The central bank session of the G7 Finance Ministers and Central Bank Governors' Meeting in Niigata, Japan © Photo by Kiyoshi Ota / POOL / AFP via Getty Images
The central bank session of the G7 Finance Ministers and Central Bank Governors' Meeting in Niigata, Japan © Photo by Kiyoshi Ota / POOL / AFP via Getty Images

G7 calls for supply chain diversification after repeated global shocks

The G7 has announced a partnership scheme for low and middle-income countries to play a greater role in clean energy supply chains.

The partnership – “Partnership for Resilient and Inclusive Supply-chain Enhancement” (RISE) – was announced in a meeting between G7 finance ministers and heads of the International Monetary Fund, World Bank Group, Organisation for Economic Cooperation and Development, and Financial Stability Board.

In it, agreements were made for “further strengthening” G7 member collaboration and supply chain resilience, after concurring there was an “urgent need to address existing vulnerabilities” in the highly concentrated supply chains of clean energy components.

The RISE announcement follows a meeting in April, where G7 countries – which comprises the UK, US, Canada, France, Germany, Italy and Japan – warned that the concentration of essential clean energy technology was a “cause of concern” and that diversifying these supply chains would support efforts to combat global warming while creating new opportunities for “value creation” in the global economy.

The project launch also comes amid calls for greater supply chain diversification in the face of “multiple and complex global challenges.”

Shocks including the pandemic and Russia’s war in Ukraine had created “associated pressures” which required agility and flexibility, ministers said.

These impacts were “disproportionately” felt by low and middle income countries, particularly Russia’s “weaponisation” of food and energy. 

Finance ministers said that “diversification of supply chains can contribute to safeguarding energy security and help us to maintain macroeconomic stability”.

Under the terms of the partnership, interested countries and relevant international organisations will help turn guidance into specific actions, by cooperating and combining finance, knowledge and partnerships to support low and middle income countries in playing bigger roles in midstream downstream clean energy supply chains. 

Last year, a Bloomberg report found China is home to 75% of global battery cell manufacturing capacity, and increasing investment in lithium ion battery capacity means it will likely remain so for the next five years. 

Additionally, the International Energy Agency (IEA) found China “dominates every single solar PV [photovoltaic] supply chain segment”.

The IEA warned without diversification of the solar supply chain and greater investment in local manufacturing, global energy security and the path to net zero was under threat.

To rectify these disproportionate impacts, the G7 finance ministers emphasised the importance of supply-side reforms, especially “those that increase labour supply and enhance productivity”.

Ministers also stressed the “crucial role of women and underrepresented groups for the long-term success of our economies”.

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