A wealth tax could help poorer countries tackle climate crisis, economists say

Tax extreme wealth to pay for the climate-related damage to the poorest, a group of more than 100 leading economists have urged.

A wealth tax on the fortunes of the world’s richest people would raise trillions of dollars that could be spent on helping poorer countries shift their economies to a low-carbon footing, and on “loss and damage”, the rescue and rehabilitation of countries stricken by climate disaster.

A 2% tax on extreme wealth would yield about $2.5tn a year, by recent estimates.

The economists, including the prominent degrowth advocate Jason Hickel, have written a letter to world leaders before a global summit on finance this week. They are calling for a tax of 1.5% for 1.5C to help ensure the world limits global temperature rises to 1.5C above pre-industrial levels.

The world’s wealthiest people are responsible for an outsize proportion of global greenhouse gas emissions, with the richest 1% responsible for double the carbon emissions of the world’s poorest half, according to Oxfam, but there are few constraints on them.

Recent research suggests if the combined emissions of wealthy countries was counted against the destruction that the climate crisis is wreaking in poorer countries, the rich would owe the poor $6tn a year in “reparations” for the damage caused.

Mark Paul, of Rutgers University, and a signatory of the letter, which was spearheaded by the campaigning group Oil Change International, said rich countries were not facing up to their responsibilities.

“Global north leaders saying they can’t afford to address global crises is the oldest excuse in the book, and simply put, a lie. What’s truly unaffordable is the status quo. The truth is there is no shortage of public money that can be dedicated to the cause, only a lack of political will – but that must change.”

In the letter, the economists also call for an end to harmful subsidies of fossil fuels, and the forgiveness of debts for some of the poorest countries.

Alex Lenferna, of Nelson Mandela University and the Climate Justice Coalition, one of the signatories of the letter, said: “Countries in the global south are drowning in debt, which is driving austerity and undermining our ability to respond to the climate crisis.

“We need much more public money to drive a truly just transition. The global north must pay their climate debt, and not use climate finance as a wolf in sheep’s clothing that advances their interests.”

Richard Heede, of the Climate Accountability Institute, said fossil fuel companies must pay for the damage they have caused. “The wealthy fossil fuel companies that have acted in concert to delay action and perpetuate the carbon economy should also contribute substantially to an atmospheric trust to aid the nations and peoples who have contributed little to the climate emergency.”

About 50 heads of state and government are expected to attend the summit for a new global financing pact, which will be held in Paris on Thursday and Friday, hosted by the French president Emmanuel Macron, with Mia Mottley, the prime minister of Barbados.

It is intended to address the deep concerns that developing countries have over the continuing lack of the financial assistance that has long been promised to them by richer countries, to help them cut greenhouse gas emissions and cope with the impacts of extreme weather.

Leaders including Olaf Scholz, the chancellor of Germany, Ursula von der Leyen, the president of the European Commission, the US special presidential envoy for climate, John Kerry, and the Chinese premier, Li Qiang, are expected to attend. Rishi Sunak, the UK prime minister, is unlikely to attend the meeting, however.

Climate finance is an increasingly contentious issue for poorer countries, which are aggrieved that the richer countries are helping Ukraine, and found trillions to cope with Covid, but are unwilling to help them with the impacts of the climate crisis.

In November governments agreed to set up a fund for “loss and damage”, to help reconstruct communities afflicted by climate disaster. But there is no agreement yet on how to raise the money needed to fill it. Poorer countries also find it hard to access money for green development of their economies, despite being urged by richer countries to cut their emissions.

Mottley has set out her proposals for reform of the World Bank and its fellow international institutions to triple the money they can make available to developing countries. The conference will also discuss potential new sources of revenue such as taxes on high-carbon activities, including global shipping.

Avinash Persaud, an economic adviser to Mottley, told the Guardian: “We need a complete rethink of the whole nexus of climate, debt and development. What we are seeing today is new – countries affected by climate disaster, this is happening now. Countries are drowning.”

cover photo:The French president, Emmanuel Macron, is hosting leaders from 50 countries in Paris for a summit on finance. Photograph: Martin Divíšek/EPA