- Policy options for raising the funds using ‘polluter pays’ principle.
- Tax on excess fossil fuel profits could raise £13 billion.
- Tax of 0.5% on wealthiest could raise £15 billion.
- Frequent flier levy, financial transactions tax and others could raise more than £20 billion.
- Many of these measures could be replicated by other Global North countries to raise their fair share of the climate finance pot.
At COP29 rich countries are under pressure to deliver trillions in grant based, public climate finance, to meet the needs of developing countries, as laid out in the terms of the Paris Agreement.
These figures might seem bafflingly large to the person on the street, and rich countries may claim the figures sound hard to achieve. But a report by Christian Aid has shown how one developed country, the UK, could raise significant amounts of climate finance and contribute its fair share to the overall money needed, without putting major strain on the public.
These measures are based on the ‘polluter pays’ principle. The report, first published last year, focussed specifically on covering the UK’s £12.6 billion fair share of the Loss and Damage Fund which was operationalised last year at COP28 in Dubai.
The loss and damage contribution is only one part of the New Collective Quantified Goal on climate finance being negotiated in Baku so these policies below could be combined and built upon further to reach the UK’s overall contribution to the new goal being negotiated at COP29.
1. Polluter producers’ tax - This would see fossil fuel companies contributing towards the UK’s fair share. The UK Government could increase the tax on excess profits from fossil fuel production to 95%, which according to Tax Justice UK could raise around £13bn. Fossil fuel companies have enjoyed huge profits in recent years.
2. Wealth tax - Another option would be a national Net Wealth Tax in line with the parameters set out by the Wealth Tax Commission. A rate of 0.5% on the wealthiest is estimated to raise in the region of £15bn. This has the advantage of being targeted on those who are likely to be disproportionately high polluters in their consumption and personal investments.
3. There are also numerous smaller targeted taxes, such as the existing International Air Passenger Levy (£3.5bn), the Emissions Trading Scheme (£6bn); an expanded Financial Transactions Tax (£6.5bn) and the existing Energy Profits Levy (around £5bn annually).
Sophie Powell, Christian Aid’s Chief of UK Advocacy, said:
“The policy measures outlined here show that there are many levers the government can use to raise these funds that don’t involve taxing working people, but instead are based on the polluter pays principle.
“Many of these measures could be replicated by other Global North countries to raise their own fair share of the climate finance pot.
“The needs of climate vulnerable countries are acute. Devastating floods, droughts and storms are destroying economies, sweeping away homes and ruining livelihoods. On Thursday a report by respected economist Lord Stern and others showed developing country needs were in the trillions, not billions.
“If a reckless driver smashes into your house, they don’t get off with just a partial contribution or loan you the money to fix it. They must pay for repairs. Likewise rich, polluting nations who have caused the climate crisis need to pay for the damage.
“This Labour government came into power promising to rebuild respect with Global South governments; to do so it must respond to this need and pay its fair share, as must other rich countries – not as charity or as loans that push countries deeper into debt, but as a moral duty to those who are least responsible for causing the climate crisis.
“Private finance, which requires a profit in return, may have a role to play in building renewable energy but has proven completely incapable of dealing with adaptation and loss and damage. For those we need grants, that only governments can deliver, and these policy measures would help raise the funds to deliver them.”
Notes to editors
For more information or interview requests contact Joe Ware on jware@christian-aid.org or on Whatsapp +447870944485.
The report can be accessed here.
Factoring in the UK’s historic emissions and its relative wealth, Christian Aid calculated the UK’s contribution of the previous $100 billion climate finance commitment at 3.5%. The paper uses that figure as a benchmark to estimate it’s Loss and Damage Fund responsibilities.
According to estimates, the cost of loss and damage by 2030 is between $290-580bn a year. To reach the UK’s fair share figure of $15 billion (£12.6bn), Christian Aid applied the 3.5% number to the middle of this forecast range (3.5% of $290 = $10bn and 3.5% of $580bn = $20bn).
Due to a misprint, the report states that a polluter’s producers tax would raise £15bn when the figure should be £13bn. This has been corrected in this press release.
