Clubs, R&D, and Climate Finance: Incentives for Ambitious GHG Emission Reductions
Authors: Carlo Carraro
Climate clubs, namely subgroups of countries implementing more ambitious and effective climate policies than others, may be the only practical approach to address the lack of incentives to reduce GHG emissions on the part of most, if not all, countries. In climate clubs, incentives to undertake ambitious GHG emission reduction efforts may come from adopting R&D and financial policies that provide benefits exclusively to club members. R&D and financial policies are beneficial because they provide innovation to reduce the costs of a unit of abated carbon and financial or insurance schemes to reduce the costs of investing in mitigation. These cost reductions can be designed to favor club members only. Unlike trade-related policies intended to favor club members, R&D and climate-finance policies do not have negative “side effects” for member countries. Indeed, they have positive co-benefits in addition to the primary environmental benefits - a “double dividend” for club members, and a single dividend (GHG emission reduction) for the world.