A climate club as a complementary design to the UN Paris agreement

The global coverage and the need for consensus explain why the UN Paris agreement, in several critical dimensions, is characterizedby low levels of commitment and reciprocity. Hence, complementary designs are needed. This paper analyzes the parameters of such designs. New agreements should cover only nations that are willing to high levels of commitments and reciprocity. They should use measures that governments can control and be made accountable for. Commitments should be short-term and few dimensional and they should incentivize efficient reductions, prevent leakages to outside nations and provide sanctions for noncompliance. Further, they should provide incentives to outsiders to reduce emissions and encourage them to join the agreement. A Climate Club that harmonizes minimum national carbon prices (i.e. carbon taxes), introduces a common carbon tariff, and welcomes new members to meet these criteria. Such a complementary design also has the potential to expand and, with time, provide a global price on carbon.