A new tax on fossil fuel companies based in the world’s richest countries could raise hundreds of billions of dollars to help the most vulnerable nations cope with the escalating climate crisis, according to a report.
The Climate Damages Tax report, published on Monday, calculates that an additional tax on fossil fuel majors based in the wealthiest Organisation for Economic Co-operation and Development (OECD) countries could raise $720bn (£580bn) by the end of the decade.
The authors say a new extraction levy could boost the loss and damage fund to help vulnerable countries cope with the worst effects of climate breakdown that was agreed at the Cop28 summit in Dubai – a hard-won victory by developing countries that they hope will signal a commitment by developed, polluting nations to provide financial support for some of the destruction already under way.
David Hillman, the director of the Stamp Out Poverty campaign and co-author of the report, said it “demonstrates that 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 by taxing them far more rigorously. This is surely the fairest way to boost revenues for the loss and damage fund to ensure that it is sufficiently financed as to be fit for purpose.”
The authors say the levy could be easily administered within existing tax systems. They calculate that if the tax were introduced in OECD countries in 2024 at an initial rate of $5 a tonne of CO2 equivalent, increasing by $5 a tonne each year, it would raise a total of $900bn by 2030.
Of that $720bn would go to the loss and damage fund with the remaining $180bn earmarked as a “domestic dividend” to support communities within richer nations with a just climate transition.
The report is backed by dozens of climate organisations worldwide including Greenpeace, Stamp Out Poverty, Power Shift Africa and Christian Aid.
Areeba Hamid, a joint director at Greenpeace UK, said governments could no longer sit back and let ordinary people pick up the bill for the climate crisis while “oil bosses line their pockets and cash in on high energy prices”.
“We need concerted global leadership to force the fossil fuel industry to stop drilling and start paying for the damage they are causing around the world. A climate damages tax would be a powerful tool to help achieve both aims: unlocking hundreds of billions of funding for those at the sharp end of the climate crisis while helping accelerate a rapid and just transition away from fossil fuels around the world.”
The world has seen the devastating effects of the climate emergency, from crippling drought in Africa to deadly floods in Pakistan and Afghanistan.
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Hamid added: “Extreme weather is claiming lives and causing catastrophic damage around the world. But while communities that have contributed least to the crisis find themselves on its frontlines, and households across Europe struggle with sky-high energy bills, the fossil fuel industry continues to rake in massive profits with no accountability for its historic and ongoing impact on our climate.”
The report’s publication comes as the newly established loss and damage fund board is preparing for its first meeting in Abu Dhabi on Tuesday to discuss how the fund will be financed.
Ministers are also gathering at the G7 climate, energy and environment meeting in Turin, Italy. According to the report, if introduced only in G7 states, where a considerable number of international oil and gas companies are based, the climate damages tax could still raise $540bn for the loss and damage fund by the end of the decade, with a $135bn domestic dividend for national climate action across the G7.