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