The long and winding road towards the creation of climate clubs: Transatlantic negotiations, potential regulatory models and challenges ahead

Proposals for the establishment of plurilateral climate clubs have gained momentum, and both the European Union (EU) and the United States (US) will play a pivotal role in forthcoming negotiations. This article closely examines EU and US proposals to uncover distinctive features in their regulatory approaches and to critically assess different potential models for sectoral climate club arrangements. The article argues that a middle ground could be reached by combining the US policy-neutral approach with the EU distinctive product-based focus. A bottom-up model involving average sectoral carbon intensity reduction targets, product standards and bans could provide an effective and practicable way forward. Recent declarations confirm that the negotiations of the Global Steel and Aluminium Arrangement are focusing on product standards. Nonetheless, several challenges lie ahead. These include the difficult coordination between plurilateral arrangements and the EU carbon border adjustment mechanism, and the US focus on non-market economies and excess capacity.