Climate Club as the Starting Point to Globally Align Climate Ambitions?

B7 welcomes the further exploration of the “climate club” concept as announced by the German G7 presidency, aiming to accelerate the industrial decarbonization while addressing carbon leakage concerns. The B7 intends to contribute to a common understanding and point out necessary features of this novel instrument.

A climate club must be designed cooperatively and be open to every country. At the same time, it should have a significant level of ambition in order to impact climate protection. The challenges related to the inclusion of developing countries should be met with a stepwise approach towards membership. While initially giving the opportunity to choose between different levels of ambition, the clear aim must be harmonizing all ambitions in the longer term. Additionally, for developing countries wishing to join, technical and financial assistance should be considered. The climate club should, for example, be linked to just energy transition partnerships that are fully supported by the B7.

Generally, the focus of this alliance on climate action should highlight the benefits of membership rather than penalizing non-members. Considering the motivation of carbon border adjustments and climate clubs to reduce carbon leakage risks, the B7 encourages the G7 governments to discuss these two policies in conjunction with one another. Carbon border adjustments (CBAM) among climate club members can and must be avoided. Instead cooperation and building trust between members are most important; CBAM should be the last resort.

Aligning carbon pricing efforts would intensify the comparability of climate ambitions, which would help to build up a climate club. Therefore, the B7 urges all G7 governments to aim to introduce carbon pricing (such as an emission trading system, a carbon tax). However, initially, all members should be allowed to consider the best policy mix in accordance with their respective circumstances. The B7 calls upon the governments to work with international institutions towards identifying suitable common metrics that allow to compare different climate policy efforts. Ahead of a potential future global price on carbon, all industrial nations should commit to Paris-aligned short and long-term objectives, specifically to meaningful greenhouse gas emission reductions by 2030, and to net-zero targets by mid-century.

Decarbonization of the Industry Sector

An imperative element of climate action is the decarbonization of the industrial sector. It serves both as a chance and a challenge for G7 economies and industries. The G7 therefore must commit to coordinated efforts on low-carbon hydrogen production, transportation capacities and infrastructure as soon as possible. Harmonized international requirements could enable a uniform global standardization and certification scheme supporting an accelerated market ramp-up of low-carbon hydrogen.

The G7 must also develop a common understanding of basic green materials such as green steel or cement, so that these markets can emerge. This is relevant to global climate action because large-scale roll-out of low-carbon produced goods necessitates new international lead-markets for green products.

Ensuring Secure and Affordable Energy Supply

The Russian invasion of Ukraine illustrates the importance of energy security and diverse supply sources. Energy carriers stand at the beginning of complex and interdependent value chains that form the basis of the economic well-being of the G7.

Given the gradual process of the energy transition, energy security needs to be strengthened by diversifying energy supplies from various sources and countries globally. The B7 acknowledges that technologies and approaches to expand deployment of renewable energy, nuclear power, energy efficiency, transportation electrification, and low-carbon hydrogen are not only important to meeting clim