Originally published at Project-Syndicate | Nov 8th, 2024
A promising way to mobilize more climate finance for developing countries is to expand the use of “solidarity levies”: global levies on carbon dioxide emissions and other economic activities that channel proceeds to developing countries. The benefits of scaling up such measures would be far-reaching.
BAKU – From Bridgetown to Nairobi to Paris, no country is immune to the worsening effects of the climate crisis. With each passing year, we witness more climate-related destruction. In 2024, we have set a number of new records: wildfires in Chile have destroyed more than 14,000 homes; extreme rainfall in Brazil has devastated 478 cities and left nearly two million people stranded in Bangladesh; and in July the world experienced its hottest day ever.
Africa has contributed only 3% of historical greenhouse-gas emissions, yet it endures some of the most severe climate-related disasters. These now cost the continent $15 billion per year, with climate-induced droughts and floods in 2023 causing food insecurity for more than 40 million Africans.
Convinced that no country should have to choose between fighting the climate crisis and combating poverty, we have decided to contribute to an ambitious reform of the international financial architecture. The Paris Pact for People and the Planet, the Bridgetown Initiative, and the Nairobi Declaration each seek to provide one piece of the puzzle. Current international dynamics give us hope: many reform tracks have been opened up, and some have delivered results. That said, many more efforts are needed, and no options should be overlooked.
One key piece is still underused: “solidarity levies.” Such policies are necessary to ensure that everyone contributes their fair share to what should be a global effort. There are swaths of the economy which are largely under-taxed yet polluting the planet. This applies to maritime shipping, aviation, and, of course, the fossil-fuel industry, which enjoys low effective tax rates due to government subsidies (totaling an estimated $7 trillion in 2022, according to the International Monetary Fund).
These levies can contribute by allocating a share of the revenues to developing countries. A global levy of 0.1% on stock and bond trades could raise up to $418 billion per year. A levy on shipping of $100 per ton of carbon dioxide could raise $80 billion per year. A levy on fossil-fuel extraction of $5 per ton of CO2 could raise $210 billion per year. Even a partial redistribution through solidarity levies would guarantee a large source of predictable climate finance for these countries, thus complementing flows of official development assistance without amplifying existing debt burdens.
The benefits would be significant. Despite Africa’s climate vulnerability, its vast potential to leverage renewable energy and critical minerals, and its role as a global carbon sink, the continent receives far less climate finance than it needs. Solidarity levies could provide the funding needed to drive green development in Africa and around the world, especially in vulnerable low- and middle-income countries and small states with little fiscal room for building resilience or climate action.
These levies already exist. More than 30 countries currently implement a financial transaction tax, and at least 21 have a levy on airplane tickets. Moreover, even small-scale initiatives such as the International Oil Pollution Compensation Funds demonstrate the feasibility of an international redistribution mechanism. To replicate and scale up these models requires further international cooperation to limit market distortions and preserve a level playing field.
To that end, we launched the Global Solidarity Levies Task Force last year at COP28. With 13 member countries already, the task force has been examining the potential of levies across shipping, aviation, fossil fuels, and financial transactions, as well as exploring options like levies on plastic or cryptocurrency. In early 2025, we will publicly launch a handful of concrete proposals with rigorous impact assessments. These will be scalable – raising at least $100 billion per year – and accompanied by clear assessments of potential externalities.
As we head toward COP30 in Belém, Brazil, next year, political leadership will be essential to the initiative’s success. COP29 this month will provide the right opportunity to discuss our options and get on track for success. Our plan is to hold a special event for heads of state and government to marshal further support for our solidarity-levies coalition. This is a crucial opportunity to ensure that the United Nations’ New Collective Quantified Goal on Climate Finance incorporates solidarity levies and unlocks climate-finance flows that are both ambitious and equitable.
When it comes to additional sources of finance, experts often allude to “innovative finance.” In the case of global solidarity levies, the only innovation required is ambitious leadership across a sufficient base of countries. Let the tenth anniversary of the Paris climate agreement next year be remembered as the moment when we came together as a global community to implement solidarity levies, providing the financial tools necessary to meet the great challenge of our time. Ahead of COP29, we call on all governments to join our coalition, and we welcome the support of civil society, business leaders, and multilateral institutions.
The authors co-chair the Global Solidarity Levies Task Force.
Emmanuel Macron: Is President of France.
Mia Amor Mottley: Is Prime Minister and Finance Minister of Barbados.
William Ruto: Is President of Kenya.