This article is part of a Synergies series on Next generation trade arrangements for environment and sustainable development. Any views and opinions expressed are those of the author(s) and do not necessarily reflect those of TESS or any of its partner organizations or funders.

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The Paris Climate Agreement has not been successful in reversing the growth of carbon dioxide emissions, which reached an all-time high of 37.6 billion metric tonnes in 2024.

We argue that the inability of the Paris Climate Agreement to stop the increase in carbon dioxide emissions is because its “name and shame” approach ignores the science of the requirements for an effective international cooperative agreement on climate policy. In particular, it does not address the free-rider problem, which is the fundamental challenge in international climate policy.

What is needed is an effective international cooperative climate agreement that: (i) addresses the free-rider problem in international climate policy and incentivizes all significant emitters of greenhouse gases (GHGs) to participate and reduce emissions; (ii) to maintain a rules-based international trade regime, is compatible with the existing laws of the World Trade Organization (WTO) and may be immediately implemented; and (iii) for economic efficiency and political reasons, allows countries to meet treaty requirements with any approach that achieves comparable reduction of GHG emissions.

We propose an international cooperative agreement (a climate club) that is based on the science of effective cooperative agreements on common resources and which is the first to meet these three requirements.

Research from multiple disciplines shows that a sustainable and effective cooperative agreement on common resources requires reciprocal commitments, which are monitored and with penalties for non-compliance. Evidence is from: (i) real-world experience of numerous communities that cooperatively and sustainably manage common resources without privatization or government regulation, in many cases over centuries; (ii) game theory; (iii) laboratory experiments; and (iv) a survey of international environmental agreements.

We propose a climate club of governments in which each member will:

1. Commit (with administrative plans and legislation) to net-zero CO2 emissions in its own country by 2050 with intermediate goals at five-year intervals. The climate club permits any WTO-consistent regulatory approach.
2. In trade with non-members in products classified as carbon-intensive, impose high and progressive import tariffs and export taxes. Member countries will take effective domestic conservation measures in these sectors.
3. Impose a uniform tariff surcharge (10% maximum) on the imports of non-member countries, except for a members-agreed list of products that reduce GHGs or contribute to environmental sustainability.
4. Impose a progressive tariff on members who fail to meet intermediate goals.
5. Accommodation for developing countries:

6. Developed countries will voluntarily contribute to a Multilateral Fund (outside of the WTO) to assist developing country members of the climate club in their transformation to net-zero emissions.

   (a) To access these funds, developing countries must be members of the climate club and must have per capita CO2 emissions below an agreed threshold.

   (b) Developing countries whose aggregate and per capita emissions are below agreed thresholds, will: be permitted to accede to the climate club with a net-zero goal of 2055; and for non-members and delinquent members, the tariffs of rules (iii) and (iv) may be adjusted down. For the largest emitters of CO2, there would be neither accommodation of tariff penalties nor net-zero dates for membership.

   (c) Only developed countries are called upon to subsidize breakthrough technologies.

Our climate club for CO2 builds on a scientific consensus and the political consensus of the need to reach net-zero CO2 emissions. We propose similar clubs for methane and nitrous oxide but without the uniform tariff and we defer to the parties to the agreement for these gases to set the net-zero date for these emissions. We suggest an institutional structure based on the highly successful Montreal Protocol and defer to the Montreal Protocol for the reduction of emissions of hydrofluorocarbons.

The rules of our climate clubs are consistent with the science of effective cooperative agreements since they: (i) contain the reciprocal commitment of net-zero emissions for each country; (ii) they contain substantial penalties and a carrot, which are designed to impact the strategic decision of countries to join the climate club; and (iii) require monitoring.

The member governments of our climate clubs make aggregate quantity commitments on their own GHG reductions on a path to net-zero emissions, not the regulations or measures employed. By focusing on aggregate emissions rather than the many measures designed to reduce aggregate emissions, our climate clubs bypass the overwhelming problem of agreeing on equivalents of different measures in international negotiations.

We propose a climate club that is initially a “coalition of the willing.” As more countries join, it becomes progressively more costly to remain out of the club. We are hopeful it would follow the model of the Montreal Protocol, which successfully addressed depletion of the ozone layer of the stratosphere; it was originally adopted by 46 nations but became the first universally ratified environmental treaty in United Nations history. We acknowledge that participation by the United States, or at least absence of its counter measures, may be crucial to success.

Our case for WTO-compliance is based on GATT Articles XX(b) and XX(g). Article XX(g) permits WTO members to immediately apply measures for the “conservation of exhaustible natural resources” even if the measures violate their WTO commitments, provided domestic measures are also taken.

In EU—Palm Oil (Indonesia), the WTO Dispute Settlement Body adopted the Panel Report which declared that measures that limit GHG emissions are measures that contribute to the conservation of an exhaustible resource. Our climate clubs require domestic conservation measures especially where international trade measures are imposed. The Dispute Settlement Body has ruled in multiple cases that for discrimination to not be “arbitrary or unjustifiable” under GATT Article XX, it must have a rational or reasonable relation to the policy objective. The measures of our climate club are focused on achieving the policy objective of net-zero emissions.

Finally, in US—Shrimp, the Dispute Settlement Body ruled the measure must permit the import of goods from countries with alternate regulatory regimes that achieve the stated environmental objective. Consequently, our climate clubs allow any regulatory approach. We acknowledge our climate clubs raise unsettled questions of WTO law, but we believe a WTO panel would uphold their legality.

We view carbon pricing as enormously useful as a core component of national carbon policy. Economic efficiency implies, however, that emissions reductions per unit of costs are equalized across different measures. Focusing exclusively on carbon pricing or any single emissions reduction measure in an international agreement, however, is an economic distortion since no incentives are provided for important complementary measures on emissions reduction.

Experts believe that both carbon dioxide removal from the atmosphere and breakthrough technologies will be necessary to achieve net-zero emissions; it appears economically efficient to provide at least some support for these and other measures. Member countries of our climate clubs do not face any distorting incentive and may choose measures that are most appropriate to their conditions.

Regarding political support, compelling a specific regulatory approach to emissions reduction will likely induce resistance in many countries. For example, Bhutan is certified to have net-zero emissions but does not have domestic carbon pricing. To impose penalties on their exports due to lack of domestic carbon pricing is likely to generate resistance.

In his seminal paper, Nordhaus proposes a climate club of nations that addresses the free-rider problem by requiring members to impose a minimum carbon price and a uniform tariff on non-members. Nordhaus proposes an amendment to the WTO to accommodate this climate club. The two amendments that passed the WTO, however, show that an amendment is not a viable option: they required about twenty years to become law; and the amendment focused on goods trade allowed developing countries to opt-out of the obligations based on their capacity to implement. Climate objectives require all major emitters to reduce emissions, including developing countries like China and India. 

The European Union began implementing a carbon border adjustment tax (CBAM) in 2026 on the carbon embedded in carbon intensive imports. The CBAM has considerable political value in climate policy since it neutralizes the competitive advantage of carbon-intensive imports and it is estimated to reduce carbon leakage. The estimates of multiple economic models indicate, however, that carbon border tax measures, like the CBAM, are insufficient to offset the carbon leakage of the EU’s own carbon policies and, crucially, are insufficient to induce carbon reduction measures globally. A climate club which has more significant penalties is necessary to induce effective carbon reduction policies outside of the EU. 

Our climate clubs have important advantages.

They have substantial penalties and a carrot to effectively encourage wide participation in net-zero emission policies, they are compatible with existing WTO laws and may be immediately implemented, and they avoid economic distortions and have political advantages.

* This article first appeared in the International Economic Law and Policy Blog. The original article has been edited to align with Synergies style guidelines. For more in-depth analysis of these issues see Tarr 2026 and 2025.

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Petros C. Mavroidis is Edwin B. Parker Professor of Foreign & Comparative Law , Columbia Law School.

David G. Tarr is a member of the academic board and policy adviser to the International School of Economics at Tbilisi State University (ISET)

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Synergies is an online platform featuring expert commentary and opinions curated by TESS. We foster dialogue and incubate ideas on how to shape a global trading system that effectively addresses global environmental crises and advances sustainable development. Synergies draws on perspectives from leading experts and practitioners across policy communities from around the world. We cultivate solutions-oriented policy analysis for a sustainable future.

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