Fossil fuel tax could unlock $720 billion for climate crisis, new report finds

The Climate Damages Tax aims to rectify historical injustices and provide a tangible pathway towards a more sustainable and just world.

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A groundbreaking report released this Monday unveils a proposed tax on fossil fuel extraction that could mobilize nearly $720 billion by 2030, offering a substantial financial boost to the world’s most vulnerable nations grappling with severe climate disruptions. This initiative, targeting fossil fuel companies in the wealthiest countries, marks a significant stride toward addressing the economic disparities wrought by climate change.

The report, titled “Climate Damages Tax,” produced by the Stamp Out Poverty campaign in collaboration with several major environmental groups including Greenpeace and Christian Aid, suggests an additional levy on fossil fuel majors based in the Organization for Economic Co-operation and Development (OECD) countries. This tax would not only help mitigate the effects of climate change but also signal a commitment by developed nations to shoulder a fair share of the financial burden.

David Hillman, director of Stamp Out Poverty and co-author of the report, emphasized the report’s call to action. “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,” Hillman stated. This robust approach could significantly enhance the funds available for the recently established loss and damage fund, which was one of the key outcomes of the Cop28 summit in Dubai.

The proposed tax would be integrated into existing tax frameworks starting in 2024, with an initial rate of $5 per tonne of CO2 equivalent, escalating by $5 each year. By the end of the decade, it is projected to generate a total of $900 billion, of which $720 billion would directly support the international loss and damage fund, and the remaining $180 billion would serve as a domestic dividend to aid wealthier nations in their transition to greener economies.

Areeba Hamid, joint director at Greenpeace UK, criticized the current passive stance of governments allowing the fossil fuel sector to thrive economically while contributing heavily to global warming. “Governments can no longer sit back and let ordinary people pick up the bill for the climate crisis while oil bosses line their pockets,” Hamid argued. The implementation of a climate damages tax, she added, would force the industry to take financial responsibility for the harm it causes and hasten a shift away from fossil fuels.

The urgency of this measure is underscored by the escalating severity of climate-related disasters. In recent years, the world has witnessed an increase in devastating events, from crippling droughts in Africa to deadly floods in Pakistan and Afghanistan. These incidents highlight the disproportionate impact of climate change on countries that have contributed least to the problem.

Moreover, the report comes at a critical time as the board of the newly formed loss and damage fund convenes in Abu Dhabi to discuss financing mechanisms. It also coincides with ministerial meetings at the G7 climate, energy, and environment gatherings in Turin, Italy. If implemented solely among G7 nations, home to many of the world’s largest oil and gas companies, the tax could still raise $540 billion by the decade’s end, with $135 billion allocated for national climate actions within the G7 countries.

The economic implications of the proposed tax are profound. The funds raised could provide significant support for countries at the frontline of climate change, offering resources for adaptation and recovery projects. Additionally, the domestic dividend could incentivize richer nations to invest in sustainable practices and technologies, fostering a more equitable global approach to environmental responsibility.

By holding those most responsible for environmental degradation accountable, the Climate Damages Tax aims to rectify historical injustices and provide a tangible pathway towards a more sustainable and just world.

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Ruth Milka started as an intern for NationofChange in 2015. Known for her thoughtful and thorough approach, Ruth is committed to shedding light on the intersection of environmental issues and their impact on human communities. Her reporting consistently highlights the urgency of environmental challenges while emphasizing the human stories at the heart of these issues. Ruth’s work is driven by a passion for truth and a dedication to informing the public about critical global matters concerning the environment and human rights.

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