At the COP28 climate summit next week, Germany and Chile intend to establish a club of states to assist developing countries in investing in decarbonizing businesses including steel and cement-making, according to reports in the media based on information from a document.

The action was taken a few weeks after the European Union introduced the world’s first carbon border tax trial phase. This policy, which would impose emission penalties on imports of cement and steel that are high in CO2 starting in 2026, has alarmed trading partners.

The “climate club” in Chile and Germany might try to allay those worries.

According to a draft statement as reported in the media, the partners will build a matchmaking tool to link emerging and developing nations with financial and technical support from governments and the corporate sector to decarbonize industry.

At a debut event at the U.N.’s COP28 climate meeting in Dubai on December 1, the statement is scheduled to be made public.

“On hard-to-abate sectors, starting with steel and cement, we will advance conducive policy frameworks for accelerating decarbonisation,” the statement said.

It further stated that part of this will involve working to harmonise global green industry standards, such as those pertaining to measuring emissions in industrial goods.

A request for comment from Germany’s ministry of the economy and climate received no response. According to a spokesman for Chile’s environment ministry, the club “reinforces the importance of working together in search of solutions” and multilateralism.

Berlin has been rallying support from governments and financial organisations. The club held its first members’ meeting in May to decide on its objectives.

The United States, Argentina, Australia, Canada, Colombia, Egypt, the European Union, Indonesia, Japan, Kenya, Mozambique, Morocco, Ukraine, and the United Kingdom are among the 33 countries listed on the club’s website.

During a conference this week in Berlin with the chiefs of several organisations, including the World Bank, African Development Bank, and World Trade Organisation, German Chancellor Olaf Scholz talked about the “climate club”.

The plan offers to cooperate with these nations on industry cleanup instead of penalising them, which is akin to presenting an olive branch to governments enraged by the EU’s carbon border tax, or CBAM.

“I would say that the climate club, in this case, is the carrot, and CBAM is the stick,” said Petter Lyden, co-head of international climate policy at campaign group Germanwatch.

“But to be really successful, this club needs the participation of more countries, because some of the biggest emerging economies with big industrial sectors are still missing,” he added.

China and India have not yet joined. The EU carbon border tax has drawn criticism from China, the largest steel exporter in the world, calling it a trade obstacle.

Regarding the move, India intends to lodge a complaint with the World Trade Organisation. According to the European Commission, the policy is made to abide by WTO regulations.

(Adapted from ADFIM.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability