A New Solution: The Climate Club
Why has progress in climate change policy been so slow? If you read five books, you will find six theories. Perhaps this is because the public is poorly informed. Or because the science is so hard. Or because industry is putting up such a vicious fight, and policies are being blocked by the oil and coal lobbies. Or because climate deniers have captured the Republican Party. Perhaps because a solution is so expensive. Or because costs must be incurred in the present while benefits accrue far in the future.
Doubtless, each of these plays a part. But the fundamental reason for the lack of progress is the strong incentives for “free-riding” in current international climate agreements... A crucial aspect of the club is that countries who are outside the club—and do not share in the burden of emissions reductions—are penalized. Penalties for those outside the club are central to the club mechanism, and penalties are the major difference from all other proposals from Kyoto to the upcoming meeting in Paris. Economic modeling indicates that the most promising penalty is uniform percentage tariffs on the imports of nonparticipants into the club region. A country considering whether to undertake costly abatement would have to weigh those costs against the potentially larger costs of reduced trade with countries in the club.