Welcome to the Climate Club

While most of the focus at the UN climate summit in Paris is on a global agreement into which every nation in the world would be woven, some academics believe there's also huge potential in an idea that in a sense is diametrically opposed.

"Climate Clubs", they say, offer significant potential for increasing the pace and scale of decarbonisation.

But what exactly is a climate club?

"'Club' is one of those terms that means something specific in the academic world but sounds rather different in the real world," said Michael Grubb, Professor of International Energy and Climate Change Policy at University College London. "In the academic world it has a rather specific definition. Whereas a 'coalition' is a group of nations with broadly similar ambitions, a 'club' is something with specific rules for members, and hence specific benefits."

Speaking at a seminar on the sidelines of the UN conference here (COP21), Professor Grubb made an analogy between climate action and world trade. The global organisation facilitating free trade to which 162 countries belong, the World Trade Organization, "acknowledges and encourages groups of countries to go further and develop schemes for further tariff reductions - and that's supportive of the WTO regime itself," he said. It is hoped something similar could happen with climate policies.

One of the earliest examples sprang up in the western US. In 2007, five states - Arizona, California, New Mexico, Oregon and Washington - agreed to measure their carbon emissions and develop a plan to reduce them, at least in part through market mechanisms.

The Western Climate Initiative has gone through several iterations and now consists of California plus four Canadian provinces - including Ontario, whose Minister for Environment and Climate Change, Glen Murray, related its reason for joining. "There have been so many COPs, but still there's no global agreement to cut carbon," he said. "And for my country, until October 19 this year [the date of the recent general election] our national government sat somewhere between denial and disengagement on climate change and we lost a decade. But provinces have quite a lot of power; so we abandoned national government."

Ontario is now on the verge of joining Quebec and California in their joint cap-and-trade system.

The Western Climate Initiative would appear to illustrate both the benefits and perils of the climate club concept. States and provinces have joined, and then left - resultin in lots of upheaval over only eight years of existence - either because they didn't like what the other members wanted to do or because of an election result.

Nevertheless, Murray suggested there is a significant benefit from forming clubs rather than formal coalitions. "We form a tight club," he said. "And we don't need the other US 49 states because we're so big, we can set the rules."

Now, New York State and the entire country of Mexico are interested in joining the cap-and-trade scheme too, with Australia among other nations said to be showing an interest.

"What national governments didn't do in 20 years we did in two," noted Murray. "Even if you have Republicans who throw snowballs on the floor of the Senate to show climate change isn't happening, they quickly become irrelevant."

One of the questions that would naturally arise in a policymaker's mind is, "why should my country join - how would I know that we will benefit?"

On that question, Daniel Moran from the Norwegian University of Science and Technology in Oslo is working on an intriguing idea: can machine learning identify the optimum members of a climate club?

The principle is that similar countries ought logically to find it easier to band together under a similar set of rules. Are they already in a regional trade partnership? Are they import- or export-dependent? Do they have similar sectoral patterns of emissions?

"Using big data and detailed maps of the global economy we ask the computer to search for similarities and complementarities among countries that might provide an opportunity to implement a greenhouse gas reduction programme at better economic efficiency," said Dr Moran. "In the same way that we saw REDD (Reducing Emissions from Deforestation and forest Degradation) initiate connections between countries which previously had few shared partnerships - e.g. Papua New Guinea, Guyana, Brazil - here we are hoping to discover new similarities between countries that could be the basis for future carbon mitigation collaboration."

The machine learning research is in its early stages but it has the potential to signal alliances of mutual benefit, perhaps unexpected ones.

The notion of Climate Clubs is itself nearer the beginning than the end of its development. But it appears to be a coming concept.

The World Bank recently launched the Carbon Pricing Leadership alliance - or "club", I suppose we should say. With seven nations and one US state (California) in the lead, and with the support of numerous corporations, it has the chance to evolve into a major driver of change.

The doyen of climate change economists, William Nordhaus of Yale University, highlighted the potential of climate clubs recently by contrasting it with alternative mechanisms for reducing emissions:

"Reviving the feeble Kyoto Protocol; weak national plans that achieve minimal reductions; geo-engineering that runs unknown risks of dangerous side effects; or doing nothing at all and incurring unchecked warming with all its fat-tailed perils," he wrote. "A Climate Club that ensures high prices of carbon emissions around the world, or the equivalent, is an essential step toward an effective policy to slow warming."

Businesses may soon have to ask themselves if they want to join the climate club.

Richard Black is director of the European Climate Intelligence Unit (ECIU).

This article is part of BusinessGreen's Road to Paris hub, hosted in association with PwC.