The recent side event, “How to make polluters pay: Climate finance to support global equity,” held at the Summit for a New Global Financial Pact, highlighted the importance of utilizing the “polluter pays principle” to generate additional climate finance.
Shipping Levies: A Path to Sustainable Seas:
- Shipping Industry’s Impact: The shipping industry currently accounts for 2.9% of global greenhouse gas emissions. However, due to the absence of jurisdiction over international waters, it has evaded taxation thus far.
- International Momentum: There is growing international momentum to tax shipping emissions. The International Maritime Organization (IMO) is set to discuss a revised greenhouse gas strategy, including a potential shipping levy of $100 per tonne of carbon dioxide. This could raise annual revenues of $60-70 billion.
- Supporting Vulnerable Regions: A significant portion of these revenues should be directed towards funding climate-related loss and damage in vulnerable regions. This ensures that the polluters pay their fair share and supports those most affected by climate change.
Financial Transaction Taxes:
- Mobilizing Climate Finance: The summit emphasized the potential of financial transaction taxes to generate substantial climate finance. By imposing a small levy on financial transactions, billions in revenue can be generated annually.
- Green Transition Funding: These revenue streams can contribute significantly to the required funding for a green transition. It ensures that the financial sector plays a vital role in addressing the climate crisis and supports the necessary investments in renewable energy, sustainable infrastructure, and climate resilience.
Levies on Fossil Fuel Exports: Holding Companies Accountable:
- Internalizing Environmental Costs: Taxing fossil fuel companies aligns with the polluter pays principle by internalizing the environmental costs of their operations. The example of India’s coal cess, progressively increased from 50 cents to 4.5 Euros per tonne of coal, showcases the effectiveness of such levies.
- Promoting Sustainable Practices: Levies on fossil fuel exports incentivize companies to transition to cleaner energy sources and reduce their carbon footprint. It ensures that polluting industries contribute to climate action and fund initiatives for a greener future.
A Global Response to Climate Change:
- Addressing Aviation Emissions: The aviation sector is another significant source of greenhouse gas emissions. The implementation of an airline levy, as demonstrated by France in 2006, can generate funds to address climate-related loss and damage. Such levies can be applied worldwide, allowing passengers to contribute to climate action directly.
- Collaboration and Solidarity: The Summit for a New Global Financial Pact highlighted the importance of global cooperation and solidarity in tackling the climate crisis. Financial mechanisms, such as levies and taxes, provide an opportunity for countries and industries to work together towards a sustainable future.