What is the potential for climate clubs in the context of the global political and economic landscape? Two new studies by NDC ASPECTS
In response to the limitations and failings of the multilateral UN climate change regime, a range of new and dynamic climate governance arrangements have emerged, including climate clubs. Two new studies by NDC ASPECTS analyse the potential for climate clubs in the context of the global political and economic landscape, especially regarding the emerging geopolitical rivalry and increasing industrial policy nationalism. The first study provides qualitative insights into different design options of climate clubs and their possible implications, while the second study analyses quantitatively the economic and environmental effects of protectionist and nationalist industrial policies.
Specifically, the first study by Catherine Hall aims to analyse different design options of climate clubs through the lens of the principle of common but differentiated responsibilities and respective capabilities (CBDR-RC). First, it explains the general rationale for climate clubs and presents a spectrum of key club design features. Second, it conceptualises the principle of CBDR-RC and describes how this has been operationalised. Third, it draws on existing club-like arrangements – namely, the Climate Club launched at COP28, the Clean Energy Ministerial, and the proposed EU-US Global Arrangement on Sustainable Steel and Aluminium – to critically examine whether different design options are (likely to be) compatible with the principle of CBDR-RC. Last, the study explores how differentiation could be woven into the architecture of future climate clubs.
The second study by Lukas Hermwille, Panagiotis Fragkos, and Kostas Fragkiadakis develops scenarios of strong industrial policy nationalism, weak industrial policy nationalism, and transatlantic friendshoring and compares these scenarios with a baseline representing the status quo of trade in selected commodities and technologies. They find that environmental effects are surprisingly small. (Strong) Industrial Policy Nationalism can even be good for the climate (lower global emissions), but only because it is so bad for the economy (it suppresses economic development and leads to unemployment). Secondly, industrial policy nationalism can cause collateral damage. The rest of the world actually suffers from the implementation of strong industrial policy nationalism. And thirdly, weak industrial policy nationalism does not work. Unless strict trade restrictions are imposed, industrial policy nationalism fails to achieve its purpose to build globally competitive industries and significantly reduce import dependency for key green technologies. While we need a technology race against climate change, the analysis demonstrates that it needs to be a race in a collaborative spirit in which all contestants encourage each other to perform at their best. But a race in the spirit of geopolitical rivalry fuelled by industrial policy nationalism may ultimately cost us the climate.
The reports can be found in the links below:
- D6.3 – Summary report on the studies
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D6.3b – A Race at All Costs? Economic and Environmental Effects of Industrial Policy Nationalism