In search of climate financing

To mobilise the huge sums needed to finance ecological transition and adapt to global warming, several countries, including France, are considering new global taxes. In an article on the Le Monde website, Audrey Garric and Matthieu Goar discuss various options being considered

COP29: From aviation to the super-rich, the search for innovative climate financing

Where can we find the trillions of dollars needed for ecological transition, particularly in developing countries? And how can we ensure that polluters pay for their damage? It was to answer these questions that a working group on solidarity taxes was launched in 2023, led by France, Kenya and Barbados. It delivered its first guidelines, on Thursday, November 14, drawing up a list of possible taxes – and expected revenues – on fossil fuels, air and sea transport, financial transactions and even plastic, cryptocurrencies and the super-rich, a financing and equity issue at the heart of the 29^th Conference of the Parties on Climate Change (COP29), taking place in Baku.

“Current public financial commitments aren’t enough, so we need to consider taxes,” Barbados Prime Minister Mia Mottley said from the COP29 podium on Tuesday, taking aim at high-emissions sectors that are getting rich without doing their fair share of the global climate effort. “Between shipping, aviation and fossil fuels, we’re easily around $350 billion a year,” she said.

In Baku, countries are due to adopt a new global climate finance target. This is to replace the one set in 2009, which called for rich countries to mobilize $100 billion in annual aid to developing countries, a sum reached in 2022, two years late. Even when revised upwards, the future financial target will still fall far short of what is needed, which is now in the trillions of dollars, hence the idea of developing so-called innovative financing, which is feasible, scalable and equitable.

The working group’s experts have first proposed a tax on international shipping, which they regard as the most mature proposal. This sector accounts for 3% of global greenhouse gas emissions. A tax of $150 to $300 per tonne of CO2 equivalent could raise up to $127 billion a year between 2027 and 2030, an envelope that would then shrink until 2050. The idea of such a levy is one of the options in the action plan to be presented by the International Maritime Organization in 2025 to achieve carbon neutrality by 2050.

Frequent travellers would be taxed more

Taxes could also be introduced in the aviation sector, responsible for 2% of global emissions. The experts have proposed taxing kerosene on commercial aircraft and private jets, which could generate, in the former case, 18 billion euros a year at 0.33 euros per liter. They have also suggested introducing a ticket levy for luxury classes (business, first) and for frequent flyers. A graduated tax, starting at $9 for the second flight of the year and rising to $177 for the 20th, would generate $121 billion a year.

Highlighting the complexity of taxing fossil fuels (coal, oil and gas), which are primarily responsible for climate change, the authors have suggested a combination of taxes, both on fuel extraction – which would generate $216 billion a year, at a rate of $5 per ton of CO2 emitted – and on the windfall profits of companies in this sector or an increase in their minimum tax rate.

The equivalent of the French financial transaction tax applied by G20 countries would generate between €156 billion and €260 billion a year. More than 30 countries have already implemented such a levy, but a proposal by the European Commission to generalize it 10 years ago was rejected by member states.

Creating a political dynamic

The experts have also put forward three new ideas. First, an annual tax of 2% on the wealth of the world’s 3,000 billionaires, a proposal pushed by Brazil, head of the G20. According to calculations by French economist Gabriel Zucman, this levy could raise $250 billion worldwide. A tax on cryptocurrencies, either on financial transactions or on associated electricity consumption, is also being considered. Finally, a levy on plastic production could generate between $25 billion and $35 billion annually.

The working group will present its final proposals, together with impact studies, by the spring meetings of the International Monetary Fund and the World Bank, to be held in Washington in April 2025. It then hopes to create political and diplomatic momentum by identifying leaders willing to take the lead in coalitions that would push for each of these levies. Hopefully, this will all come to fruition at COP30 in Belem, Brazil.

These ideas are currently being promoted by a 17-member coalition, officially launched at COP29. Led by France, Kenya and Barbados, it includes only two other developed states (Spain and Denmark), alongside developing countries (Senegal, Colombia and the Marshall Islands), as well as three observers: Germany, the European Commission and the African Union. For France, tackling this issue worldwide is also a way of escaping the national debate. “It’s a good question on a global scale to say that we need more fairness … A tax on wealth is a good global debate,” said Emmanuel Macron in May on the American channel CNBC.

‘We already haven’t counted much on the US.’

Will this sea snake of innovative climate financing find wider political support, with states anxious to guarantee their fiscal sovereignty? Romain Weikmans, professor of international relations at the Université Libre de Bruxelles, said that “agreement on a form of global taxation seems highly unlikely, particularly in the current context of rising nationalism and fiscal austerity”. He cited as evidence the opposition of many developing countries to taxes on international shipping and air transport, since they host a significant share of these activities and feel that the financial obligations fall on developed countries.

What’s more, a levy on fossil fuels is, in his view, “inaudible to producer countries,” notably the US. The latter, “fundamentally opposed to any form of international taxation,” will disengage all the more following Donald Trump’s election. Weikmans said: “If one of these taxes were to be introduced in the near future, it would place a burden on the few EU countries that have agreed to implement it.”

“We haven’t counted on the US to be a major player in climate financing for some time now,” said Laurence Tubiana, co-director of the working group’s secretariat. “But I think there’s a momentum to be seized, as many States no longer have enough money in their coffers and could rely on this source of income that doesn’t generate additional debt.”

This is a wish shared by many non-governmental organizations (NGOs), who are hoping that multilateralism will be strong enough to make progress on the highly sensitive subject of taxation. “For the moment, it’s hard to know where all this might land politically,” said Fanny Petitbon, head of France at the NGO 350.org. “But there’s an opportunity, because it’s an increasingly sensitive subject in public opinion, which is suffering from inflation while noting the increasingly staggering profits reaped by fossil fuel companies and billionaires.” According to the NGO Oxfam, which champions the idea of a 5% tax on billionaires, the fortunes of the five richest men on the planet have doubled since 2020.

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