Advancing international cooperation for the decarbonisation of energy-intensive industries: the G7 Climate Club and beyond

Simon Otto & Sebastian Oberthür

This policy brief explores institutional options to advance the global governance of the decarbonisation of EIIs. It argues that existing international institutions as well as the newly proposed G7 Climate Club can address key remaining governance gaps, although not all of them, and offers recommendations to this end. 

Key Messages:

  • International cooperation holds great potential to advance the global decarbonisation of energy-intensive industries (EIIs). However, despite existing far-reaching international cooperation this potential remains underexploited. Major gaps remain regarding (1) harmonised standards for near-zero emissions basic materials, (2) related lead markets, (3) sufficient means for technology development and transfer, (4) rules addressing international competition and carbon leakage, and (5) orchestration of existing activities. 
  • Existing institutions hold significant potential to address the gaps of lead markets and means as well as, to a lesser extent, harmonised standards and orchestration. However, they lack the needed institutional capacity and legitimacy to address competition and carbon leakage or ensure a near-universal harmonisation of standards. 
  • The proposed G7 Climate Club holds further potential to advance international cooperation on harmonised standards, lead markets and orchestration. However, its narrow membership and limited legitimacy constrain its effectiveness, while clear incentives for other countries to join are lacking. These shortcomings can be addressed by especially reaching out to emerging and developing countries with an established interest in international cooperation on industrial decarbonisation, explicitly addressing equity issues, making clear financing commitments and providing access to lead markets. 
  • Neither existing institutions nor the Climate Club have the required institutional capacity or legitimacy to address competition and carbon leakage. Whereas bi- or plurilateral cooperation holds some potential, the current geopolitical context might render broader international cooperation on carbon leakage politically unfeasible. To put EIIs on track for near-zero emissions by mid-century, enhancing and deepening cooperation on the other gaps should therefore be prioritised.