ECO has heard that finance ministers generally like talking about numbers and money. That is great, because the lack of money is something which hinders the necessary transformation in many countries. Greater financial support from rich countries can help shift political will towards more climate action in developing countries. So here is some inspiration for finance ministers, as well as finance negotiators, to tackle the climate finance gap:
GCF: time for the laggards to step up
ECO welcomes the pledges that were already made earlier this year to the Green Climate Fund (GCF) of close to US$9.7 billion, with some countries doubling their original pledges. While much more is needed, ECO’s eyes this week will be on ministers arriving from countries who have not stepped up to at least double their contribution, or have not pledged at all. Australia and the United States: shame on you for continuing to ignore the climate crisis and the needs of the most vulnerable communities. ECO was also disappointed that countries like Canada, The Netherlands, New Zealand, Switzerland, Finland, and Belgium did not double their pledges or provided their fair share at the replenishment conference in Paris. Ministers, make the best use of your time in Madrid: scale up your GCF contribution!
This will not only help provide the much needed support for developing countries to adapt to the impacts of the climate crisis, but also create the right conditions for enhanced ambition in 2020.
New sources of finance
ECO is pleased to hear that some developed countries brought up, in the negotiations on the review of the Warsaw mechanism on loss and damage, including a reference on sources of finance. ECO has seen the devastation that the climate crisis is already causing in vulnerable communities, and is all for exploring ways to generate significant new and additional finance. But we are not talking about vague private sector finance that will only be called climate finance through creative accounting exercises. What is really needed is finance at significant scale which can then be channeled to support developing countries in climate action. So here are some suggestions that COP should decide to explore:
- A global air travel levy could raise $40–$100b annually (at $10–$25 per person, per flight, given that current passenger levels exceed 4 billion per year).
- A climate damages tax is a proposal for a tax on the fossil fuel industry. If it were introduced globally in 2021 at a low initial rate of $5 per tonne of CO2 equivalent, it would raise around $210b in its first year, some of which could be allocated to loss and damage, and adaptation.
- Introducing a carbon tax on maritime fuel of $75 per tonne of CO2 in 2030 could raise revenues of about $75b in the same year.
- A financial transaction tax (FTT) that puts a levy on shares and bonds at 0.1% and derivative agreements at 0.01% has the potential to raise $63b (if applied to the European Union), and a similar global FTT could raise significantly more.
Parties may not yet be ready to adopt any of these options, but could send a strong signal at COP25 by giving a clear mandate to explore those sources in the run up to COP26 and recommending implementation pathways. For loss and damage, such exploration should target an additional $50b by 2022. It’s not that there is no money available, it just has to be channelled into the right kinds of action.