With climate finance deadlocked, global tax proposals rise again

Last November, low- and middle-income countries left COP 29 in Baku, Azerbaijan, tired and disappointed. They had fought into the early hours of the morning, all the way through the weekend, to secure more public financing from high-income countries. Ultimately, they lost, leaving with a measly promise of $300 billion annually, and an “I owe you” known as the Baku-to-Belém road map that promised discussions on how to stretch that to $1.3 trillion leveraging finance from “all actors,” including private. This week in Bonn, Germany — during the midway meetings to COP 30 in Brazil — those same nations showed that they are not done fighting for public finance. But high-income countries are making it clear that they consider the book on this closed. Bonn began with a battle over whether to put Article 9.1 of the Paris Agreement on the summit’s official agenda, which mandates the provision of finance from developed to developing countries. Ultimately, the article was not included, and developing countries agreed to a footnote saying that they would continue “informal consultations” on it as the Bonn conference continues. Monday midday, countries gathered for the two-hour slot that is the only dedicated time for those consultations during the two-week meeting. But country representatives grew increasingly frustrated as their speeches were cut off after only three minutes. “I would expect that parties are allowed to say what they want to say,” said Amandeep Garg, the additional secretary at the Indian Ministry of Environment, Forest and Climate Change and the lead negotiator for India. Garg’s mic had been turned off mid-sentence during his first turn. “Developed countries haven’t exactly been rushing to fulfill what has been asked of them, what they’ve agreed to, what they’ve signed on to embrace relative to 9.1.” --— Anonymous delegate from a developing country While the consultation allowed countries to speak, their three-minute statements didn’t seem to change anybody’s mind. “We are not clear what an agenda item on 9.1 would fulfill,” said Outi Honkatukia, the European Union’s lead negotiator for means of implementation, including climate finance. The fear among civil society and developing countries is that COP 29, nicknamed the “finance COP,” was the only chance they would get to talk about finance. “Before [COP 29], you had the NCQG negotiation coming up to talk about it,” said Jeffrey Qi, policy adviser with the International Institute for Sustainable Development’s resilience program, referring to the New Collective Quantified Goal, which was the finance agreement that determined the $300 billion target at COP 29. “But now it’s done and there’s no home for it anymore.” Developing countries are still fighting for what they say is a legal obligation by developed countries to provide climate finance. Developed countries feel that the issue of financial provision was already settled in Baku and is taken care of in the $300 billion goal, along with the Baku-to-Belém road map. “We are bewildered by the backtracking on finance,” said Anna Rasmussen, a climate expert from Samoa speaking on behalf of the Alliance of Small Island States, or AOSIS, on Tuesday. But many are also aware of the reality that this money is not likely to come anytime soon, especially as official development assistance from the West plummets. “Developed countries haven’t exactly been rushing to fulfill what has been asked of them, what they’ve agreed to, what they’ve signed on to embrace relative to 9.1,” said a delegate from a developing country who asked to stay anonymous due to the ongoing negotiations. “There’s a reluctance to take or accept any of the responsibility for the circumstances that exist.” Innovative solutions As the stalemate progresses, some interim solutions are resurfacing as viable options, including a tax on the ultra-wealthy to fund climate action, a tax on large, high-emitting ships, or even a tax on defense companies and luxury goods. In the first week of the negotiations in Bonn, the Arab Group — a coalition of 22 countries — reiterated an idea to tax financial transactions and luxury fashion brand sales to raise money for climate change. The suggestion raised some eyebrows, and delegates told me that the idea wasn’t taken too seriously, but back in April, at least 14 countries at various income levels endorsed the Global Solidarity Levies Taskforce as well, an initiative to tax polluting industries and high-carbon activities. Experts don’t see these ideas as serious solutions to the dearth of financing — both because it hasn’t gained a lot of traction yet and because they aren’t sure how much money this will realistically raise — but as developed countries continue to reject calls for increased bilateral finance, these solutions are coming to the fore as ways to redirect private money through public channels. Some experts say that it could be a good time for these other solutions to gain steam. “The key question is what could an agenda item on Article 9.1 on the [Subsidiary Bodies] agendas deliver?” said Joe Thwaites, senior advocate for international climate finance at the Natural Resources Defense Council. “International negotiations can set targets, as they did with the NCQG last year, but it’s primarily domestic politics that determines how well countries deliver.” Thwaites said that the role of the United Nations is to seek out these other proposals for how to raise public finance. “Levies on highly polluting sectors such as aviation and fossil fuels, or taxing extreme wealth, require international cooperation to be effective.” This isn’t a new idea. Just after the Copenhagen negotiations in 2009, then U.N. Secretary-General Ban Ki-moon established a High-Level Advisory Group on Climate Change Financing to find other sources of revenue to help achieve the $100 billion goal settled on at COP 15. The group developed a detailed report with lots of ideas, but it was largely shelved as nations fought for more direct bilateral funding. Thwaites said that many of the innovative finance proposals being discussed now were in the 2010 plan, including proposed shipping, aviation, and fossil fuel levies, and the use of IMF Special Drawing Rights. “Back then, governments didn’t really pick up these ideas, instead focusing on traditional budgets to meet climate finance goals,” he said. “But 15 years on, with government budgets increasingly squeezed, a number of countries are taking a deeper look at these innovative proposals.”