Germany’s new leader proposes a ‘climate club’ of leading economies that would punish free-riders like Australia – Watts Up With That?

[let the bullying commence-cr]

Wesley Morgan, Griffith University

Germany has announced plans for a new climate alliance among the world’s advanced economies, in a move that promises to change international climate action.

This year, Germany is the chair of the G7 – an important forum for rich democracies to discuss solutions to global challenges.

Germany’s new Chancellor Olaf Scholz, who replaced longtime leader Angela Merkel last December, wants the G7 nations to become founding members of an international “carbon club”. The coalition of nations will coordinate common climate policy standards and impose costs on countries that fail to meet those standards.

The proposal should set off alarm bells in Canberra. It could mean economic and diplomatic costs for Australia, and further isolate the country as a climate laggard on the world stage. To avoid this, Australia should at least match the climate ambitions of the G7 countries, by pledging to halve its greenhouse gas emissions this decade.

What is a climate club?

The concept of the “climate club” was developed by the Nobel Prize-winning economist William Nordhaus in 2015and since then reach the ground in the world of international policy.

UN climate agreements – such as the 1997 Kyoto Protocol and the 2015 Paris Agreement – are voluntary. This, Nordhaus argues, creates an incentive for some countries, overly focused on their national interests, to seek to reduce the share of the global costs of climate action.

So while responsible countries bear the costs of transitioning to new, cleaner technologies, “free-riding” countries benefit from those technologies and are likely to be safe. while failing to cut their own domestic emissions.

To solve this problem, Nordhaus proposes a “club” model for climate cooperation. Club members – the first countries to take climate action – will be rewarded and protected from a competitive disadvantage.

Members will harmonize plans to reduce greenhouse gas emissions and work towards a common goal. And countries that fail to meet their global obligations face penalties, such as taxes on exports to club member countries.

How G7 can become a climate club

In addition to Germany, the G7 includes the United States, United Kingdom, France, Italy, Japan and Canada.

Just a month after being elected Chancellor of Germany, Olaf Scholz announced at the World Economic Forum in January that Germany intends to make the G7 the nucleus of an international climate club.

Scholz has been interested in the climate club idea for some time. Last August, as Germany’s finance minister, Mr offer the “ABC” model would be:

• ambitious: all members will commit to climate neutrality by 2050 at the latest and set strong interim targets
• bold: member states will define a shared minimum carbon price and coordinate measures to prevent production from being shifted to countries with weaker emissions rules
• cooperation: club membership will be open to all countries that put forward appropriate climate action goals and measures.

A G7 climate club could build on the experience of the European Union. The EU already has an internal carbon market and next year will start imposing border duties on imported goods, based on the emissions generated during their production. The highest costs will be borne by exporters from countries without meaningful carbon pricing or climate policies.

Scholz suggest G7 countries can negotiate agreements similar to those of the EU. G7 countries will consider Germany’s proposal in ministerial meetings This year.

Climate policy is a priority for the Biden administration in the US, providing an opportunity for active negotiations.

And there have been moves to set common standards across the Atlantic. In October last year, EU and US announced they are working towards a world-first agreement to limit their market access to high carbon steel.

What does this mean for Australia?

Australia is widely seen as a liberal nation in global climate efforts. While the G7 member countries have promised to cut their emissions by about 50% Over this decade, Australia has committed to cutting emissions by only 26-28% from 2005 levels.

At last year’s COP26 climate conference in Glasgow, Australia was the only major developed country to refuse to set a stronger 2030 emissions target. It is also the only country in the world to abolish carbon pricing.

Furthermore, the Morrison government is pushing for a “gas-driven” economic recovery from the COVID pandemic. It further promotes coal and gas exports, and reduces EU carbon border taxes such as protectionism.

Suffice to say, if a G7-led climate club were to be formed in the near future, Australia would not be invited to join.

Australia should take the proposal of the German climate club seriously and quickly implement climate policies that bring us in line with the G7 nations.

Otherwise, Australia faces the prospect of economic harm. This will not only be in the form of potential carbon border feebut also lose both the capital investment and the economic profits that come from being a leader in clean industries.

Continue the race

The climate club concept is not without its detractors. Some climate scholars and negotiators warn that it could destroy multilateral cooperation in UN climate talks, while others warn such agreements could exacerbating equity issues between richer and poorer nations.

For its part, Germany suggested that climate finance could be provided to help developing countries become club members and club members could make a phased policy transition.

The proposed G7 climate club marks a major shift in global efforts on climate change. Great powers now see climate action as a race for competitive advantage. The first movers in the new industrial revolution will win first, second and third prizes.

If Australia wants to stay in the race, more ambitious federal climate policy is needed.

Wesley MorganResearch Fellow, Griffith Institute Asia, Griffith University

This article was republished from Conversation under a Creative Commons license. Read original article.