Date: July 2020

Clubs, R&D, and Climate Finance: Incentives for Ambitious GHG Emission Reductions


Carlo Carraro (University of Venice, Fondazione Eni Enrico Mattei)

Editor: 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.

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Clubs, R&D, and Climate Finance: Incentives for Ambitious GHG Emission Reductions

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