulation, where it can have the greatest economic impact.

This policy brief proposes a better way for MSMEs to leverage their digital data for increased and cheaper access to finance and other value-added services via a public-private partnership establishing “Data Utilities” to provide real-time and affordable access to trusted data on MSMEs for better access to financial services, helping lenders better assess MSME credit risk and support faster onboarding.

Think7 Communiqué

The communiqué summarizes about 70 papers of the Think7, in which policy recommendations for the G7 summit in Elmau are made. For example, the authors argue that the G7 should work more closely with the G20 countries to counter a relapse into a polarized world and to work toward an end to the war in Ukraine. A second key recommendation is that the G7 should develop common standards for measuring human well-being that take into account not only economic criteria but also the state of the environment and social cohesion. The third central recommendation of the Think7 to the G7 is that the work of the group of states should be continuously accompanied by science and civil society in the future – until now, the composition and goals of the so-called various G7 Engagement Groups have changed with each new G7 presidency.

Issue Paper: Saving the Planet

Humans are destroying the planet through unrelenting emissions of greenhouse gases, land use change and pollution, causing widespread biodiversity loss and ongoing land, forest and ocean degradation that are undermining human health and harming agriculture and food production. These challenges can be addressed in a limited window of opportunity. G7 leaders at Elmau should:

  1. Create climate clubs
  2. End fossil fuel subsidies
  3. Expand climate finance
  4. Bolster biodiversity
  5. Strengthen sustainable agriculture, food and water security
  6. Create climate–health benefits

These six recommendations should be implemented in SDG-supportive, jobs-rich, inclusive, equality-enhancing, gender-equalizing, independently monitored and continuously improved ways.

Reform Subsidies Harmful to Nature

G7 countries are actively working to repurpose agricultural subsidies to reduce unintended effects on nature (across climate, biodiversity and lands impacts). The G7 has a key role to play on agricultural subsidies discussions in the World Trade Organization. At the WTO and elsewhere, the G7 should move to replace subsidies harmful to nature with incentives that increase agricultural resilience while benefiting the natural environment.

Aligning Climate And Biodiversity Finance

The G7 can provide a powerful signal on resource mobilization for biodiversity and climate change ahead of the Biodiversity Convention COP15 in Kunming to ensure that financing efforts to address the global climate crisis and the global biodiversity crisis are synergistic and mutually re-enforcing. G7 countries should commit to allocate 30% of their international climate finance towards nature-based solutions in order to simultaneously achieve climate and biodiversity outcomes. Furthermore, the G7 should commit to ensure that, in achieving the $100B climate finance commitment, all climate finance is screened to be nature-positive. Additionally, Lastly, the G7 should call upon the Multilateral Development Banks to build on the MDB Joint Nature Statement from Glasgow to become “Kunming Aligned” following the adoption of the Global Biodiversity Framework at UNCBD COP15, just as they have previously committed to become “Paris Aligned.

Using Debt Conversions to Support the Sustainability Agenda

Countries across the global are facing a sovereign debt challenge in the wake of the economic impacts of Covid. This will likely result in an increasing need for debt restructuring and debt forgiveness operations. As global institutions look at this issue, they have an opportunity to ensure that these restructuring and forgiveness interventions are truly sustainable by incorporating climate and nature risk. The G7 countries are influential creditors in the sovereign debt market. As such, setting out a joint statement of intent and direction through the G7 process would be an important market signal. Importantly, the G7 countries – when acting together – can also influence discussions and outcomes at the IMF and other influential sovereign debt fora to ensure that debt conversions and debt forgiveness operations explicitly secure climate and biodiversity benefits.

Accelerating Renewable Energy Deployment for Energy and Nature Security

The current crisis in Eastern Europe highlights, more than ever, the need for a clear pathway for accelerating the renewable energy transition to address the twin challenges of energy security and climate change. However, the deployment of renewables is often slowed down by planning processes that do not sufficiently account for biodiversity, agricultural, and social impacts from the very outset. Proactively identifying preferential areas for renewable energy deployment will help accelerate the required buildout while reducing negative impacts. Identifying these higher benefit, lower risk areas requires integrating ecological and socio-cultural values into planning and procurement processes. G7 countries should proactively identify preferential areas for renewable energy siting within their own territories, guided by the latest climate and biodiversity science. Additionally, G7 countries should call upon bilateral and multilateral development finance institutions to ensure that their financing and technical assistance likewise supports all countries to undertake integrated spatial planning assessments to define preferential areas to harness renewable energy sources for the production of electricity, while ensuring the preservation of natural habitats, agricultural production, and addressing the interests of local communities.

Safeguarding the Blue Planet – Eight Recommendations to Sustainably Use and Govern the Ocean and Its Resources

Over 30% of the world’s population lives within 100 km of the oceanic coast. More than three billion people rely on fishing and other ocean-related livelihoods. The ocean is a biodiversity hotspot and moderates the climate, having absorbed around 40% of the world’s total carbon emissions. Oceanscapes provide an essential cultural good, offer recreational opportunities, health benefits, artistic inspiration and an entire cosmology and way of life for indigenous communities. However, anthropogenic pressures have seriously impacted the ocean and threaten its ability to provide human societies with the required climatic and ecosystem conditions for life on earth. The German G7 presidency has proposed a G7 “Ocean Deal” for the sustainable use, protection and effective governance of the ocean and its resources. Several ongoing global ocean governance processes require strong multilateral leadership and close alignment between the G7, in particular in this period of serious international tensions following the Russian invasion of Ukraine. At the One Ocean Summit in February 2022, global leaders have put forth first commitments to make 2022 a decision year for the ocean. Building on the final declaration of the summit and the UK G7 Ocean Decade Navigation Plan, we highlight that a G7 “Ocean Deal” should include provisions for 1) ambitious ocean governance to safeguard ocean health and climate (in the G7’s own waters and through leadership in international settings), 2) improving ocean observation, data infrastructure and knowledge sharing, and 3) financing the transition towards more sustainable interactions with the ocean. Specifically, we recommend that G7 states:

1a. Eliminate national subsidies that contribute to overfishing and push to finalize the related WTO agreement; step up international cooperation, financial & technical assistance to prevent IUU fishing.

1b. Reduce marine debris through a comprehensive global agreement on plastic pollution.

1c. Pause deep sea mining until risks are better understood and a transparent, inclusive and accountable institutional structure is in place that guarantees the effective protection of the marine environment.

1d. Expand marine protected areas in line with the proposed goal of at least 30% by 2030, and accelerate work in the coming months to successfully finalize negotiations for a legally binding instrument to conserve and sustainably use marine biological diversity in areas beyond national jurisdiction (BBNJ).

1e. Fully recognize the importance of the ocean-climate nexus and strengthen the ocean dimension in key climate negotiations.

2a. Adopt a legal framework and binding commitments for a sustained and shared global coordination of ocean observations and infrastructure on marine data, compliant with FAIR and CARE principles.

2b. Ensure long-term, guaranteed funding, clear institutional affiliations, coordinated and integrated data products to enable continuous, comprehensive observations supporting policy monitoring & evaluation

3a. Redesign and scale up ocean finance by increasing funding of early-stage, nature-positive and science-based opportunities, and large-scale investment into zero-carbon, resilient and nature-based coastal blue infrastructure, and by integrating ocean criteria into sustainability finance frameworks (EU Taxonomy, Task Force on Climate-related Financial Disclosures (TCFD), Taskforce for Nature-related Financial Disclosures (TNFD)).

Financing a Green Future: The Energy Transition Mechanism (ETM) and the Green Impact Fund for Technology (GIFT)

The G7 should consider (i) an Energy Transition Mechanism (ETM) and (ii) a Green Impact Fund for Technology (GIFT) to accelerate the transition from fossil fuels to low-carbon technologies in developing countries. ETM is a scalable, collaborative initiative led by the Asian Development Bank (ADB) in partnership with developing countries that will leverage a market-based approach to accelerate the transition from fossil fuels to clean energy. It funds early retirement of coal power plants in developing countries using the proceeds from ETM purchased coal plants for low-carbon technologies. Pilots of ETM have been launched in Indonesia, the Philippines and Viet Nam. GIFT would reward emission reductions achieved in specified developing countries with any patented green technology whose monopoly privileges in this “GIFT Zone” are waived. To prepare for GIFT initiative, the G7 should immediately fund a pilot project featuring a single reward pool to be split among preselected green innovators in proportion to the emission reductions they achieve with their respective innovations, affordably priced, in a self-selected region of the GIFT Zone over a 2-year period. With preparation and assessment, a meaningful pilot could be completed for €35 million per annum over four years. These proposals complement to each other. ETM stimulates demand and GIFT reduces the cost to implement low-carbon technologies.

Towards an Inclusive Climate Alliance With a Balance of Carrots and Sticks

As G7 countries generate 25% of world greenhouse gas emissions, an open and cooperative G7 climate alliance can accelerate international climate policy in a transformative and inclusive manner. Building upon a proposal of the German Government (2021), we propose the following design elements for such an alliance:

  1. Membership conditions that benefit all members and are sufficiently ambitious to enable a pathway to genuine ‘net zero’

Reaching ‘net zero’ emissions globally by mid-century is key to enable limiting global warming to 1.5°C – the core objective of the Paris Agreement. The alliance must adopt membership conditions that keep the aim of 1.5°C alive. These include:

  • a differentiated carbon price with a common floor, e., an effective price set in accordance with criteria that reflect different economic capacities, with a floor at 50 € in 2025 and 100 € in 2030.
  • common energy sector policies consistent with a pathway to genuine net zero, including a 2024 removal of fossil fuel subsidies, a 2030 phase-out date for coal-fired electricity generation for OECD members that join the alliance and a commitment to immediately end the new development of upstream coal, oil and gas supply infrastructure;
  • a joint effort sharing mechanism to achieve emission reductions based on Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC).

  1. Apply a ‘carrot and stick’ approach based on Article 6 and a differentiated CBAM to encourage alliance participation

‘Carrots’ should be designed as an open means to incentivize decarbonization outside of the alliance and encourage participation in the alliance. We recommend using international carbon markets under Article 6 of the Paris Agreement as a carrot, providing an additional financial incentive to non-members of the alliance for low carbon development. A differentiated carbon-border adjustment mechanism (CBAM) is the crucial ‘stick’ to avoid carbon leakage, with differentiation based on development status and clear exemptions for Least Developed Countries (LDCs). Additional carrots should include differentiated carbon border levy refunds as well as targeted industry and energy partnerships.

  1. Use a ratcheting mechanism to raise ambition

A roadmap to ratchet-up the ambition of measures within and beyond the alliance is essential. Such roadmap should align with five-year NDC update cycles under the Paris Agreement, adjustable to align with national and global net zero targets and set clear milestones for expansion regarding sectors (from heavy industry and energy to land use) as well as countries (from G7 to G20 and beyond). Ensuring institutional continuity of the alliance requires a legally binding agreement that is independent from annually changing G7 presidencies and governed by a secretariat hosted by one or more volunteering member states, with a slim administration and explicit inclusion of a wide range of civil society representatives.