Deadly floods in Kenya, Brazil, China, Dubai and Germany. The US bracing for an extraordinarily hazardous hurricane season and Greek firefighters again on high alert for potential wildfires.
The severity of the climate crisis is stark and immediate. The question is though, who will pay for the damages experienced now and in the future? And how will the clean energy transition be financed? This has been a central question at the the annual mid-year UN climate talks in Bonn, this June.
Trillions of dollars are needed in a significantly scaled up international public climate finance package and making polluters pay offers an equitable approach to raising these revenues.
Among the options for taxes and levies on the fossil fuel industry (and other high emitting sectors) is the idea of a Climate Damages Tax (CDT). Imposed on the extraction of fossil fuels, this is an example of a new and innovative source of finance based on the polluter pays principle.
It’s a concept I personally put to South African President Cyril Ramaphosa, who immediately expressed a willingness to champion the idea. “That is a revolutionary proposal – we have been taking on the G7 and G20 countries about their responsibility,” he said at a recent town hall event hosted by the Gordon Business Institute.
Ramaphosa will host the G20 in 2025 and has already set his sights on persuading G7 and G20 countries to agree to a fairer world through the reform of multilateral forums.
His support for the Climate Damages Tax is therefore a crucial endorsement because the concept of such a tax has been advocated as a fair and equitable solution for some time. The proposal is anchored on the polluter pays principle – which mandates that the cost of pollution and environmental damage should be borne by those responsible for causing it.
This applies to the countries contributing most to climate change: they have a responsibility to help pay towards the costs to combat it. This principle also applies to the most polluting industries, and the CDT aims to put the polluter pays principle into action.
Nations negotiate a new finance goal
This issue of climate finance has been a central focus at the Bonn Climate Change Conference, where governments are negotiating a new goal to replace the long-standing US$ 100 billion climate finance commitment.
Nations from the Global South have been let down by the historical failure of wealthy nations in the Global North to mobilise climate finance in a way that is fair and robust.
Zimbabwe’s former Minister of Local Government and Public Works, Saviour Kasukuwere, has even accused the G7 nations of taking an insincere approach to UNFCCC negotiations, implying that wealthy nations do not engage in these processes to negotiate in good faith.
It’s therefore crucial that the new climate finance goal being negotiated in Bonn, the New Collective Quantified Goal (NCQG), finally addresses the responsibilities of the world’s biggest polluters – countries and corporations – and results in an ambitious agreement to make them pay.
The UN Secretary General Antonio Guterres has also called for a windfall tax on the profits of fossil fuel companies to help pay to combat global warming, so there is increasing recognition of the polluter pays principle.
What’s the potential of a Climate Damages Tax?
The proposed Climate Damages Tax, put forward by Stamp Out Poverty, CAN International and Greenpeace, among many other NGOs, was unveiled at the end of April and could unlock significant revenues.
It suggests that a levy introduced at an initial rate of $US 5, and increasing by $US 5 every year thereafter on the CO2e of each tonne of coal, barrel of oil and cubic metre of gas extracted in G7 countries alone, could generate close to $US 700 billion by 2030. If imposed by all of the 38 OECD countries, it could generate $US 900 billion!
Clearly, there’s immense potential in the idea to help Global North countries meet their global finance obligations and provide more debt-free climate financing to the Global South. The tax could pay for loss and damage and unlock funding for mitigation and adaptation measures, paving the way for a just transition.
The outcome in Bonn ahead of the UN climate talks (COP29) in Baku, Azerbaijan later this year will go a long way to defining the global financial response to climate change.
Bonn will also be a litmus test for the veracity of the Global North’s commitment to provide debt-free climate finance to the Global South.
It’s time to finally answer the burning question: Who pays?
It’s time to make the polluters pay. Sign now to hold the oil and gas corporations accountable, and support a safe and fair future for all.
Thandile Chinyavanhu is a Stop Drilling Start Paying Global Campaigner with Greenpeace International.