Beyond Treaties: Rethinking Legal Mechanisms for International Climate Governance

This chapter introduces the urgent and complex challenge of climate change, positioning it as the defining environmental issue of the twenty-first century with profound consequences for ecosystems, economies, and societies. It critically evaluates the current international legal frameworks, particularly the Paris Agreement, for their inability to produce enforceable and effective measures to combat global warming. By highlighting the limitations of multilateral negotiations, including collective action problem, free-riding, carbon leakage, and the asymmetry between developed and developing nations, the chapter emphasizes the need for innovative governance mechanisms to bridge these gaps. The “economic analysis of law” lens is used to evaluate the interplay between environmental goals and economic realities, underscoring the feasibility and efficiency of market-based instruments in addressing the externalities of greenhouse gas emissions.

This chapter examines the evolution and challenges of international climate governance, emphasizing the progression from scientific recognition to a global concern. It highlights the pivotal roles of the UNFCCC, Kyoto Protocol, and Paris Agreement in establishing frameworks for collective climate action. While these agreements have advanced international cooperation, their effectiveness is hampered by weak enforcement mechanisms and financial constraints. The analysis underscores the gaps between commitments and implementation, particularly under the Paris Agreement, and stresses the importance of bridging divides between developed and developing countries. Cross-fertilization with other legal realms, such as trade law, is proposed to strengthen climate norms and address structural deficiencies within the UN regime.

The chapter analyses the potential of minilateralism as an alternative governance structure for climate cooperation, which can address the limitations of traditional multilateral approaches. Minilateralism offers a pragmatic and flexible platform for focused, efficient, and region-specific climate action, allowing smaller groups of like-minded countries to lead innovative mitigation efforts. These initiatives complement multilateral frameworks by serving as experimental hubs for climate solutions. The chapter highlights the necessity of aligning minilateral efforts with existing agreements, such as the Paris Agreement, to ensure coherence in global climate governance. However, challenges such as inclusivity, legitimacy, and the risk of duplicating efforts must be addressed to maximize effectiveness. Ensuring meaningful participation from less developed nations and maintaining alignment with broader international objectives are vital to the success of minilateral initiatives. As the global climate landscape evolves, refining the minilateral approach to remain responsive and inclusive will be essential in advancing international climate action.

This chapter examines the climate club concept as a novel framework for enhancing global climate governance through focused and cooperative action among willing nations. By adopting a minilateral approach, climate clubs aim to circumvent the inefficiencies of multilateral negotiations, leveraging market-based mechanisms to encourage ambitious emissions reductions. The European Green Deal is a compelling example of how targeted policies and economic incentives can drive regional and global climate progress. However, the approach faces significant challenges, particularly regarding equity and inclusivity. Critics highlight potential deviations from the principle of Common but Differentiated Responsibilities and Respective Capabilities, raising concerns about marginalizing less developed countries. Practical challenges, such as aligning diverse interests, ensuring compliance, and managing policy coordination, also pose hurdles. Despite these issues, the climate club concept offers a strategic and pragmatic pathway to global climate cooperation. By addressing these challenges and aligning with the goals of the Paris Agreement, climate clubs have the potential to serve as effective and legitimate mechanisms for accelerating global climate action.

This chapter explores the critical role of market-based instruments in the framework of climate clubs, emphasizing their effectiveness in reducing global emissions while maintaining economic efficiency. Instruments such as import bans and quotas for high carbon emitted products, emissions trading systems, domestic carbon tax, border carbon adjustments, and technical regulations and standards are highlighted as key tools for fostering shared responsibility and promoting sustainable markets. These mechanisms offer valuable insights for policymakers, demonstrating their potential to achieve emission reduction targets and encourage economic competitiveness within a cooperative global framework. The analysis also underscores the importance of aligning these instruments with WTO law to ensure their long-term viability.

This chapter evaluates the legality of the climate club scheme, focusing on its alignment with the Paris Agreement and WTO norms. Through an analysis of Article 6 of the Paris Agreement, the chapter underscores how the club scheme complements and amplifies international climate governance, emphasizing its potential to foster heightened ambition and cooperation among countries. The Climate Club Initiative introduced at COP 28 exemplifies the practical application of this framework, highlighting its role in industrial decarbonization and advancing global climate goals. The chapter also addresses the compatibility of climate club linkages of extra carbon tariffs, import requirements leading to bans or quotas for high carbon emitted products, or surrender of emission allowance certificates for certain imports’ implications on WTO norms. The examination of the schedule of concessions, tariff deconsolidation, and the general elimination of quantitative restrictions has highlighted the intricate legal considerations involved in reconciling climate-related trade instruments with WTO law. The climate club scheme mitigates potential trade disputes and fosters a global market for green goods by proposing shared standards, carbon pricing mechanisms, and mutual recognition of emissions allowances. The integration of environmental and trade policies, leveraging legal flexibilities and multilateral negotiations, emerges as key to aligning climate action with sustainable trade practices. With dual legitimacy under the Paris Agreement and WTO law, the climate club framework offers an innovative and cooperative model for addressing the multifaceted challenges of climate change. Its evolution will be pivotal in advancing international climate governance and achieving the ambitious goals set by the Paris Agreement.

In its first section, this chapter examines the most-favored nation (MFN) principle’s intersection with climate-related trade measures, particularly border carbon adjustments (BCAs). BCAs, applied as carbon tariffs or emissions allowance requirements, potentially contravene the MFN principle by providing market advantages to climate club members over non-members. The evaluation centers on whether products with differing carbon intensities qualify as “like” under WTO rules. If determined to be like, BCAs based on club membership would violate the MFN principle by discriminating against imports based on origin rather than product characteristics. The second section explores the complexities of applying the national treatment principle to climate-related trade measures. Integrating environmental considerations, such as non-product-related processes and production methods (npr-PPMs) and carbon content, complicates the application of this principle. The analysis highlights the role of the likeness test for internal taxes and charges and the principle’s application to directly competitive or substitutable products under internal regulations. The third section examines the role of labels, standards, and certifications as technical regulations under the TBT Agreement and their compatibility with the principles of non-discrimination. They risk de facto discrimination when criteria are set primarily by member states, potentially favoring countries with greater financial and technological resources. The last section explores the intersection of climate-related trade measures and their legal justification under GATT 1994 Article XX, particularly subsections (b) and (g), and the Chapeau. The discussion in this chapter reveals the challenges of aligning international trade policies with climate goals in a legally sound and sustainable manner. It stresses the necessity for coherence between trade obligations and climate commitments, particularly in the context of the WTO Agreements.

This chapter synthesizes key findings of a novel paradigm for international climate governance, transitioning from traditional treaty-based approaches to club-based strategies. The chapter underscores the critical role of integrating trade and climate law to address the systemic shortcomings of the Paris Agreement, particularly its lack of enforceability and susceptibility to free riding. It evaluates the potential of climate clubs as a pragmatic, minilateral approach to climate governance, leveraging market-based instruments like carbon pricing, border carbon adjustments, and emission trading systems to foster cooperation and drive ambitious climate action. The chapter further summarizes the legal intricacies of climate clubs under the Paris Agreement and WTO regulations. It demonstrates how climate-related trade instruments can align with principles of non-discrimination, the most favored nation and national treatment, by focusing on the evolving interpretations of “like products” based on non-product-related process and production methods. It also analyzes the potential application of the GATT 1994 Article XX exceptions to justify the environmental objectives of climate clubs while ensuring fair trade practices. The chapter proposes future research directions, including the just transition mechanisms, the role of consumer preferences in shaping non-discrimination analyses, and integrating behavioral economic insights into policy frameworks.