Just a 2 per cent tax on extreme wealth can raise $2.5 trillion a year which can be diverted to loss & damage fund
Photo: iStock_ A special tax on the wealth of the world’s richest people can help raise funds for the poorest countries in the world to tackle the impacts of climate change, economists from across the globe urged world leaders in an open letter.
The letter signed by over 140 economists was made public June 19, 2023, three days ahead of the “Summit for a New Financing Pact” to be held in Paris. They suggest measures to transform the international financing mechanism to help the world tackle climate change as well as loss and damage.
Just a 2 per cent tax on extreme wealth can raise $2.5 trillion a year which can be used to pay climate reparations to countries in the Global South, the letter mentioned. This can go up to $3.6 trillion as the tax slabs increase progressively.
“The wealthiest 1 per cent have captured two-thirds of new global wealth created in the last two years, all while we are likely seeing the biggest increase in global inequality and poverty since World War II,” the undersigned wrote. Preventing tax evasion can increase the benefits, they added.
The poorest countries have contributed the least to climate change but are the worst sufferers. The impacts of the global phenomenon are more intense on the people living in these countries that have some of the world’s poorest human development indices. Some of them, such as the low-income island nations, are the most threatened by climate crisis as well.
The developed countries, on the other hand, are responsible for 90 per cent of excess emissions that have led to climate change, according to a 2020 study. They owe low-emission countries like India $170 trillion in compensation, a new report released earlier this month noted.
Economies of the Global North can start with a ‘1.5 per cent for 1.5°C’ tax on extreme wealth, the signatories led by Oil Change International, a global clean energy advocacy, said.
Ironically, in May 2023, France that called for the Paris talks on climate finance last November, disregarded the suggestion of a new green wealth tax proposed by economist Jean Pisani-Ferry, according to news publication Le Monde.
A report by the economist submitted to the French government that imposing an ‘exceptional tax’ on the financial assets of 10 per cent of the wealthiest taxpayers can contribute to the $70 billion the country will need annually to “to address the climate crisis and reduce greenhouse gas emissions”, the French daily noted.
The economists who signed the letter also suggested two other methods the Global North should adopt at the upcoming Paris summit: Cancelling illegitimate Global South debts and withdrawing financial support for fossil fuel projects.
The industrial development of the Global North has been founded on the resources amassed from the lower income Global South countries in Asia, Africa and Latin America through exploitation during colonial rule, the undersigned highlighted.
The value of wealth and resources extracted from the Global South nations since 1960 would have contributed $152 trillion to their development today, according to a report in Al Jazeera, an international news organisation.
Even today, the developed economies continue to drain $2 trillion a year from lower income countries through unequal exchange, the letter noted citing the Al Jazeera news story co-authored by economist Jason Hickel who also signed the letter.
Thus, at the Paris Summit, the Global North leaders should “unconditionally cancel public external debt for at least the next four years for all lower income countries (estimated at $300 billion a year)”, the economists urged.
Finally, the Global North should urgently withdraw government support for fossil fuel projects and make polluting industries pay for damages, the economists urged. “Ending fossil fuel handouts in high-income G20 countries alone would raise about $500 billion a year.”
The letter cites a research paper that proposes a ‘Climate Damages Tax’ on the fossil fuel industries. This could raise approximately $300 billion a year in revenues for loss and damage to help vulnerable nations recover and pull through amid the unfolding climate crisis.
The authors of the letter also pointed out how leaders of some of the biggest economies and major polluters have tried to propagate false notions that they don’t have the funds to pay for the reparations and meet climate finance goals. They cite the example of United States Climate Envoy John Kerry’s attempt to ‘mislead’ the audience at a New York Times event in September 2022.
Kerry said no country has “trillions of dollars” to build the loss and damage fund that is required, whereas the global pledge was $100 billion a year and the requirement, by some estimates, is $300-600 billion a year by 2030, reaching $1.2 trillion by 2060.
Also, the funds are expected to be pooled from several developed nations, without putting the burden on any one country.
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