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Why Has Australia Signed Up to Germany’s Climate Club and What Difference Will It Make?

In the world of climate diplomacy, the bewildering number of policies and initiatives can be hard to follow.

Take just about any country, state or territory — or just about any transnational organisation — and chances are you’ll find a list of schemes and strategies as long as your arm.

Overnight, Australia became a party to one of the latest such initiatives — the so-called Climate Club.

The announcement came as part of Prime Minister Anthony Albanese’s tour through Europe, which has traditionally been a front-runner on efforts to decarbonise the global economy.

It was a development that garnered some applause from environmentalists — albeit of the fairly muted variety.

A man is seen walking past a coal power plant in a dusty, barren landscape
The EU’s carbon border tax is designed to penalise emissions-intensive imports.(Reuters: Stringer)

But for many more Australians, the announcement was equally likely to have been greeted with a bemused look or a shrug of the shoulders.

So, what has the federal government just signed up to, and should Australians care?

What is the Climate Club?

Ostensibly, the Climate Club is designed to help jawbone emissions lower by pressing governments to put a minimum price on carbon.

As well as this, the club holds as a central tenet the idea that countries with a carbon price should tax imports from countries without one.

Together, the thinking goes, these twin policies will foster a world in which economic growth can be decoupled from carbon emissions almost completely by 2050.

The club is an initiative of German Chancellor Olav Scholz, whose ruling coalition is made up of parties from the centre-right to the Greens on the left.

German Chancellor Olaf Scholz smiling.
The Climate Club, a group of mostly rich nations, is an initiative of Olaf Szholz.(AP: Michele Tantussi)

Despite their differences, the three parties in the coalition broadly seem to agree on the need to tackle global warming by reducing pollution.

And Mr Scholz has already enjoyed some success in enlisting members to the cause, with all of the members of the G7 group of rich nations, such as the US, Japan and the UK, backing the club.

Other members include Argentina, Chile, the EU, Indonesia, Luxembourg and the Netherlands.

Why has Australia only just joined?

For starters, the Climate Club is a relatively new initiative, which was only launched after Mr Scholz’s coalition formed in 2021.

On top of this, the club is, by reports, still yet to develop a concrete agenda or purpose, raising the question of whether Australia is even signing prematurely.

Perhaps, Australia has decided that when it comes to policies as potentially profound as those relating to climate change, it is better to be in the tent with the world’s richest and most powerful nations rather than outside it.

From October, the European Union will phase in its “carbon border adjustment mechanism”, which will tax carbon-intensive imports of products from cement to steel and hydrogen.

The Climate Club, given its membership, could ultimately help broaden the application of such a tax to other parts of the world.

Aerial shot of a solar farm
Australia wants to use green energy to underpin a new clean export industry.(ABC News: Chris Lewis)

Australia is already a major exporter of some of the affected products such as iron ore and aluminium.

But it also wants to be in the game of exporting clean versions of them, with a particular focus on things such as green hydrogen, steel and fertiliser.

Mr Albanese suggested the government was keen to learn through the Climate Club how to be a part of the action.

“My government has set the ambition for Australia to be a renewable energy superpower,” Mr Albanese said in Berlin.

“But we also want to be a renewable energy export superpower, working with countries like Germany on the industries of the future.”

Does the club make a difference?

The jury would seem to be out on this score, given the immaturity of the club and its lack of clarity to date.

But one thing is clear — the countries that are party to the Climate Club wield serious economic clout.

For example, the members of the G7 alone account for almost one-third of the world’s economy.

And it’s also become a truism that while Europe might no longer set the economic pace compared with the US and, increasingly, China, it is often at the vanguard of global regulation.

A worker wearing a face mask works on a production line manufacturing bicycle steel rims in China.
China is worried about how Europe’s carbon border tax could affects its steel exporters.(China Daily via Reuters)

Europe was the first major jurisdiction to impose a price on carbon earlier this century, for example, while it has also led the crackdown on social media giants over privacy concerns.

To that extent, what Europe, led by Germany, does on the matter of carbon pricing and trade taxing is likely to have a major bearing far beyond its own borders.

How the European Union’s carbon border tax will work in practice is yet to be seen.

Many countries, notably including China, have been vocal in their opposition to the tax.

Still, China has also been taking greater steps to put a price on carbon itself, including via an emissions trading scheme in its energy industry.

Will it change Australia’s climate goals?

As yet, Australia has not made or flagged any material changes to its climate policies just because it’s signed up to the Climate Club.

However, since coming to power in May last year, the federal government has overhauled many of the country’s climate and energy positions.

It has vowed to cut Australia’s carbon emissions 43 per cent by 2030, toughened the “safeguard mechanism” to limit pollution from major emitters and set a renewable electricity target of 82 per cent by the end of the decade.

The efforts might have brought Australia closer into line with its peers in Europe and North America, but they haven’t stopped calls for wider ranging measures such as a carbon price.

Joe Biden at a lectern.
US President Joe Biden is backing the Climate Club, though America has its own policies.(Reuters: Kevin Lamarque/File)

Advocacy group the Climate Council, for one, is also agitating for Australia to bring forward its 2050 net zero emissions goal to 2035.

“The fact is Australia’s emissions reduction target remains weaker than Europe’s, the US, and other members of the Climate Club,” Climate Council research director Simon Bradshaw said.

“We will now rightly see even more international pressure on Australia to up our game.”

The prime minister was giving little away on this front last night.

“One thing we can do is to co-operate and learn off each other,” Mr Albanese said.

“Because you can’t address climate changes just as a national issue.

“It has to be, by definition, a global response.

“No challenge is more pressing than that posed by climate change.”

Source : ABC

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