Designing Climate Clubs in Harmony with the Principle of Common but Differentiated Responsibilities and Respective Capabilities

By Catherine Hall, PhD Researcher

Despite some notable successes and progress, the UN climate regime has been unable to stem the flow of global greenhouse gas emissions at the speed and scale needed to avoid dangerous climate change. The latest Emissions Gap Report reveals a particularly sobering reality. If countries fail to deliver stronger ambition in the next round of Nationally Determined Contributions (NDCs), the 1.5°C temperature goal will be lost within a few years. What’s more, we now have a second Trump presidency on the horizon, casting a shadow over the future of multilateralism.

With that said, new ways of governing climate change have sprung up ‘around, below and to the side’ of the climate regime. This includes so-called ‘climate clubs’. While smaller groups of countries may offer a way to break through the political impasse that has stymied progress under the UNFCCC, they also raise some question marks. One major concern is equity, as explored in this blog post.

Moving beyond the UNFCCC and the rise of climate clubs

Throughout its history, the UNFCCC has experienced political stalemates and gridlock. This is mostly explained by the challenging nature of getting almost every country in the world to agree on something as wickedly complex as climate change. Persistent North-South divides and wider geopolitical tensions have often spilled over to and plagued climate negotiations, creating a recipe for stagnated ambition and slow progress. Take negotiations on loss and damage for one.

Although the UNFCCC remains a central piece of the climate change puzzle, a number of new and dynamic arrangements have emerged, creating a complex and multifaceted ecosystem of actors. In other words, the response to climate change has seen the rise of alternative approaches to governance, including the arrival of climate clubs. In short, climate clubs are formed by a select number of nations and operate independently from the UNFCCC. They can also include non-state actors, for example businesses and civil society organisations.

While clubs are not intended to replace the UNFCCC process, crafting deals in smaller, more nimble and more agile settings could help complement the global governance toolkit. For instance, a limited group of countries may be able to progress contentious issues far quicker by avoiding negotiation bottlenecks. We also know that multilateral-style negotiations often lead to watered-down compromises. A club formed of enthusiastic, front-runner countries may be able to produce more ambitious outcomes in the absence of laggards.

Economist William Nordhaus first introduced the climate club concept as a way to prevent countries from simply piggybacking on the efforts of other countries. His club proposal has several key ingredients that set it apart from many existing initiatives aimed at bolstering climate action, including a binding carbon price, penalties for non-compliance, private incentives for members, and sanctions against non-participants.

While the Nordhaus club may present an elegant solution to addressing climate change on paper, translating this into practice is a challenging task. Because of this, many iterations of climate clubs have been developed, resulting in club models of all different shapes, sizes and flavours.

Club design matters, especially for CBDR-RC

The concept of equity is embodied in the principle of common but differentiated responsibilities. Under the climate regime, it is expressed as ‘common but differentiated responsibilities and respective capabilities’ (CBDR-RC) and has two limbs. It sets a common responsibility on all countries to address climate change, while acknowledging their different circumstances, capacities and historical contribution to the problem.

Like many legal principles, CBDR-RC has not remained static. The principle has evolved dynamically, taking on different interpretations and applications over the years. Generally speaking though, CBDR-RC means placing an onus on developed countries to take the lead, through more ambitious targets and potentially at a higher standard of compliance, and to provide support to developing countries.

CBDR-RC has served as a cornerstone of the climate regime. However, scholars have long debated whether the principle can be classed as customary international law. Fast forward to today and the legal status of CBDR-RC remains a sticking point. Despite this, it has been described as the ‘overall’ guiding principle of the climate regime, having significantly influenced and shaped climate negotiations and agreements for decades.

With this in mind, how have climate clubs attempted to bake CBDR-RC into their design structure, if at all?

The Climate Club

Let’s first look at the Climate Club launched at COP28 in 2023, which has the overall goal of supporting implementation of the 1.5°C temperature goal, particularly through decarbonising industry. When the idea to establish a climate club was originally floated by the G7, the proposal drew inspiration from the Nordhaus club model. But this quickly lost steam. In moving from theory to practice, the Climate Club abandoned the Nordhaus blueprint and has since evolved into an inclusive and open arrangement.

In the beginning, there were concerns that this could be perceived as another so-called club of the rich, dominated by the G7 and aimed at ‘setting the agenda on climate change’. However, the reality that emerged was quite the opposite. As COP28 rolled around, the Climate Club launched as a far more diverse alliance. Its current membership spans a number of developed and developing countries, reflecting a more inclusive and pragmatic approach to international climate cooperation.

As well as being voluntary and open to any country, the Climate Club does not contain any legally binding rules or sanctions against participants and non-participants. While this approach to design eases thorny issues and tensions around CBDR-RC, it also means that the Climate Club may lack the necessary teeth to drive substantial action. Some have called into question whether clubs of this nature represent yet another stage for promoting ‘cheap talk and symbolic gestures’, rather than acting as a catalyst for impactful and transformative change. Time will tell whether the Climate Club can eventually move the needle on meaningful climate action and live up to its promises.

The Clean Energy Ministerial

Unlike the open-door Climate Club, the Clean Energy Ministerial (CEM) established in 2010 is very much exclusive. In other words, countries can only join if they are invited to participate. Membership is currently restricted to the world’s key economies, who account for approximately 75% of global greenhouse gas emissions.

By bringing together economic powerhouses under one exclusive roof, clubs designed like the CEM raise significant concerns around representation. While providing a forum for cooperation among major emitters, it equally creates a closed venue that marginalises the perspectives and voices of those most vulnerable to climate change. Some have argued that these elite-centric style of clubs have been ‘strategically’ formed by developed countries to actually contest and sidestep the principle of CBDR-RC.

While this approach may make for swifter and more streamlined discussions among the world’s ‘elites’, it speaks to the delicate balance between efficiency on the one hand and inclusivity and representation on the other. The main challenge here is that absent a more diverse membership, significant decisions concerning international climate policy could be taken within these clubs that spell disaster for those who do not have a seat at the table, especially climate-vulnerable countries.

For instance, if major emitters come together under an exclusive club like the CEM and agree on activities or targets that are not aligned with 1.5°C and especially 2°C degree pathways, this could have dire consequences for some countries. Take Small Island Developing States (SIDS), who are among the most vulnerable of countries to climate impacts despite being the least responsible. For SIDS, time is running out. These nations are on the frontlines of climate change and many are threatened with submergence, even in a 1.5°C world.

The Global Arrangement on Sustainable Steel and Aluminium

In 2021, the EU and USA set out to resolve their longstanding trade dispute. Along the way, they also announced their intention to launch a new club-like arrangement, the Global Arrangement on Sustainable Steel and Aluminium (GASSA). With Trump returning to the White House, however, the future of the GASSA faces an uncertain road.

Although negotiations are still underway, the GASSA is currently shaping up to form the nucleus of the world’s first Nordhaus-style club, with binding rules, favourable trade terms for members, and sanctions on non-participants. While these features could make the arrangement a powerful force in decarbonising two of the world’s largest industrial sources of emissions, there are important question marks hanging over the GASSA, including around CBDR-RC.

For starters, the club claims to be open to ‘any interested country’. On closer inspection though, the criteria are designed to exclude a specific country from joining, namely China. Some fear that other countries may struggle to meet the stringent membership criteria, especially due to the ‘secretive nature’ of negotiations. These entry barriers cast serious doubt on the GASSA’s supposed inclusivity. By deepening existing geopolitical divides and tensions, the GASSA might in fact undermine its own supposed climate objectives.

The EU is pushing for legally binding obligations, requiring all prospective GASSA members to fully decarbonise their steel and aluminium industries by 2050. While this might coincide with EU goals, it is unfair to impose the same expectations on developing country members, many of whom have set longer-term net-zero targets. For instance, Indonesia, China and Nigeria have set net-zero targets for 2060, while India has set a target of 2070. What’s more, binding mitigation targets have historically applied only to developed countries under the climate regime and in line with CBDR-RC. This marks a significant and contentious departure under the GASSA.

The proposed sanctions on non-participants will likely take the form of a common external tariff on carbon-intensive steel and aluminium imports. However, uniform trade tariffs would place a heavy and unfair burden on developing countries by treating imports on par with those from developed countries. This one-size-fits-all approach to sanctioning non-participants risks exacerbating North-South tensions and violating CDBR-RC, by ignoring the different challenges and capacities that countries face.

Currently, there are no provisions for support for developing country members, at least in the eyes of the USA negotiators. While ‘leaked’ documents concerning the EU’s position do make some reference to the provision of support for least developed countries, no clear commitment has surfaced in formal negotiations. This goes against the grain of CBDR-RC under the climate regime, which requires developed countries to provide support. It also risks alienating potential developing country members from the GASSA, who may perceive it as yet another forum skewed towards the rich and powerful.

Looking ahead: Embracing CBDR-RC into the fabric of future climate clubs

The analysis reveals that different climate club design options interact with CBDR-RC in varying ways. Looking forward, how can differentiation be woven into the fabric of future climate clubs? Existing club-like arrangements provide some creative food for thought.

One way of differentiating members in future clubs could take the form of different membership tiers. The Beyond Oil and Gas Alliance (BOGA) offers three different membership options. Core members commit to ending oil and gas production and exploration, including phase-out targets. Associate members take ‘significant steps’ to restrict fossil fuel supply. Friends sign the Declaration to show their support. This approach allows for flexibility through varying levels of commitment between members depending on the category that they join.

Differentiation can also be embedded into clubs through different commitments. While all core members under the BOGA set phase-out dates for oil and gas, industrialised countries are expected to lead the way. The Powering Past Coal Alliance (PPCA) also sets differentiated timelines, acknowledging that not all countries can phase out coal at the same rate. OECD and EU countries commit to phasing-out unabated coal by 2030, meanwhile developing and emerging economies commit to a phase-out date of 2050. This approach accommodates the varying capacities and diverse circumstances of different countries, all while working towards a common objective. 

Moreover, clubs can operationalise differentiation by providing targeted support to developing countries, including through financial mechanisms. The Climate and Clean Air Coalition assists developing country members with project implementation through its Trust Fund. Between the period 2012 and 2021, the Trust Fund received around $96 million from developed country members. This approach can enable participation of developing countries in clubs by bridging gaps and issues around capacity.

Through embracing these different strands of differentiation, thoughtfully and carefully designed clubs can serve as a complementary tool to advance climate policy, while remaining aligned with the wider UN climate regime.