Unlocking Trillions: How Wealth and Fossil Fuel Taxes Could Transform Climate Finance

Wealthy nations could generate five times the amount developing countries are requesting for climate finance by implementing windfall taxes on fossil fuel companies, ending harmful subsidies, and introducing a wealth tax on billionaires, according to recent research. Developing countries are seeking at least $1 trillion annually in public funds to reduce greenhouse gas emissions and cope with the increasing impacts of extreme weather.

Despite these urgent requests, wealthier nations are considering much smaller sums through conventional climate finance options, such as low-interest loans from global institutions like the World Bank. However, discussions have begun around alternative funding sources, including taxes on shipping and frequent flyers. Brazil, currently holding the G20 presidency, is advocating for a 2% wealth tax on billionaires as a potential solution.

Research from the group Oil Change International, published this week, highlights that a combination of wealth and corporate taxes, alongside measures targeting fossil fuels, could generate $5 trillion annually. Specifically, a global wealth tax on billionaires could raise $483 billion, while a financial transaction tax could bring in $327 billion. Additional taxes on big tech, arms sales, and luxury fashion could generate $112 billion, and reallocating just 20% of global military spending could yield $454 billion.

Phasing out subsidies for fossil fuels could free up $270 billion from wealthy nations and $846 billion globally, while taxes on fossil fuel extraction could bring in $160 billion in the rich world and $618 billion worldwide.

Laurie van der Burg, who leads public finance at Oil Change International, stressed the need for wealthy countries to follow through on their promises to phase out fossil fuels. She stated that there is no shortage of public funds available for these nations to contribute their fair share to climate action, both domestically and internationally. By ending fossil fuel subsidies, taxing polluters, and reforming financial rules, trillions could be unlocked for climate finance.

Alejandra López Carbajal, director of Transforma Climate Diplomacy, emphasized that the narrative of limited public finance from developed countries is misleading. She argued that sufficient resources are available to tackle the climate crisis.

Finance is set to dominate discussions at the upcoming UN climate summit, Cop29, in Azerbaijan this November, where a new collective goal for climate finance will be negotiated under the framework of the Paris Agreement. This week, governments are also convening at the UN General Assembly, where climate will be a top priority. Brazil’s President, Luiz Inácio Lula da Silva, aims to push for greater UN responsibility in global climate action and the governance of environmental resources like water, which currently lack coordinated oversight.

Meanwhile, global carbon reduction targets remain in focus. The International Energy Agency noted that replacing inefficient fuels like biomass, coal, and paraffin—commonly used for cooking in developing countries—would significantly advance global efforts to transition away from fossil fuels.

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