‘The Climate Damages Tax’ report, backed by over 100 climate organisations worldwide, including Greenpeace, Stamp Out Poverty, Power Shift Africa and Christian Aid, forecasts that taxing fossil fuel majors in the OECD countries, in particular members of the G7, could raise $720bn (£580bn) for the climate fight.
The report argues that the recent levels of fossil fuel company profits have been “excessive,” as have the remunerations of the CEOs of companies such as ExxonMobil, Chevron, BP and Shell.
“With such broad shoulders, the industry can clearly afford to pay a far greater amount in taxation,” said the report.
It outlines that the Climate Damages Tax (CDT) is a fee on the extraction of each tonne of coal, barrel of oil, or cubic metre of gas, and calculated at a consistent rate based on how much CO2e is embedded within the fossil fuel.
Working with existing systems of payment, fossil fuel companies who already pay royalties (or similar) to the states where they operate, will pay an extra amount on the volume they extract to the Loss and Damage Fund, it shared.
It proposes that the substantial additional revenue raised is allocated in two ways.
Firstly, to assist OECD countries, in particular – who, under the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC), are seen as most able to provide finance to the LDF – to help pay for their contributions without unfairly costing their citizens.
Secondly, it will generate a significant domestic dividend that can be channelled to climate action nationally, helping to pay for the necessary support for workers and communities to transition away from fossil fuels towards green energy and transport.
It is recommended that the tax be introduced in 2024 at a low initial rate of $5 per tonne of CO2e, increasing by $5 per tonne each year.
If implemented at this rate, the CDT, as applied to OECD countries employing a 20 per cent domestic dividend, would raise:
- $44.6 billion for the LDF in year one,
- $90.1 billion in year two and
- $119.8 billion in year three.
By the end of this decade, the cumulative figure for OECD revenue would be $900 billion.
This, it said, equates to $720 billion to the LDF and, with a domestic dividend at 20 per cent, $180 billion for OECD countries to transition their economies.
For the G7, with a 20 per cent domestic dividend, $33.5 billion would be raised for the LDF in year one.
By the end of this decade, revenue would amount to $675 billion in total, with $540 billion for the LDF and (with a 20 per cent domestic dividend) $135 billion for national climate action.
If applied globally, the cumulative total over this period would be in the region of $3.5 trillion, the report shared.
Read the full report here.