Climate club plan could punish Australia

Tracey Ferrier |

Germany’s new leader Olaf Scholz wants the G7 nations to form a climate club to fight global warming
Germany’s new leader Olaf Scholz wants the G7 nations to form a climate club to fight global warming

Australia could get the economic cold shoulder from some of the world’s richest nations unless it does more to curb its emissions, observers say.

Climate diplomacy experts have seized on a speech by Germany’s new chancellor, Olaf Scholz, who has called for the Group of Seven (G7) industrial nations to become the founding members of a “climate club”.

He promised Germany would use its G7 presidency to push for new standards by member nations, warning there would be no more waiting for stragglers.

“We will use our presidency of the G7 to turn that group into the nucleus of an international climate club,” he said on Wednesday at an event held by the World Economic Forum.

“What we want to achieve is a paradigm shift in international climate policy: We will no longer wait for the slowest and least ambitious.

“Instead, we will lead by example, and we will turn climate action from a cost factor into competitive advantage by agreeing on joint minimum standards.”

Scholz suggested the G7 climate club should commit to limiting global warming to 1.5C and achieving climate neutrality by 2050, and could seek to achieve those goals “by pricing carbon and preventing carbon leakage”.

Economist Nicki Hutley, a councillor with the Climate Council, said the chancellor’s comments make it clear what is on the line for countries like Australia if they fail to ramp up their emissions-reduction timetables.

“The cost of failing to do so is not only through the prospect of carbon border tariffs, but also a loss of investment capital and the potential for economic gains from being a first mover in green industries,” she said.

Dr Wesley Morgan is an expert in international climate diplomacy and a research fellow at the Asia Institute at Griffith University.

He said Scholz’s use of the phrase climate club is a nod to Nobel prize winning economist William Nordhaus, who proposed it back in 2015 as a way of stopping some nations trying to get a free ride on the back of action by others.

Nordhaus said collective action was the solution, including punitive mechanisms such as tariffs on products from countries that fail to pull their weight.

“The Morrison government will be paying very close attention to this climate club proposal because this is where the rubber will hit the road,” Dr Morgan said.

“It’s going beyond diplomatic pressure, to major trading partners and major powers considering policy that they’ll implement collectively – policy that will impose real economic and diplomatic costs on countries that are not doing enough.”

All G7 countries have pledged to halve their emissions by 2030 but Australia has only committed to a reduction of 26 to 28 per cent, although has said it expects to do better than that.

At the beginning of the year, Germany took over the presidency of the G7 bloc of leading Western economic powers, which also includes the United States, France, Italy, Japan, Canada and the United Kingdom.

AAP has sought comment from the government.