Climate Clubs: Implications for International Trade, Sustainability, and the European Union

Written by Rafael Leal-Arcas

Image credit: Adobe Stock

Climate change is one of the greatest challenges that humanity faces today. In EU Trade Law, Second edition, I explore pathways in which the international trading system can help mitigate climate change from the perspective of the European Union (EU). One way to do so is through the creation of climate clubs,[1] and several incentives exist for countries to wish to enter such arrangements. For instance, effective tax incentives or technology transfer could help address climate change mitigation between regions or countries as politically diverse as the EU, the US, China, Australia, Iran, or India.

Questions to consider include: what are the criteria for joining such a climate club and, moreover, why remain in such a club, if the onus of complying with environmental protection rules is too great? After all, clear historical examples of countries exiting clubs exist, such as the UK leaving the EU (“Brexit”), Canada backing out of the Kyoto Protocol, and the US withdrawing from, though later re-joining, the Paris Agreement on Climate Change. Countless other such examples exist. Creating a climate club that countries will actually wish to join and not leave poses a complex challenge.

Of course, any climate club should be designed to include countries responsible for the greatest amount of greenhouse gas (GHG) emissions. The G20 provides a logical platform, consisting as it does of the 20 major world economies, including countries of key strategic significance such as Saudi Arabia, sandwiched between Asia and Africa and with a major global impact in international trade (through fossil-fuel exports) and potentially in renewable energy, too (whether solar or wind).

The proposed climate club will need a governance approach that suits countries with an emphasis on free markets (such as the US) and also countries that encourage big government (such as China). Another consideration for such a club relates to its decision-making. History has made all too clear the risks of democracy, where a potentially uninformed public has the power to decide issues of key strategic importance (such as the general public dictating whether a country should remain within or leave the EU). On the other hand, authoritative regimes and dictatorial systems of governance come with their own sets of risks. Achieving international cooperation within such a climate club, regardless of varied governance styles, will be an important balancing act. Bringing the world’s major economies on board means juggling governance styles as diverse as those of the EU, China, the US, Saudi Arabia, and Russia.

The possible hurdles loom large related to such divergent entities cooperating despite their geopolitical tensions and geoeconomic disparities. In today’s multipolar world, greater divergence, not convergence, seems to be emerging between the West[2] and the rest – a fact that complicates the creation of an effective climate club involving countries from diverse regions of the world. However, the potential benefits of such a club make it worth attempting to override the obvious challenges.

In EU Trade Law, Second edition, I address two fundamental questions: 1) in a world of geopolitical tension, how can we achieve international cooperation on mitigating climate change; and 2) is the international trading system’s impact on the environment only negative, or can it have a positive environmental impact? In raising these questions, EU Trade Law, Second edition closely examines ways in which the international trading system can actually tackle climate change and help achieve sustainable energy (namely energy that is affordable, reliable, and reduces environmental damage). EU Trade Law, Second edition proposes combinations of top-down and bottom-up governance approaches to sustainability.

I also analyze two of the most relevant issues currently featuring in international trade agreements: climate change and sustainable energy. EU Trade Law, Second edition takes the novel approach of bringing together law, international political economy (IPE), and international relations (IR) to explain sustainable energy as an academic discipline. It is interdisciplinary and inter-sectoral, combining an analysis of international trade and sustainable energy from the perspectives of law, IPE, and IR—an approach that makes EU Trade Law, Second edition ground-breaking and unconventional. It applies methods of legal analysis, namely a comprehensive analysis of treaties and academic writings from scholars as well as literature from other social science disciplines, such as IR and IPE, to help explore the challenges addressed.

In EU Trade Law, Second edition, I also analyze trade in the context of a climate-club to understand the crucial relationship between trade and climate clubs operating in global markets. EU Trade Law, Second edition digs deeper into the question of whether and how we can connect climate clubs to markets. The connection relies heavily on creating incentives for countries to be part of a climate club – incentives that will outweigh their membership obligations. EU Trade Law, Second edition also explores crucial links between the workings of a proposed climate club and the international trade system. It explores potential symbiosis between a climate club and international trade and explores the question of whether trade rules can help influence a climate club. Moreover, it explores concerns related to the climate crisis in the context of multilateralism and global aspirations for energy security, and the main challenges that emerge in the dialogue between trade and climate change from an EU and international perspective.

[1] William Nordhaus, The Climate Club: How to Fix a Failing Global Effort, Foreign Affairs (2020) https:// pcfraz.org/resources/Documents/The%20Climate%20Club% 20_%20Foreign%20Affairs.pdf.

[2] By “the West”, we mean Europe, Canada, the US, Australia, and New Zealand.