Climate clubs and the macro-economic benefits of international cooperation on climate policy

Abstract

The Paris agreement has provided a new framework for climate policy. Complementary forms of international collaboration, such as climate clubs, are probably necessary to foster and mainstream the process of gradual and voluntary increase in nationally determined contributions. We provide a quantitative macro-economic assessment of the costs and benefits that would be associated with different climate club architectures. We find that the key benefits that could structure the club are enhanced technological diffusion and the provision of low-cost climate finance, which reduce investment costs and also enables developing countries to take full advantage of technological diffusion. Although they face the highest absolute mitigation cost, China and India are the largest relative winners from club participation because the burden faced by these countries to finance their energy transition can be massively reduced following their participation in the club.

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Fig. 1: Global macro-economic impacts of a climate club.
Fig. 2: Comparative macro-economic impacts of varying climate club architecture.

Data availability

GEM-E3 is calibrated using input-output tables and datasets from EUROSTAT, GTAP 9, 2017 IEA energy statistics and ILO data. A detailed description of the calibration procedure is given in the online manual13.

Code availability

A detailed description of the algorithmic structure of GEM-E3 is given in the online manual13.The implementation is proprietary.

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Acknowledgements

The authors acknowledge support from the European Union’s Horizon 2020 Research and Innovation Programme under grant agreement No. 642018 (GREEN-WIN project).

Author information

L.P., A.M., J.H. and K.F. conceived and designed the experiments. L.P., K.F., P.F. and Z.V. performed the experiments. L.P., K.F., P.F., Z.V. and A.M. analysed the data. A.M., L.P., K.F. and J.H. wrote the paper.

Correspondence to Antoine Mandel.

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The authors declare no competing interests.

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Supplementary information

Supplementary information

Supplementary Figs. 1–5, Supplementary Tables 1–8, Supplementary Tables 1–10, Supplementary Discussion, Supplementary Methods, and Supplementary References.

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