G7 allies met Saturday for two days of "difficult" climate talks in northern Japan, facing pressure to show progress on key fossil fuel commitments in an example to other major economies including China.

Campaigners have warned climate and environment ministers from the leading developed countries against backsliding on pledges to shift away from coal and natural gas at home and abroad.

But a leaked third draft of a statement to be issued on Sunday at the meeting in Sapporo has relieved some experts, who had feared a more ringing endorsement of the need for overseas gas investments.

"All in, given low expectations, it now seems a better outcome than many expected," said Ed King from the climate-oriented communications firm GSCC.

The ministers want to show unity after a major United Nations climate report warned last month that 1.5 degrees Celsius (2.7 degrees Fahrenheit) of global warming would be seen in about a decade. It called for "rapid and far-reaching" action to keep increases within relatively safe limits.

However, as the energy crisis sparked by the Ukraine war squeezes G7 countries including Japan, Germany and the United States, divisions have arisen among the bloc.

A French government source earlier described "difficult" discussions, but the country's energy transition minister Agnes Pannier-Runacher painted a brighter picture of Saturday's talks.

She hailed "significant progress" in the joint statement, which she said sent "positive signals for the upcoming G20 and the upcoming COP" in Delhi and Dubai.

"For the first time ever, the G7 said that we must accelerate the 'phasing out' of all unabated fossil fuels," and that there should be no more new coal-fired power plants, Pannier-Runacher told reporters.

'Critical decade'

The latest draft statement, seen by Agence France-Presse (AFP), calls on nations to take action "in this critical decade," urging a peak in global greenhouse emissions by 2025 at the latest.

Experts say this language is aimed at China, the world's largest carbon emitter, which is targeting a peak in its carbon emissions by 2030.

The draft also stresses the "urgency" of slashing global emissions by 60% by 2035 from 2019 levels, as recommended by the U.N.'s IPCC panel of climate experts.

Language on fossil fuels has been more contentious, however.

Britain and France proposed new concrete targets, while other members including this year's G7 president Japan, which is heavily dependent on imported fossil fuels, and the United States have pushed a more conservative line.

Ministers pledged at the last G7 climate ministerial in Germany to end new direct public support in 2022 for overseas fossil fuel projects that do not offset emissions.

But this was watered down a month later when G7 leaders said the "exceptional circumstances" of Russia's war in Ukraine made gas investments "appropriate as a temporary response."

Japan had sought language to solidify that exception, but instead the draft statement calls for "gas demand reduction" and sets multiple parameters around such investments.

Hydrogen controversy

Coal is another hotly debated topic, with different degrees of ambition put forward by Japan, the United States and Britain on global efforts to phase out fossil fuels in electricity systems.

Japan had sought G7 recognition for its controversial strategy of burning hydrogen and ammonia alongside fossil fuels to reduce carbon emissions – which climate activists say only serves to extend the lifespan of polluting plants.

The draft statement simply notes that "some countries are exploring" the potential of the two fuels in the journey to net-zero emissions, adding that this should be "aligned with a 1.5C pathway."

Governments around the world are also looking to the G7 talks for action on resilience funding for the developing nations most affected by climate change.

Sultan Al Jaber, president of the COP28 climate talks, told AFP he had called for "available, accessible and affordable" global climate finance in Sapporo.

The draft statement reaffirms the G7's commitment to an unfulfilled promise to provide developing nations with $100 billion a year to fight climate change.

In the draft, the G7 vows to work with other developed nations "to fully meet the goal in 2023."