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A sustainable and inclusive global economic recovery following the COVID-19 pandemic faces significant unprecedented global challenges, unforeseen during COP26 and exacerbated by the recent Russian invasion of Ukraine. They reduce already-constrained fiscal spaces available for post-pandemic recovery, threaten access to and affordability of clean energy, and impede multilateralism’s effectiveness. Said unprecedented challenges, coupled with difficulties in implementing non-binding international agreements, threaten to derail the energy transitions required to achieve net-zero emissions by 2050 and hinder economic recovery. A sustainable global recovery needs universal access to clean energy, both energy security and affordability, as well as the low-carbon energy transition and a transition to a circular economy across the world, which in turn requires the transfer of appropriate technologies to the Global South and the mobilisation of private finance. This Policy Brief calls on the 2022 Group of 7 to develop and support international partnerships and consistent domestic implementation to safeguard the energy transition and circular economy advancements to advance towards net-zero emissions targets, while advancing towards a sustainable economic recovery and global energy access. This partnership, consisting of public-private and bilateral/multilateral development organisations and national governments, should address three interdependent areas: circular economy; energy transition and decarbonization regulation and incentives; and investment and finance. Such partnership will be indispensable for achieving an environmentally sustainable economic recovery.
Our policy brief directly addresses Germany’s G-7 priority of tackling issues of “particular global urgency …. to achieve tangible improvements for the people – within G7 countries and beyond, especially in newly industrialising and developing countries” by proposing a global basic income for all children. Even before COVID-19 hit, children were globally twice as likely as adults to live in extreme poverty, with long-term consequences for their life chances. During the past two years, the economic fall-out from the pandemic as well as school closures have further disproportionately hit children. Global shocks, whether pandemics or extreme weather conditions linked to climate change, are likely to only become more common, with negative shocks to our economies and social fabric, and ensuing humanitarian and migratory crises. We call for the establishment of a global universal basic income for all families with children, targeted preferentially via mothers, to ensure access to basic needs. This technically and fiscally feasible measure will have far-reaching benefits in the wellbeing and human capital of the next generation, directly addressing the G-7 policy priorities #2 (economic stability and transformation), #3 (healthy lives) and #5 (stronger together), and indirectly addressing priorities #1 (a sustainable planet) and #4 (investment in a better future). Furthermore, it will set a historical symbolic landmark: the beginning of a true sense of global citizenship where every child born will have his/her most basic needs ensured.
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:
- 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).
- 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.
- 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.