Developing Nations Ask the Wealthy to Raise Billions to Fund Climate Action

During recent UN talks, a group of developing countries proposed that wealthy governments raise $1.1 trillion annually to help poorer nations address climate change. They suggested that rich countries could spend 0.8% of their GDP per year to raise $441 billion, which could mobilise enough private finance to reach $1.1 trillion. They also proposed specific domestic measures, such as a financial transaction tax and a Big Tech Monopoly Tax, to raise the funds. The group emphasised that the issue isn't whether the resources exist but whether there is the political will to prioritise climate change.

 

Bolivian negotiator Diego Pacheco, who often speaks for the influential Like-Minded Developing Countries group, told Climate Home that rich countries were trying to pass their responsibility to provide climate finance onto the private sector and development banks that mainly offer loans.

 

He suggested that developed countries should shift military budgets towards tackling climate change or tax luxury products because luxurious patterns of consumption are also a driver of the climate crisis.

 

Referring to the document in talks on the new finance goal yesterday, Saudi Arabia’s negotiator justified a tax on arms manufacturers by saying that military emissions of planet-heating gases represent 5% of global historical emissions.

 

One potential idea is to impose a tax on defence companies in developed countries. It was suggested that this could be a game-changer. Similarly, financial transaction taxes could garner about $240 billion a year over a decade.

 

During the COP28 climate summit in November, France and Kenya announced the creation of a task force to explore new taxes aimed at funding climate action, including levies on international shipping, aviation, fossil fuels, and financial transactions. However, they did not mention specific taxes for fashion, technology, or defence companies.

 

About $57 billion a year could be raised from a 5% tax on the annual sales of the top seven technology firms, it says. Those include Amazon, Apple, and Google. “The ‘Big Tech’ firms hold a global monopoly on technologies, upon which developing countries have been reliant,” the paper argues.

 

About $34 billion a year could come from a 5% tax on the annual sales of the roughly 80 top fashion firms in developed countries, it says. This would hit brands like Louis Vuitton, Dior and Nike.

 

The G77+China group adds that the fashion sector comes behind only fossil fuels and agriculture in the size of its emissions – “however, unlike fossil fuels and agriculture, high-end brands are not critical for food and energy security”.

 

Around $21 billion a year could come from a 5% tax on the annual sales of the top 80 defence firms in developed countries, the paper says. This would include US firms like Lockheed Martin, Northrop Grumman and Boeing, the UK’s BAE Systems and France’s Thales.

 

All these measures would result in finance flows mainly from developed to developing countries, the document notes, except for the technology tax where “flows would be mixed as consumer[s] would shoulder the cost”.

 

Under the UN climate change process, the group of developed countries defined back in 1992 have so far had the sole responsibility to provide climate finance to developing nations.

 

Developed-country governments are now pushing hard to change this so that wealthier and high-emitting developing countries like Saudi Arabia would also contribute towards the new post-2025 finance goal.

 

This is one of the divisive issues government negotiators will wrangle over this week and next in Bonn to prepare the ground for an expected agreement on the finance goal at COP29 in Baku in November.