Billionaires, fossil fuels and the future of climate finance

A recent study suggests some of the world’s richest countries could raise around $5 trillion annually in climate finance through one-time taxes on fossil fuels, ending harmful subsidies and a wealth tax on billionaires. New researchpublished by Oil Change International in September, shows that rich countries around the world have the potential to raise about five times more money than low-income countries require for climate finance. Developing nations have asked at least $1 trillion a year in public funds to support them in decarbonisation efforts and to respond to extreme weather events. However, to date, high-income countries have not provided anywhere near this level of funding to support a global green transition. Most of the funding comes in the form of low-interest loans from the World Bank and other financial institutions, rather than the form of investment that is desperately needed to combat climate change.

As the current leader of the G20, Brazil encourages member states to introduce a 2% wealth tax for billionaires to help finance the global ecological transition. This type of wealth tax could help raise $483 billion globally, and a tax on financial transactions could generate another $327 billion. Additional taxes could help raise even more funds, such as the sale of high technology, weapons and luxury fashion, which would amount to about $112 billion. Redistributing 20 percent of global public military spending could add another $454 billion.

While taxing the rich could help raise funds, simply removing subsidies for some of the most polluting forms of energy could help provide an additional $270 billion from rich countries and $846 billion if are applied worldwide. In total, Oil Change estimates that rich countries could raise about $5.3 trillion in climate finance. This amount could be even higher if high-income countries take more extreme fiscal measures, which have been seen before in times of emergency. For example, during the Covid-19 pandemic, countries mobilized $16 trillion in public COVID stimulus in 2020.

Laurie van der Burg, director of public finance at Oil Change International, he stated“Last year, countries agreed to phase out fossil fuels. Now is the time for rich countries to pay to turn this 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 matching funding for climate change, ending fossil fuel subsidies, making polluters pay and changing unfair financial rules.”

While there is significant potential for increased levels of climate finance, Oil Change points out that the pace and ambition of the policy reform under consideration is yet to be taken into account.

ambitious enough to unlock the scale of public funds presented in the report. The organization says there needs to be deeper multilateral cooperation between governments supporting these calls and connecting fair finance agendas and climate action globally to help unlock finance.

The research was published ahead of the COP29 climate summit in Azerbaijan in November. During previous COP summits, many developing countries have expressed the need for more financing from high-income countries to reduce their dependence on fossil fuels, increase their renewable energy capacity and mitigate disaster risk climatic. In mid-September, the Azerbaijani leadership presented his plans for the climate summit. One of the main objectives is to establish a new annual funding aim that rich countries will contribute to helping poorer countries cope with climate change.

However, countries have I have not been able to agree so far on the amount of funding they will provide to low-income countries to tackle climate change. In July, Azerbaijan announced plans to establish a 1 billion dollar fund to support some of the countries most affected by climate change to address the effects as well as develop their green energy capacity. The biggest obstacle to fundraising is that contributions will be voluntary, with no plans to introduce a mechanism to force fossil fuel producers to contribute, despite growing pressure from environmentalists for such a move.

Many developing countries say they cannot set a more ambitious climate TARGETS without greater financial support from rich countries. During COP28 in Dubai last year, more than 120 countries pledged to triple renewable energy capacity by 2030. However, this will be watershed unless more support is given to developing countries to do the same.

Many low-income countries are industrializing, which increases their greenhouse gas emissions. This is especially evident in fast-growing countries like Guyana and Namibia developing their oil and gas sectors. With Oil Change’s research providing a clear path to climate finance, the organization hopes it will help rich countries do more to support the global green transition going into COP29.

By Felicity Bradstock for Oilprice.com

More top reads from Oilprice.com