Panellists discuss shipping and airline levies, financial transaction taxes and fossil fuel taxes at Pact Summit
Side event for polluters taxes at Summit for a New Global Financial Pact. Photo: Avantika Goswami / CSE The Summit for a New Global Financial Pact was held in Paris this week, with country leaders, finance ministers, and civil society organisations coming together to discuss the transformation of the global financial architecture. The overarching aim of the summit is to identify financial system reforms for climate and development.
At a side event titled How to make polluters pay: Climate finance to support global equity, discussions focused on using the ‘polluter pays principle’ to raise more climate finance for global equity.
Also read: Paris finance meet: What is the Summit for a New Global Financing Pact about?
The principle essentially says that those who pollute should also be liable to bear the costs of managing the pollution and compensate affected parties for the damage caused to the environment and human health.
Greenhouse gases (GHGs) are considered pollutants because of the damage they cause in the form of climate change impacts as well as outdoor and indoor pollution.
The Global South urgently needs climate finance delivered at speed and scale that can be used to fund a green transition in developing country economies. An estimated $2.4 trillion (Rs 1,96,85,160 crore) per year until 2030 is needed for this herculean transition.
The scale of investments needed underlines the need for new revenue streams other than what country governments and multilateral development Banks (MDBs) will be able to provide as climate finance.
Panellists discussed instruments such as shipping levies, financial transaction taxes, fossil fuel taxes, levies on the export of oil, gas and coal and airline levies.
The shipping industry emits 2.9 per cent of the total global GHG emissions currently. However, the industry has managed to escape taxation as the high seas do not fall under the jurisdiction of any single country’s government.
However, there has been an international push to tax the shipping industry’s emissions. Shipping industry emissions will likely be discussed at the International Maritime Organization’s (IMO) meeting in July this year, where the organisation will discuss a revised GHG strategy.
Avinash Persaud, climate envoy to Barbados Prime Minister Mia Mottley, said the world needs a financing roadmap to meet the scale of investments that are needed for the green transformation in developing countries.
Also read: Paris finance meet: Barbados envoy proposes tool to make green finance affordable
New revenue generating streams will be needed in addition to unblocking investment flows to developing countries, he emphasised.
There is a high chance that the IMO will introduce a shipping levy of $100 per tonne of carbon dioxide, which will raise approximately $60-70 billion per year, a part of these revenues must go towards the loss and damage fund.
He also spoke of a levy on the exports of oil, gas and coal, as well as a financial transaction tax which together can generate billions in revenue per year.
Frans Timmermans, vice president of the European Commission, supported a shipping levy, but specified that it should be applied at the global level so it is not seen as punitive in nature.
A similar levy can be applied to international aviation, in addition to pushing for a financial transaction tax, he added.
An airline levy in solidarity was strongly supported by Saleemul Huq, director of the International Centre for Climate Change and Development, Bangladesh. Huq reiterated that loss and damage from human-induced climate change was now a reality and needed to be dealt with in an expedited manner.
An airline levy is something that passengers worldwide could be persuaded to pay, Huq said. It would be similar to the airline levy that France instituted in 2006, which raised proceeds for an HIV/AIDS fund.
A shipping levy can be applied to all countries universally, said Lola Vallejo, climate lead at French think tank IDDRI and co-chair of the United Nations Framework Convention on Climate Change’s mitigation work programme.
Also read: Climate finance is not going to Global South where it is needed the most: CSE
Proceeds from a shipping levy should go towards a just and equitable transition of the shipping sector, but a portion of these revenues must also go to developing countries to support their climate plans, Vallejo said.
Fossil fuel companies should be taxed as part of the polluter pays principle, said Sanjay Vashist, director, Climate Action Network South Asia. He cited the case of India’s coal cess which started at 50 cents per tonne of coal and progressed to 4.5 Euros per tonne, with the proceeds going into the National Clean Energy Fund.
Recently, the UN Secretary General Antonio Guterres expressed support for developed countries to tax windfall profits of fossil fuel companies and re-direct revenues to help nations recover from climate disasters.
Researchers put a price tag of $209 billion recently on climate damages caused by fossil fuel companies.
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