1July 20, 2024

New Climate Club
Hitoshi Matsushima
Department of Economics, University of Tokyo2

1. Background
International cooperation is essential to solve the climate change problem. Various global efforts
are being made to reduce CO2 emissions.
・ The Conference of the Parties (COP) under the United Nations has been conducting
international negotiations for over 30 years to agree on and implement CO2 emission
reductions based on the principles of sustainability (SDGs).
・ However, COP has been slow in forming agreements and has not achieved sufficientresults.
Therefore, the establishment of the Climate Club has been proposed.
・ The goal is to gather countries and regions with high awareness, speed up agreement
formation, and achieve early CO2 emission reductions.

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2. Climate Club
The climate club adopts the following approach:・ Only member countries set a common global carbon tax target and require its
implementation globally.
・ However, the international community has concerns about coercion, sanctions, andpressure against non-member countries.
While there may be short-term effects, it is not consistent with the SDGs and could ignite
international conflicts and disputes.43. Objective
I propose a resilient approach that accelerates agreement formation and ensures emission
reductions without using coercion, sanctions, or pressure, and aligns with the principles of theSDGs.
・ This approach is named the "New Climate Club (NCC)."・ Location:

It can be established either within or outside UN.
If established externally, faster progress is expected.
Being consistent with SDGs, it can be absorbed into UN in the future.

・ Contribution:

Restoration of international order and its sustainable management.

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4. Mechanism of the New Climate Club (NCC) (1)The New Climate Club (NCC) is characterized by the following negotiation rules:
・ Membership conditions:Regions (or countries) with a high awareness of sustainability join theNCC.
・ Decision of carbon tax targets:
Member regions decide on a common global carbon tax target.
・ Declaration of carbon tax limits:
Each member region declares the upper limit of the carbon tax it cantolerate. It is assumed that non-member regions declare a limit ofzero.
・ Setting of commitment values:
Based on the list of declared upper limits, the commitment values foreach region’s carbon tax are determined.
・ Respect for sovereignty:
The commitment values of each region are set below their declared
upper limits. The commitment values for non-members are zero.

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4. Mechanism of the New Climate Club (NCC) (2)・ If all regions join and set their upper limit at the target value, the commitment values for
all regions are set at the target value.
・ If there are regions whose upper limit is below the target value, the commitment values
for all (cooperative) member regions are set slightly below their declared upper limits.
・ Gradual adjustment:
The difference between the upper limit and the commitment value for eachmember region increases in stages depending on the number of regions withupper limits below the target value.
・ Adjustment method:
An integer M is predetermined. For any non-negative integer X, if the numberof regions with upper limits below the target value is between MX+1 andM(X+1), the commitment value for each member region is set X+1 units below
their declared upper limit.

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4. Mechanism of the New Climate Club (NCC) (3)Example:・ Total number of regions: 200, number of member regions: 110, target value: 500 yen,number of member regions with the target value as their upper limit: 85, M = 20
・ In this case, the number of regions with upper limits below the target value is 200 - 85 =115. Therefore, we have MX+1 < 115 < M(X+1), X = 5, and the commitment value formember regions with the target value as their upper limit is set at 500 – (5+1) = 494 yen.
・ As the number of regions with upper limits below the target value increases by 20, thecommitment values for all regions are reduced by 1 yen, keeping the difference between
upper-limit and commitment values always below 10 yen, which is a much smaller value
than the target value 500 yen.

84. Mechanism of the New Climate Club (NCC) (4)・ The New Climate Club respects sovereignty by not forcing commitments beyond the declared
upper limits. The New Climate Club even allows all member regions to change their declared
upper limits midway.
・ The New Climate Club always requires member regions to commit to values close to theirdeclared upper limits.
・ By maintaining transparency and democracy, the New Climate Club encourages external
regions to join.

95. Incentives
The following conditions, when met, provide incentives for all member regions to set their upperlimits at the common carbon tax target value:
・ Member regions adhere to international order (i.e., keep their promises).
・ Regional divisions are more granular than at the national level.
・ Each member region considers global benefits (even to a low degree).

Incentive logic:
・ Granularity makes the reduction costs of each region negligible on a global scale.
・ The global benefit of a uniform 1 yen increase in carbon tax cannot be ignored.
・ This difference incentivizes each region to declare a high upper limit.

106. Resilience
The mechanism of the New Climate Club ensures resilience to unforeseen circumstances from an
incentive perspective:
・ Even if insufficient member regions gather, member countries commit to high carbontaxes.
・ Even if many member regions do not adhere to international order, other member
regions still commit to high carbon taxes.
・ Even if many member regions declare low upper limits, other member regions stillcommit to high carbon taxes.

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7. Sustainable Implementation (1)For the New Climate Club to be sustainably implemented, the following complementary
approaches are important:1.

Sustainability education

2.

Environmental technological innovation and inequality correction

3.

Carbon Border Adjustments (CBA)

4.

Ethical capitalism

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7. Sustainable Implementation (2): Sustainability Education
It is crucial for global citizens to have a high awareness of sustainability, considering economic,
social, and environmental issues comprehensively.
・ Practical education programs:
Learning about environmental ethics, social ethics, care ethics, systems
thinking, diverse ethical perspectives, community engagement, diversity
and inclusion, etc. is essential.
・ Reforming economics education:
It is necessary to reform current economics education, which centers on
explanations assuming self-interested individuals, and incorporate
sustainability education into the curriculum.

137. Sustainable Implementation (3): Creating an Environment for Developing
Countries to Participate
Creating an environment where developing countries can voluntarily join the New Climate Clubis crucial.
・ Avoiding conflicts:
It is necessary to eliminate conflicts over the setting of carbon tax targets
between developing and developed countries.
・ Balancing education and technology:
It is important to ensure that the balance between the spread ofsustainability education and environmental technology adoption isuniform across regions.
High education levels and advanced environmental technology directly contribute to CO2emission reductions, but balancing education and technology is required to address the NorthSouth divide.

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7. Sustainable Implementation (4): Establishing CBA
To prevent free-riding by member and non-member regions, establishing Carbon Border
Adjustments (CBA) is necessary.
・ Necessity of CBA:To prevent carbon leakage due to different carbon taxes, CBA isindispensable.
・ Careful operation:
CBA should be operated carefully to avoid being excessively strengthened
and used for sanctions or pressure.
It is necessary to avoid promoting inequality in environmental technology
transfer.

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7. Sustainable Implementation (5): Promoting Ethical Capitalism
For-profit companies are required to bear social responsibility by contributing to the SDGs
through their business activities.
・ Reconstructing the capitalist competitive system:
It is necessary to create a mechanism that eliminates for-profit companies
that do not contribute the SDGs.
・ Various elements of ethical capitalism:
Ethical consumers
Ethical employees
Ethical investors
ESG evaluation
Certification systems by NPOs
Benefit corporations
Support for social entrepreneurs
Partnerships among the private sector, community, and government
Crowdfunding based on empathy