Rich countries could raise $5tn of climate finance a year, study says

Rich countries could raise five times the money that poor countries are demanding in climate finance, through windfall taxes on fossil fuels, ending harmful subsidies and a wealth tax on billionaires, research has shown.

Developing nations are asking for at least $1tn (£750bn) a year of public funds to help them cut greenhouse gases and cope with the impacts of extreme weather.

Rich countries are mooting potential sums much lower than this, in conventional climate finance such as low-interest loans from the World Bank and similar institutions. But they are also discussing potential new forms of finance, such as a levy on shipping and on frequent flyers. Brazil, which currently has the presidency of the G20, is pushing for a wealth tax of about 2% on billionaires.

Research by the pressure group Oil Change International, published on Tuesday, shows that rich countries could generate $5tn a year from a combination of wealth and corporate taxes, and a crackdown on fossil fuels.

A wealth tax on billionaires could generate $483bn globally, while a financial transaction tax could raise $327bn. Taxes on sales of big technology, arms and luxury fashion would be another $112bn, and redistributing 20% of public military spending would be worth $454bn if implemented around the world.

Stopping subsidies to fossil fuels would free up $270bn of public money in the rich world, and about $846bn globally. Taxes on fossil fuel extraction would be worth $160bn in the rich world, and $618bn globally.

Laurie van der Burg, the public finance lead at Oil Change International, said: “Last year, countries agreed to phase out fossil fuels. Now it’s time for rich countries to pay up to turn that promise into action. There is no shortage of public money available for rich countries to pay their fair share for climate action, at home and abroad. They can unlock trillions in grants and grant-equivalent climate finance by ending fossil fuel handouts, making polluters pay, and changing unfair financial rules.”

Alejandra López Carbajal, the director of Transforma Climate Diplomacy, said: “There is an attempt by developed countries to frame the new climate finance negotiations in a context of public finance scarcity, while in reality there are enough resources to address the climate crisis.”

Finance will be the key issue under discussion at the next UN climate summit, Cop29 in Azerbaijan in November, where a “new collective quantified goal” is expected to be set, under the terms of the Paris agreement.

Governments are meeting this week at the UN general assembly, where the climate will be a high priority. Brazil’s president, Luiz Inácio Lula da Silva, intends to push for changes to the UN under which it would take on far greater responsibility for global climate action, and for other environmental responsibilities including water resources, which suffer from a lack of global governance.

Carbon targets, from both the rich and poor world, are another focus. The International Energy Agency said on Tuesday that replacing dirty fuels, such as biomass, coal and paraffin, used for cooking in large parts of the developing world, would go a long way to meeting the world’s targets on moving away from fossil fuels.

That should be accompanied by higher efficiency standards for buildings and improvements to air conditioning equipment, much of which is grossly inefficient; and in the developed world switching to electricity for heating and vehicle transport.

Sub-national governments, such as regional authorities and cities, also need to do more, according to an annual survey published this week. The Net Zero Tracker report shows there has been a substantial increase in the number of companies, cities and regions setting net zero targets, but four in 10 such entities, even in large countries, do not have such targets.

The electric vehicle company Tesla, for instance, though it claims to be making “meaningful progress on building a plan to achieve net zero emissions as soon as possible”, has not yet published it.

Baku, the capital of Azerbaijan, where Cop29 will be held, has no emissions reduction target. The city’s government has never responded to the annual global CDP survey, which has been asking city authorities about their carbon targets since 2018. Azerbaijan is also one of about 50 countries to lack a national net zero target, though the government is understood to be working on a new climate plan before Cop29.

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