Climate Finance Stalls as Government Debts Grow: Panel Urges Higher Taxes and Fossil Fuel Subsidy Cuts

Climate Finance Stalls as Government Debts Grow Panel Urges Higher Taxes and Fossil Fuel Subsidy Cuts

Advisory panel to COP28 recommends increasing taxes on polluting activities and cutting fossil fuel subsidies to generate trillions of dollars for climate change action.

As the COP28 talks in Dubai kick off, an advisory panel has put forth a bold proposal to address the pressing issue of climate finance. With rising government debts and faltering political will, the panel suggests that higher taxes on polluting activities, including emissions from the maritime and aviation sectors, and cutting fossil fuel subsidies could generate trillions of dollars to tackle climate change. The report emphasizes the urgent need for new funding sources and reallocating existing revenue streams. Let’s delve into the details of this proposal and its implications.

Higher Carbon Taxes and Reallocating Revenue:

The panel recommends exploring higher carbon taxes, specifically levies on emissions from the maritime and aviation sectors, as options to be studied at COP28. By taxing harmful activities that contribute to greenhouse gas emissions, governments can raise revenues and discourage polluting behavior. The report highlights the potential of such taxes to generate predictable resources for climate action.

The Urgency of Funding:

While calling for new funding sources, the report also emphasizes the reallocation of existing revenue. It highlights the disproportionate investments in the fossil fuel economy compared to the clean economy. Fossil fuel subsidies alone amounted to $1.3 trillion, not accounting for the societal cost of dealing with emissions and pollution. The urgency to catch up on Paris Agreement targets to limit global warming to under 2 degrees Celsius is stressed, with the report emphasizing the need for speed and scale in investments.

Moral Obligation of Energy Companies:

The report acknowledges that taxing the record profits made by oil and gas companies following the Ukraine war may not gain political traction, especially when many of these companies are state-owned. However, it argues for a moral case for energy companies to make voluntary contributions. The panel believes that highlighting this moral obligation will be a key focus at COP28 and beyond.

Carbon Levy on Shipping and Aviation:

The panel also calls for a carbon levy on shipping, which accounts for 90% of world trade and nearly 3% of global carbon dioxide emissions. While aviation is not directly covered by the Paris Agreement, the air transport sector has pledged to align itself with its goals. With aviation accounting for 2-3% of emissions, exploring ways to reduce its carbon footprint is crucial.

The Funding Gap and Rich Nations’ Responsibilities:

The panel estimates that emerging and developing economies, excluding China, will require a total investment of $2.4 trillion per year by 2030 to transition to clean energy, adapt their economies, and address climate damage. While domestic funding can cover a significant portion, the report calls on rich nations, who have fallen behind on their promise of $100 billion to help poorer countries with climate change, to triple the volume of concessional loans by 2030. The report also criticizes the lack of private finance in emerging and developed countries and poor cooperation between development banks and the private sector.

Conclusion:

The advisory panel’s proposal to increase taxes on polluting activities and cut fossil fuel subsidies offers a potential solution to the pressing issue of climate finance. By exploring higher carbon taxes, including levies on maritime and aviation emissions, governments can generate trillions of dollars for climate change action. The urgency to catch up on Paris Agreement targets and the moral obligation of energy companies to contribute further emphasize the need for immediate action. As the COP28 talks progress, it remains to be seen how these recommendations will be received and whether tangible action will be taken to address the funding gap and combat climate change effectively.