The new taxes that could help raise money to fight climate change

The COP29 climate talks in Azerbaijan aim to agree on an annual finance target of $1-trillion (R18.13-trillion) or more a year to help poorer countries respond to global warming. Some see new taxes as one way to get there.

The Global Solidarity Levies Task Force (GSLT), led by France, Barbados and Kenya, is exploring the issue. Below are extracts from its latest report on the options being discussed and estimates about how much could be raised.

SHIPPING

The levy that could be closest to being agreed is for shipping, responsible for about 3% of global emissions, with governments set to debate a series of measures at a meeting of the International Maritime Organisation in April.

Models for a levy include a Pacific islands and Caribbean proposal for a flat rate of $150/tonne (R2,719) of carbon dioxide equivalent (CO2e), rising every five years, the GSLT said.

The EU and Japan favour a levy of $100/tonne (R1,812) in 2027, while countries including Bahamas and Liberia have proposed an initial flat rate of about $18.75/tonne (R339.72).

A levy of $150-$300/tonne could generate $127bn (R2.3-trillion) a year in 2027-2030, the GSLT said, citing a study by UN Trade and Development. Revenue would fall to $103bn (R1.86-trillion) in 2031-2040 and $36bn (R651.9bn) in 2041-2050 as ships became less polluting.

AVIATION

Aviation accounts for 2% of global emissions yet is usually free of VAT or sales taxes. Levies being discussed by the GSLT include on kerosene fuel, private jet fuel, luxury tickets and frequent flyers, which together could generate $19bn (R334.92bn) to $164bn (R2.97-trillion) a year, it estimates.

About 29 countries already tax aviation fuel through excise duties, carbon levies or emission permits. The average price among G20 countries in 2021 was €9 (R172.25) per tonne.

Hurdles to a broader tax include ensuring a level playing field for industry players and overcoming legal barriers.

At least 21 countries also already have some form of levy on airline tickets, at rates ranging from €2 (R38.27) in Portugal to almost €500 (R9,569) on some flights out of Britain, the GSLT said.

FOSSIL FUELS

Countries already impose levies on fossil fuels, including indirectly when petrol is bought at the pump, through VAT, carbon taxes or emissions-trading schemes, or via royalties or taxes on oil companies.

GSLT said revenues could be generated in future through a levy on extraction or “windfall” taxes on energy company profits. A “Climate Damages Tax” of $5/tonne (R90.74) extracted in 2024 would generate an estimated $216bn (R3.91-trillion), a Greenpeace report this year said. An ActionAid report said a 50% tax on the windfall profits of the biggest 14 fossil fuel companies by market value in the two years to July 2023 would have generated about $173bn (R3.13-trillion).

FINANCIAL TRANSACTIONS

More than 30 countries have some form of levy on financial transactions including Britain, France, Italy and Spain though agreeing a cross-border levy has proved tough. The Austrian Institute of Economic Research estimates a 0.1% levy on trading stocks and bonds and a 0.01% rate on derivatives trades globally could raise $238bn (R4.31-trillion) to $419bn (R5.78-trillion) a year.

CARBON

The GSLT says there are 75 carbon pricing mechanisms in 83 jurisdictions, of which 36 are structured as emissions trading systems and 39 as carbon taxes. In total, they cover 24% of global emissions.

Most are priced more cheaply than the $40-$80 (R725.32 to R1,450) a tonne needed to keep the world on track to rein in global warming, due to political concern about the impact on households and businesses.

A plan proposed by the International Monetary Fund (IMF) would see countries agree a minimum price of $50 a tonne (R906.63), or of $25 (R435.25), $50 and $75 (R1,359) a tonne varying with the stage of a country's development.

The GSLT said another option could be to link up existing trading schemes.

WEALTH

The Group of 20 largest economies this year discussed whether to raise taxes on the super rich. A report backed by G20 leader Brazil proposed a global minimum tax of 2% of wealth for the world's about 3,000 dollar-billionaires, to raise about $250bn (R4.53-trillion) a year.

Other options could include changing the threshold at which the tax kicks in and the rate at which it is applied.

CRYPTO

Cryptocurrencies such as bitcoin are created by computation power driven by energy usage that creates emissions.

In 2022, Kazakhstan moved to charge crypto miners between 1 and 25 Tenge (R0.03 and R0.91) per kWh, the GSLT said. A global tax on electricity use of $0.045 (R8.16) per kWh could raise $5.2bn (R94.3bn), the IMF has estimated.

A levy on crypto trading at 0.1% could raise $15.8bn (R286.51bn) while a capital-gains tax of 20% could raise up to $323bn (R5.58-trillion), IMF research shows.

PLASTICS

Countries are set to meet in South Korea next week to agree a deal on reining in plastics pollution, with Ghana and others calling for a levy on producers of virgin plastic polymers.

A fee of $60 to $90 (R1,088 to R1,632) per tonne on primary polymer production could raise $25bn to $35bn (R453.32bn to R634.66bn) a year, the GSLT said, citing analysis from Australian NPO the Minderoo Foundation.

Reuters