Introduction

The Global Climate Policy Project (GCPP) is a joint initiative between Harvard and MIT that identifies innovations in global climate policies. Coordination among willing subsets of countries has emerged as a practical complement to the consensus-based process under the United Nations Framework Convention on Climate Change (UNFCCC). This technical report builds on the GCPP 2025 flagship report by setting out a practical framework for coalition design and implementation, specifically focusing on heavy industries including iron and steel, aluminium, cement, and fertilisers.

Recent developments: Emerging momentum towards a climate coalition

Momentum for coordinated climate action is growing. On 1 January 2026, the European Union’s Carbon Border Adjustment Mechanism (CBAM) entered its compliance phase, becoming the first policy to charge imports for their embedded emissions. The United Kingdom plans to implement its own CBAM beginning in 2027, while jurisdictions including Australia, Thailand, and Türkiye are evaluating similar trade measures. A significant milestone occurred at COP30 in Belém, where 17 countries and the European Union endorsed the Declaration on the Open Coalition on Compliance Carbon Markets (the Open Coalition). This coalition formally launched in May 2026 in Florence, Italy, with Brazil, China, and the European Commission serving as co-chairs.

Climate coalition impacts and feasibility

Updated modelling analysis using plant-level data for over 3,600 facilities demonstrates that a coordinated climate coalition can deliver emission reductions well beyond the current policy baseline. The report examines two scenarios: a Uniform Price Coalition with a common carbon price floor of USD 50 per metric ton ($50/t), and a Graduated Price Coalition with differentiated floors based on income ($25/t for low-income, $50/t for upper-middle-income, and $75/t for high-income countries). Annual emission reductions under these scenarios reach approximately 557–584 million metric tons (Mt) of CO2 equivalent, corresponding to roughly 1.1% of global annual greenhouse gas emissions (1.5% of global carbon dioxide emissions). The steel industry accounts for more than half of these total reductions.

Participating countries could generate approximately USD 145 billion annually in carbon pricing revenues, which could help improve fiscal positions and support industrial decarbonisation. For example, Zambia could generate annual revenue equivalent to 1.4% of its total government revenue, while Brazil could generate approximately USD 4.4 billion. Industrial output in member countries is projected to decline by no more than 2.5%, suggesting that emissions leakage would be minimal. Coordinated carbon pricing leads to moderate commodity price increases relative to current policies: steel prices increase by 0.6%–1.4%, aluminium by 2.6%–3.0%, cement by 3.0%–3.1%, and fertiliser by 3.5%–4.2%.

Including India, Indonesia, and Türkiye in a uniform price scenario could increase annual emission reductions by an additional 145.7 Mt CO2e. The report suggests that differentiated carbon price floors are essential for balancing climate ambition with economic development objectives, as they mitigate output losses for lower-income countries while preserving the majority of the coalition’s climate benefits.

A common framework for assessing carbon pricing effort

Achieving interoperability across compliance carbon markets requires a structured basis for comparing diverse policy approaches. The proposed framework relies on three core elements: a common methodology for measuring effective carbon costs, differentiated benchmarks for expected pricing effort, and a transparent review process. At the centre of this framework is the effective carbon cost (ECC) metric, which captures the average carbon price borne by regulated facilities after accounting for policy design features such as coverage, free allocation, and output-based benchmarks.

The effective carbon cost is calculated using the formula: Effective Carbon Cost = Headline Price × Coverage × (1 − Carbon Cost Relief Share). Applying this metric reveals that headline carbon prices often overstate differences between systems. For example, a headline price gap of USD 75/t between the European Union and China in the steel industry shrinks to roughly $35/t when accounting for free allocation and other design features. The framework aims to preserve national policy autonomy while addressing competitiveness concerns by ensuring firms face broadly comparable carbon costs regardless of their location.

The review process for assessing comparability combines standardised self-assessments, independent technical review by a permanent secretariat, and peer dialogue. Implementation would rely on transparency and access to coalition benefits rather than punitive enforcement. Continued participation could provide benefits such as technical assistance, capacity development, climate finance, and technology cooperation.

Conclusion

The case for a multilateral climate coalition has strengthened as carbon pricing systems come into direct contact across borders. Formalising cooperation through the Open Coalition could deliver substantial climate and economic benefits, cutting emissions by an order of magnitude more than current policies while generating nearly USD 150 billion in annual revenue. Establishing a common technical foundation for assessing carbon pricing effort is essential to prevent the fragmentation of global trade into a patchwork of conflicting national rules.