A duo on a world tour

It is really immediately clear – to be able to afford transitioning away from fossil fuels without major social dislocations, we must raise the requisite funds from those industries that were the first to enrich themselves from them, namely, the fossil fuels industry. Studies show that more than half of all worldwide emissions since 1988 can be attributed to the exploitation of fossil fuels by just 25 companies. No one has ever paid up for the long-term costs being engendered by these emissions, which are causing climate change. At the same time, the profits and dividends accruing to those trading in these fuels have risen continuously. Thanks to the price increases triggered by Russia's invasion of Ukraine, the 2022 profits of oil and gas companies skyrocketed to four trillion dollars

Make polluters pay

It is therefore no surprise that in the context of the urgent need for climate funding for the Global South, and in keeping with the polluter pays principle, the call is growing louder for additional taxation of these companies. This goal has long been present in international civil society under the slogan "Make polluters pay". A current study by the Heinrich Böll Foundation shows that in this very decade, a CO₂ tax on the production of coal, oil and gas, called a Climate Damages Tax, would yield 900 billion dollars in OECD countries for managing the climate crisis.

The call for international CO₂ taxes is almost as old as the Framework Convention on Climate Change itself. As early as 2006, the then Swiss Federal President Moritz Leuenberger used the Climate Conference to call for a global CO₂ tax. Concrete agreement at the UN never stood a chance, however. But in view of the UN negotiations on a new climate finance target at the COP29 this coming November in Baku, pressure is growing for the available funding to be increased. This has recently prompted a range of players and countries to call for international CO₂ taxes or other methods of financing based on the polluter-pays principle. The approaches vary widely, spanning national tax on profits from oil extraction, voluntary contributions from the extraction industry, and legally requiring enterprises to accept climate accountability. All approaches to international taxes will, however, require political will at the national level. Switzerland, too, should levy "polluter-pays" taxes on enterprises that profit from the fossil fuels business, in that way increasing its contributions to international climate finance.

The "gilets jaunes" – or how not to do things

Additional funds could be raised for ecologically restructuring our societies not only by levying additional taxes on fossil fuel producers, but also if governments asked their consumers to pay more. However, if the restructuring is to be not just ecological but also social, caution is advised when deciding on the right type of CO₂ consumer tax. France, for example, has unpleasant memories of the violent street clashes between the "gilets jaunes" (yellow vests) and the police about six years ago in the middle of Paris. Those protests were triggered simultaneously by an increase in the fuel tax (eco-tax) that the French President wanted to levy on every litre of diesel being dispensed by that country's petrol pumps. By his reckoning, it would have garnered an additional 15 billion euros in revenue for the State. But this tax would have affected everyone equally: rich and poor, including people racing their Porsche TDI along empty French country roads, as well as those living in far-flung, non-metropolitan parts of France badly served by public transport and dependent on their rickety diesel vehicles in everyday life. The "gilets jaunes" movement was therefore supported not only by climate deniers and automobile enthusiasts, but also by many people whose already tight monthly budgets would have been busted by this diesel tax. This toxic mix constituted political dynamite. The liberal French government backed down and also slowed the pace of its climate policy agenda. At the same time, President Macron further renounced the reintroduction of a "solidarity tax" on high net-worth individuals, which had been introduced in the 1980s by the long-standing socialist President François Mitterrand, and which Macron had abolished as one of his first official acts in power. That would possibly have taken the social policy wind out of the sails of the "gilets jaunes".

No climate justice without tax justice

Today there is a highly progressive wealth tax with a social and environmental dimension, among other places, on the agenda of the G20 countries. In a report published in November 2023, the NGO Oxfam International concludes that a global wealth tax on all millionaires and billionaires would raise 1700 billion dollars annually worldwide. An additional penalty tax on investments in climate-damaging activities could bring in a further 100 billion dollars. Combining these measures with a 60-per cent income tax on the 1 per cent with the highest incomes would generate an additional 6400 billion. Depending on business cycle and price trends, an excess profits tax can also generate massive amounts of additional revenue. According to Oxfam, such a tax would have raised another 941 billion dollars in each of the years 2022 and 2023 when inflation was high. These measures therefore have the potential to garner an additional tax take of at least 9,000 billion in a single year.

The premise of the 2024 report on the funding of sustainable development published by the United Nations Department for Economic and Social Affairs (DESA) is that the funding and investment shortfalls in connection with the UN Sustainable Development Goals of the 2030 Agenda amount to 2500 to 4000 billion US dollars. Using just the tools mentioned above, the 2030 Agenda could therefore be easily funded up to 2030 – to say nothing of reforms in other areas of development finance. Unlike Macron's diesel tax, a global wealth tax would certainly be in line with the polluter-pays principle within the meaning of international climate policy. According to Oxfam, in 2019, the world's richest 1 per cent accounted for 16 per cent of all global CO₂ emissions. This meant that they produced as much CO2 as the poorer 66 per cent of the world's population, that is to say 5 billion people.

Climate and tax justice on a world tour: an overview of some global approaches and initiatives

• Washington D.C. – Climate Damages Tax: Current study by the Heinrich Böll Foundation on a CO2 tax on coal, oil and gas production. While some of the proceeds would be earmarked for the UN fund to cover climate-related loss and damage, another portion would go towards managing the climate crisis domestically. Producing countries in the Global South could also introduce the tax and use the proceeds in their own countries. Increasing the tax annually would also create an incentive to phase out fossil fuels. Civil society endorses this concept.
• Nairobi – Africa Climate Summit: Already a year ago, African countries called for global CO2 taxes on the trade in fossil fuels, on marine and air traffic, and also for a global financial transaction tax, in order to boost investment in climate protection.
• Baku – Climate Finance Action Fund: As President of COP29, Azerbaijan is keen to build up a climate fund that is fed by voluntary contributions from coal, oil and gas producers. The fund's Board of Directors would decide on the distribution of the monies raised from the participating production industry. The previous COP host, the United Arab Emirates, proved that this is not a good idea. Climate Home News recently uncovered the fact that resources from their newly founded climate fund were being invested in natural gas projects and airports.
• Paris – Task Force for Global Solidarity Taxes: Last year, France, Barbados and Kenya formed a task force to work together with other interested countries on ideas for global solidarity taxes applicable to the fossil fuels industry, financial transactions, as well as marine and air traffic. Civil society observers in France, however, view this as both international image cultivation by President Macron and a diversion from international negotiations on climate finance or the UN Tax Convention.
• London – Excess profits tax on oil and gas production: Following the outbreak of the war in Ukraine, the United Kingdom introduced an excess profits tax on companies producing oil and gas in the UK, and raised 2.6 billion pounds in the first year. The new Labour Government is planning to further increase the tax rate. The proceeds go into government coffers.
• Pari Island (Indonesia) – Lawsuit against Holcim: Pari Island is being flooded with growing frequency and is being swallowed up by the sea, metre by metre. Four residents have initiated litigation in the Zug Cantonal Court against the Holcim cement company over its climate responsibility, and are demanding that the company reduces its emissions, pay compensation for the climate damage they have suffered, and contribute financially towards adaptation to global warming.
• Rio de Janeiro – Global wealth tax: In late June, G20 finance ministers discussed a model for the global wealth tax devised by the French economist Gabriel Zucman. In principle, it reflects what Oxfam proposes in its report (see text). As President of the G20 this year, Brazil raised the idea in the club of the world's 20 leading economies. After much fanfare in the early stages, the summit's final declaration could only produce fine-sounding rhetoric. The project had reportedly been hampered, among other things, by disagreement among participants over the question of whether the UN or the OECD should be tasked with working out such a tax.
• New York – UN Tax Convention: Negotiations between the 197 UN member governments on the Terms of Reference (ToRs) of a Framework Tax Convention concluded successfully in mid-August. From the very beginning, many countries – especially those in the Global South – had come out in favour of including in the ToRs the creation of more effective climate and environmental taxes as an aim of the Convention in its own right. Despite having been highly controversial, this point is now embodied in the text and promises long-term global progress on climate-related taxes with redistributive effects. Elaborating a global wealth tax with a climate-related dimension would be best placed in the hands of the UN, where the prevailing majority dynamics will ensure that such a taxation model would also reflect the specific interests of the countries in the Global South.
• Berne – Initiative for a Future: The Young Socialists wish to impose a 50-per cent tax on inheritances of more than 50 million francs. The Confederation and cantons would then use the proceeds of the tax to "combat the climate crisis in a socially equitable manner and to fund the complete overhaul of the economy that this would require." This is stated in the text of the initiative. As it is well known that the climate crisis cannot be tackled strictly within the borders of Switzerland, the initiative also provides for additional contributions by Switzerland towards the funding of the UN Sustainable Development Goals worldwide.

COP29 – Climate Conference

In November, UN Member States will negotiate a new collective funding target for supporting the countries in the Global South in dealing with the climate crisis. Funding in accordance with the polluter-pays principle is also a part of this discussion. The funding gap is growing dramatically and financial support is simply a necessity if the countries in the Global South are to continue their development using climate-friendly technologies, and avoid more loss and damage thanks to adaptation measures. The pressure for an ambitious funding target is accordingly great, and rich countries are challenged to increase their contributions significantly in the years ahead.