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25 August 2021

Climate action

The German government wants to establish an international climate club

Joint key-issues paper presented to the federal cabinet

  • Number 23

In the federal cabinet today, Germany’s Finance Minister Olaf Scholz presented a joint key-issues paper for an international climate club. The goal is to give the implementation of the Paris Agreement additional impetus at the international level. At the heart of this initiative is the cooperation between countries that want to press ahead with the social and economic transformation needed to tackle climate change. The German government believes that such an open, collaborative climate club should be a partnership in which the participating countries commit to ambitious climate goals and to the measures needed to reach them. The idea of creating an international climate club was already floated by Germany’s Finance Minister and discussed among G7 and G20 finance ministers in May.

“Climate action remains the greatest challenge of our time. Germany aims to be carbon-neutral by 2045, the EU wants to achieve this by 2050. What is needed now is implementation. But one thing is clear: it is not possible to tackle climate change successfully at the level of individual countries or of the EU. This is why we want to create an international climate club for everyone who is moving forward with ambitious climate goals. This open, collaborative club will set joint minimum standards, drive climate action that is internationally coordinated and ensure that climate action makes a country more competitive at the international level. Following our achievement of introducing a global minimum taxation rate, we now want to make similar strides in the area of climate action. We can again overcome major challenges through concerted international action.” Finance Minister Olaf Scholz

Additional impetus for the implementation of the Paris Agreement

The Paris Agreement was a milestone for international climate action. If its goal of limiting global warming to preferably 1.5 degrees Celsius is actually to be achieved, it is essential that the global economic system be transformed. Only if the key countries move forward together can this global challenge be met.

This is the founding idea upon which the international climate club, which was presented to the federal cabinet today, is built. The initiative will take advantage of the window of opportunity opened by the return of the United States to the Paris Agreement and by the ambitious climate targets that the EU and other countries have now set themselves.

Protecting climate policy pioneers from competitive disadvantages

Scientists agree that cooperation is key when it comes to international climate action. While measures to ensure effective climate action may, in theory, be in the interest of every country in the world, certain countries are currently able to gain a competitive advantage for their own industrial sectors by pursuing less ambitious climate action goals than other countries (this is known as carbon leakage). The climate club will help ensure that countries which press ahead with climate action suffer no disadvantages when it comes to the competitiveness of their industries.

In combating the global financial and economic crisis, and in the area of tax policy, where agreement was achieved on the global minimum tax rate, the G20 countries have shown that concerted action is the best tool for overcoming global challenges. When it comes to combating climate change, the international community is once again facing a task that can only be tackled through global and concerted action. At the same time, the EU has demonstrated that such cooperation works for climate action: it is thanks to its internal cooperation and consultations that the EU was able to adopt the most ambitious climate policy in the world, without member states enriching themselves at the expense of other member states through their industries. This line of action must be taken to the international level.

Trade policy can also support climate action measures and thereby make a contribution to protecting the climate. That is why the members of the climate club should coordinate with each other on trade policy, including with regard to trade with third countries that are not yet members of the climate club – while ensuring conformity with WTO rules.

Working together to advance the climate-friendly transformation of the economy

The ambitious climate goals can only be achieved with bold climate action measures. Practically all industrialised countries and emerging economies are facing the same challenge. For this transformation to succeed, all members of the international climate club need to coordinate their climate-policy instruments and create a reliable framework that prevents their respective industries and economies from being at a competitive disadvantage.

The instruments used can differ from country to country. The objective of the climate club is above all to make the different rules comparable. The climate club members will therefore discuss ways of achieving a uniform measurement of the CO2 content of products and materials. Working together to accelerate the transformation of the industrial sector is another important objective. To this end, members will work together to create joint lead markets for climate-neutral raw materials such as steel and drive the development of a supply chain for green hydrogen.

Setting in motion a new global dynamic to boost climate action

The alliance will be a partnership of the countries with the highest ambitions for climate policy worldwide. In Germany and Europe, the objective is clear: in order to reach the 1.5 degree target of the Paris Agreement, Germany wants to become carbon neutral by 2045, the EU by 2050. The climate club is also open to other countries wishing to achieve climate neutrality, as a rule by 2050 at the latest. Ambitious interim targets will be set with this goal in mind.

More countries to join over time. The alliance will be open to new members with ambitious climate action targets. To start with, one of the most important goals will of course be to bring on board the biggest CO2 emitters. The climate club will therefore also expressly take into account the interests of those partners that are not yet able to become members, but that are willing to increase their efforts to boost climate protection if they receive the right support from other countries. By including the most ambitious countries in the world, the climate club will create a ripple effect worldwide.

The Key-issues paper of a cooperative and open climate club [pdf, 814KB] being presented to the federal cabinet today is just the start of the work that lies ahead. The German government will now discuss the establishment of a climate club with its European partners and the European Commission, liaise with the U.S. and the G7 partners and then jointly approach China, India and other G20 countries. The key-issues paper is also an invitation to scientists and affected stakeholders to become involved in shaping the climate club.