Taxing the extraction of fossil fuels in the world’s most advanced economies could raise $720bn (£575bn) by 2030 to support vulnerable countries facing climate damages, analysis has found.
In a new report, over 100 climate organisations including Greenpeace, Christian Aid, and Stamp Out Poverty propose that OECD countries introduce a fee per tonne of CO2 embedded within domestic extraction of coal, oil and gas.
A low initial rate of $5 per tonne increasing by the same amount each year would raise a total of $900bn by the end of the decade, with the report recommending that 80% go to the Loss and Damage Fund for climate-vulnerable countries.
The remaining 20% would provide a $180bn "domestic dividend" for countries that introduce the tax, which could be “easily administered” within existing systems of royalty payments or similar that fossil fuel companies already have to pay.
David Hillman, director of Stamp Out Poverty and co-author of the report, said It would be “unforgivable” if wealthy nations fail to deliver the funds needed for the Loss and Damage Fund, which was operationalised by world leaders at COP28 in Dubai last year.
“The richest, most economically powerful countries, with the greatest historical responsibility for climate change, need look no further than their fossil fuel industries to collect tens of billions a year in extra income by taxing them far more rigorously,” he continued.
“This is surely the fairest way to boost revenues for the Loss and Damage Fund to ensure that it is sufficiently financed as to be fit for purpose.”
Around $700m has been pledged for the fund so far, which has been estimated to equate to less than 0.2% of the irreversible economic and non-economic losses developing countries are facing from global heating every year.
According to the report, the total sum raised by a fossil fuel tax by 2030 could pay for rebuilding and recovery from the damage caused by Cyclone Freddy – which displaced over half a million people in Southern Africa last year – more than 1,300 times over.
If introduced solely in the G7, it could raise $540bn for vulnerable countries by the end of the decade, with a $135bn domestic dividend across the member states.
As well as generating funds to help countries least responsible for the climate crisis, the tax would help accelerate the phase out of fossil fuels by making their production more expensive through progressively ratcheting up the proposed tax rate each year.
The report also suggests that the domestic dividend would ensure workers and communities in developed countries reap benefits from the tax to ensure a just transition towards renewable energy and other green infrastructure.
Areeba Hamid, joint executive director at Greenpeace UK, said: “A climate damages tax would be a powerful tool to help achieve both aims: unlocking hundreds of billions of funding for those at the sharp end of the climate crisis while helping accelerate a rapid and just transition away from fossil fuels around the world.”
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