Carbon dating

Getting together to reduce carbon emissions brings hope in a world that doesn’t care, say Colin Nolden and Michele Stua

On first sight, the global climate conference in Madrid was a failure. “Right now,” according to Greta Thunberg addressing country representatives at COP25, “we are desperate for any sign of hope”. The only hope she identified is coming from people, as opposed to governments and corporations. Multilateralism, it seems, is in crisis. 

On close inspection of the technicalities, however, it is not clear-cut. Some countries are willing to take the lead in tackling climate change while others throw spanners in the works at every opportunity. One glimmer of hope we want to stoke is the emergence of “carbon clubs.” Such clubs are the result of countries teaming up to collectively reduce carbon emissions.

The concept of carbon clubs is nothing new. Throughout the last decade, the pros and cons have been debated in academic circles. Article 6 of the 2015 Paris Agreement (PA) enshrined the concept in international climate law. Its opening paragraph states “Parties recognise that some parties choose to pursue voluntary cooperation in the implementation of their nationally determined contributions (NDCs) to allow for higher ambition in their mitigation and adaptation actions and to promote sustainable development and environmental integrity.”

In plain English, this paragraph suggests that countries can team up voluntarily to reduce their carbon emissions. In UN-speak, NDCs are each country’s commitment to reduce carbon emissions. As climate-change action is considered a liability, there is a race to the bottom among countries to ensure that their NDCs commit them to doing as little as possible without losing face. Why should I care if nobody else cares?

“The concept of carbon clubs is nothing new. Throughout the last decade, the pros and cons have been debated in academic circles.”

Article 6 of the PA has opened the door for caring countries to team up and do more by implementing their NDCs collectively and pursue more ambitious climate action together. Resulting carbon clubs are considered crucial to operationalise the PA in general, given the lack of ambition evident in NDCs and the yawning gap between rising carbon-emission levels and the steep downward trajectory required to meet the PA’s objectives.

Several recent developments support the emergence of carbon clubs. One milestone was the institution of the Climate Ambition Alliance in September 2019. It is a coalition of countries, local authorities and firms aiming to align their efforts to the PA’s general objectives. Another milestone was the European Commission’s willingness to embrace border carbon adjustments (BCAs) as part of its European Green Deal. BCAs are considered essential to reduce carbon leakage, which is the result of carbon-intensive industries shifting production to countries with less stringent climate policies to subsequently export back to their original host country.

The final milestone was reached in the early morning of 14 December 2019, the penultimate day of COP25, when Costa Rica and Switzerland together with nine other countries established the so-called San José Principles. In practice, they established a carbon club with the intention to deliver an overall reduction in global carbon emissions. Since its inception, several other countries have joined, including members of both the Independent Alliance of Latin America and the Caribbean (AILAC) and the Alliance of Small Island States (AOSIS), large European Union member states, as well as New Zealand, Norway, Switzerland and the UK.

The benefit of carbon clubs is that they offer more flexibility and create space for achieving more with less through multilateralism. Having fewer and only voluntarily participating countries around a table (so-called plurilateralism) makes for easier negotiation and more achievable targets. The San José Principles carbon club seeks to deliver the following:

  •  an overall reduction in carbon emissions; 
  •  to prohibit the transfer of carbon emission allowances and units from previous mechanisms such as the Kyoto Protocol’s Clean Development Mechanism;
  • to avoid double counting of carbon emission reductions and ensure that use of markets is subject to adjustments – when a carbon emission reduction unit is sold by one country to another the buyer’s carbon emissions go down while those of the seller go up;
  • to apply principles of transparency, accuracy, consistency, comparability and completeness to avoid fraud and increase trust.

“A key feature of 
such voluntary, yet ambitious carbon clubs is their transformational potential.”

The clubs’ strength lies in the combination of NDCs and their “pledge and review” approach with the ability to make it easier for ambitious countries to converge towards a common and shared objective.

A key feature of such voluntary, yet ambitious carbon clubs is their transformational potential. Their malleability contributes to the foundation of a transformational climate regime capable of meeting the overall objectives of the PA. Combined with BCAs, climate clubs pave the way for the establishment of a homogeneous demand-and-supply system for carbon-emission reductions (carbon clubs). BCAs help level the playing field between ambitious plurilateral carbon clubs and countries pursuing unilateral goals.

By levying carbon tariffs or taxes on imported goods according to their carbon footprint, BCAs ensure that the benefits of partaking in a carbon club only accrue to partaking countries. BCAs thereby act as a membrane, delineating and protecting carbon commons inherent in carbon clubs. Combined, carbon clubs and BCAs provide the foundation for valuing carbon-emission reductions, as opposed to the more common practice of assigning a cost to carbon emissions. Such “positive carbon pricing” allows carbon clubs to shift their focus towards the fair sharing of the remaining carbon budget (in line with the objectives of the PA).

“Carbon clubs by themselves cannot solve some key issues, and even run the risk of exacerbating a number of them.”

So carbon clubs like the San José Principles grouping represent the first step towards the development of a new economic system that supports people’s well-being and needs fulfilment while promoting sustainable development.

On the other hand, carbon clubs, by themselves, cannot solve some key issues, and even run the risk of exacerbating a number of them. The biggest risk behind the institution of a carbon club lies in its potential failure to include enough countries to acquire adequate momentum. Several commentators argue that a carbon club is ineffective without the participation of large emitters such as China and the USA. This participation/ambition/compliance trilemma may represent the biggest obstacle to the establishment of an effective carbon club.

Further Reading

Aguedas Ortiz, D. (2020). 32 leading countries set benchmark for carbon markets with San Jose Principles. Direccion de Cambio Climatico. Press release

Michaelowa, A. (2019). Markets, ambition and finance – COP 25: too much on the plate. Perspectives Climate Group 

Pihl, H. (2020). A Climate Club as a complementary design to the UN Paris agreement. Policy Design and Practice.

Stua, M. (2017). A Transformational Club within the Paris Agreement: A Climate-Club Perspective on Article 6. In: Stavins R, Stowe R. Market Mechanisms and the Paris Agreement. Cambridge, USA: Harvard Project on Climate Agreements.

Colin Nolden

Colin is a Vice-Chancellor’s Fellow at University of Bristol Law School and a Researcher at the Centre for Research into Energy Demand Solutions at the Environmental Change Institute, University of …

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Michele Stua

Michele is an independent researcher and an internally recognised expert on climate change governance and finance. Aside from academic positions he has worked as a consultant for the Brazilian government …

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