The idea was pushed by German Chancellor Olaf Scholz during Germany’s G7 presidency in 2022. The club is intended to help achieve the Paris Agreement’s goal of limiting global warming to 1.5 degrees Celsius. In addition to the G7 states of Germany, France, Italy, Canada, the United Kingdom, Japan, and the USA and the EU Commission, Argentina, Chile, Denmark, Indonesia, Colombia, Luxembourg, the Netherlands, Singapore, and Uruguay are also participating in the G7 Climate Club.
The concept of the Climate Club was originally introduced by Nobel Laureate William Nordhaus. Countries willing to cooperate and promote climate protection join together to form a climate club. They introduce a uniform minimum price for CO2 emissions. Those that do not join have to pay a tax when exporting their goods to the club countries. Studies show that even a flat tax of 2 percent would be enough to get countries to join the club. The climate club is to be based on three pillars.
01 Promote ambitious and transparent climate protection measures.
These measures should be designed to reduce the emissions intensity of participating economies on the path to climate neutrality through policies and outcomes in line with countries’ ambitions. In this context, members will share best practices and work towards a common understanding of how to evaluate methodologies to compare effectiveness.
02 Joint transformation of industries to accelerate decarbonization.
The transformation will take place taking into account the industrial decarbonization agenda, including the Hydrogen Action Pact and the expansion of markets for green industrial products.
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03 Strengthening international engagement through partnerships and cooperation
In this way, climate action should be promoted and facilitated to unlock the socio-economic benefits of climate cooperation and support a just energy transition. Complementary to this, partnerships for a just energy transition have the potential to provide support and assistance to developing countries in decarbonizing energy and industrial sectors, including through financial, and technical assistance and technology transfer, development, and deployment depending on their level of climate ambition.
“Switzerland’s international commitment remains to reduce CO2 emissions by 50 per cent by 2030 compared to 1990. We can best achieve this goal with market-based instruments that price the climate damage from the use of fossil fuels,” said 2021 Patrick Dümmler, Senior Fellow and Head of Research at Avenir Suisse, an independent think tank for the future of Switzerland. “Climate gases should be reduced in Switzerland as well as through corresponding projects abroad.”
The aim of the Climate Club is to encourage nations with bold climate goals to join forces to accelerate the transition to net-zero emissions by 2050. A climate club can help address coordination and implementation issues arising from other instruments and initiatives, such as the EU’s new carbon cap-and-trade mechanism, the Green Deal industrial plan, and the US Reducing Inflation Act.
