US climate envoy John Kerry and German Vice Chancellor Robert Habeck shake hands at the G7 talks in Berlin. EPA
US climate envoy John Kerry and German Vice Chancellor Robert Habeck shake hands at the G7 talks in Berlin. EPA
US climate envoy John Kerry and German Vice Chancellor Robert Habeck shake hands at the G7 talks in Berlin. EPA
US climate envoy John Kerry and German Vice Chancellor Robert Habeck shake hands at the G7 talks in Berlin. EPA

G7 climate ministers pledge low-carbon power grids by 2035


Tim Stickings
  • English
  • Arabic

The G7 countries on Friday promised to make their electricity grids mostly carbon-neutral by 2035 and cut funding for fossil fuels by the end of this year, toughening their climate commitments at a time of crisis in their domestic energy markets.

Current G7 chair Germany hailed what it said were “enormous steps forward” at a two-day meeting of the group’s climate and energy ministers, held in Berlin in the shadow of the war in Ukraine and a resulting surge in fuel prices.

An 84-point agreement said any fossil fuel subsidies to mitigate the fallout from Russia’s invasion should be “temporary and targeted” as countries try to stay on track with their climate change goals.

German Vice Chancellor Robert Habeck said it was more important than ever to speed up the shift away from fossil fuels at a time when Europe’s dependency on Russian oil and gas is complicating its response to the war.

“Protecting the climate, exiting coal and expanding renewable energies are questions of national, European and international energy security that we need to tackle resolutely together,” Mr Habeck said.

The G7 countries — Britain, Germany, France, Italy, the US, Canada and Japan — set a goal of having “predominantly decarbonised electricity sectors by 2035”, going further than a previous pledge to do this at some point in the 2030s.

They said they would do this by “rapidly scaling up the necessary technologies and policies for the clean energy transition”. Countries including Britain and Germany plan to massively increase offshore wind power generation.

Electricity is only one part of their energy consumption. The countries said they would also “drastically increase” the use of renewable fuels in heating, air conditioning and transport.

Mr Habeck has described the expansion of wind and solar power as geopolitically prudent to prevent countries such as Russia from monopolising energy. But the fuel squeeze has also stirred interest in using more fossil fuels.

The seven countries adopted tougher language on cutting methane emissions, saying reductions were necessary to keep alive the Paris Agreement target of limiting global warming to 1.5°C over pre-industrial levels.

And in what Germany hailed as a significant breakthrough, Japan for the first time promised to end all subsidies for overseas fossil fuel plants — joining the other six countries in pledging this by the end of 2022.

A communique after last year’s summit, when Britain held the G7 presidency, had only extended this promise to coal power, regarded as the most environmentally damaging fossil fuel.

This year’s talks ended with a separate declaration on protecting the oceans in which the seven nations said they were “ready to do our utmost” to tackle plastic pollution.

All seven countries have committed to reduce their net greenhouse gas emissions to zero by 2050. The talks come six months after the Cop26 summit in Glasgow brought about numerous pledges to drive down carbon emissions.

The Glasgow summit ended in acrimony after India pushed through an amendment to water down a global commitment to reduce coal power consumption.

G7 president Germany hopes to phase out coal plants by 2030 and expand wind power generation to fill the gap. Bloomberg
G7 president Germany hopes to phase out coal plants by 2030 and expand wind power generation to fill the gap. Bloomberg

“I’m going home with a good feeling after this G7 meeting,” said German Environment Minister Steffi Lemke, who said the club of rich democracies was responsible for dealing with the outsized environmental damage it has caused.

“Despite Russia’s terrible war against Ukraine, despite the pandemic and discussions about energy security, the community of nations is sending a clear signal of doing more to protect nature and the environment.”

Analysts at climate think tank E3G said the announcements were a step in the right direction but there was much still to do when German Chancellor Olaf Scholz hosts the G7 leaders for their annual summit next month.

Mr Scholz’s main proposal is to create a separate “climate club” of green-minded nations to drive through commitments that would struggle to find consensus in forums such as the UN and G20.

Brick Medak, the head of E3G’s Berlin office, said there were gaps in “the actions needed in this decade to phase out coal and mobilise the trillions necessary for a global green transition”.

“Olaf Scholz must show up at the leader’s level ready to go beyond his pet project climate club and move G7 leaders on where the climate and energy ministerial fell short,” he said.

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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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Company Profile

Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million

Updated: May 27, 2022, 1:53 PM