Advancing climate action internationally is fundamentally in the interests of Germany and the EU. It not only helps avert climate-related damage but can also serve as a lever for achieving security and economic policy objectives while reducing dependence on fossil fuel imports. A policy brief from Ariadne, a Kopernikus project funded by the German Federal Ministry of Research, Technology and Space, sets out why Germany and the EU should maintain ambitious climate policies and examines the instruments and formats through which they can promote climate action internationally while safeguarding domestic efforts.

From a climate perspective, it makes no difference where in the world greenhouse gas emissions are reduced. The research team therefore argues that it is worthwhile for Germany and the EU to provide financial support for emissions reductions in other countries: every tonne of CO₂ avoided anywhere in the world reduces future climate-related damage at home.

"The avoided climate damage within the EU alone amounts to around €34 for every tonne of CO₂ that is not emitted. On top of this come security-policy externalities, as well as the human costs of potential crises, conflicts and migration, which cannot readily be expressed in monetary terms," says Ole Adolphsen of the German Institute for International and Security Affairs (SWP), a co-author of the study.

Researchers from the Potsdam Institute for Climate Impact Research, the Hertie School, Ecologic Institute, the German Institute for International and Security Affairs, Climate Transition Economics and adelphi examine four selected elements of a strategic policy portfolio: 

1. financial support for decarbonisation in other countries; 
2. improved non-financial incentives for decarbonisation abroad;
3. protecting domestic climate action from external pressures; and
4. managing risks in the supply chains for climate technologies. 

On this basis, they assess the relevance of a number of potential policy options, including international cooperation formats such as Just Energy Transition Partnerships (JETPs), policy instruments such as the Carbon Border Adjustment Mechanism (CBAM), and the newly proposed concept of Jurisdictional Reward Funds (JRFs).

Levelling the playing field and safeguarding domestic climate action

From an economic perspective, pursuing the policy portfolio outlined above makes sense as long as the marginal cost of reducing emissions in other countries does not exceed the social costs that those CO₂ emissions – or associated security-policy dynamics, such as revenues from oil and gas accruing to producer states such as Russia – would otherwise impose at a national or European level.

According to the study, Germany and the EU stand to benefit when they create incentives for other countries to adopt more stringent climate policies. The Carbon Border Adjustment Mechanism, for example, places a carbon price on certain imports from countries with less ambitious climate policies. This has two effects: it helps level the competitive playing field for domestic industry while simultaneously encouraging other countries to raise their climate ambitions.

In this way, the instrument not only creates incentives for stronger climate policy abroad but also helps safeguard domestic climate targets. These targets can come under particular pressure when parts of industry relocate abroad in search of more favourable production conditions, potentially fuelling calls for domestic climate policies to be weakened.

The newly proposed Jurisdictional Reward Funds offer another financing mechanism for strengthening incentives for governments in other countries to pursue climate action. Rather than financing individual, small-scale climate projects, the concept shifts the focus towards rewarding emissions reductions achieved across entire jurisdictions. Funding is disbursed through a results-based payment mechanism designed to incentivise the lowest-cost mitigation options first. Article 6 of the Paris Agreement and Just Energy Transition Partnerships provide potential policy frameworks within which such instruments could operate.

Replacing fossil fuel dependencies with reciprocal partnerships

Diversified supply chains and strategic reserves of goods and technologies needed for a climate-neutral economy can strengthen Germany's own negotiating position – including on climate action. "As climate policy increasingly intersects with economic and security policy, it can also be used as a lever in these areas," the researchers explain. "Germany should speak more openly about its legitimate strategic interests and replace existing dependencies with partnerships based on reciprocity. This would give it greater negotiating power internationally."

The policy brief concludes that the United Nations Framework Convention on Climate Change (UNFCCC) should continue to provide the overarching framework for global climate policy efforts. More targeted climate action, however, requires greater structure and, according to the researchers, could be implemented more effectively through smaller coalitions of countries with similar circumstances and interests.

The researchers recommend that Germany concentrate its resources on a limited number of high-impact initiatives while, wherever possible, maintaining its partnerships with the United States, China and India – including at the European level. This is precisely where Germany and Europe can make a difference: by advancing global climate action in ways that not only benefit the climate but also strengthen their own resilience, prosperity and strategic position.