February 25, 2024

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The COP28 committee advises “taxing the bad” to boost climate finance

The COP28 committee advises “taxing the bad” to boost climate finance

  • Climate finance falters as government debt grows
  • Policy options include aviation and marine fees
  • The committee says there is a moral case for oil companies to contribute

Nov 29 (Reuters) – An advisory panel for the UN Climate Change Conference (COP28) talks in Dubai said that increasing taxes on polluting activities and cutting fossil fuel subsidies could generate trillions of dollars to tackle climate change.

The summit’s host country, the United Arab Emirates, a major oil producer, said the two-week meeting that begins on Thursday must come up with “concrete actions” on climate finance, which has come under pressure due to rising debt burdens, faltering political will and patchy efforts. Private financing. .

The committee recommended that higher carbon taxes – including duties on emissions from the maritime and air transport sectors – should be among the options in COP28 studies.

“We see great potential, especially by taxing the bad guys internationally and using that money to generate predictable resources,” panel member Amar Bhattacharya of the Brookings Center for Sustainable Development said at a news conference.

In economics, taxing the bad refers to charges aimed at harming public goods – for example, greenhouse gases – as a way to raise revenues and discourage activity.

Although noting the urgent need for new funding sources, the report prepared by a group of independent economists said that existing revenue sources could also be reallocated.

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He added that investments in the fossil fuel economy continued to exceed those made in the clean economy. Fossil fuel subsidies totaled $1.3 trillion, much more if we take into account the societal cost of dealing with emissions and pollution.

Report co-chair Vera Songwe, a former World Bank economist, said the report’s focus was on how to boost the investments needed for the world to catch up with the Paris Agreement goals of limiting global warming to below 2 degrees Celsius (3.6 Fahrenheit).

“That’s why we emphasize speed and volume — the longer we wait, the more expensive it gets,” she said.

Record oil and gas profits

Taxes on record profits made by oil and gas companies from rising energy prices in the wake of the Ukrainian war are unlikely to receive political attention, partly because many of them, such as the UAE’s ADNOC, are state-owned, the report’s authors said.

Nicholas Stern, co-chair and professor at the London School of Economics/Grantham Research Institute, said there was a compelling case for energy companies to make voluntary contributions.

“I believe that moral commitment is something that will be emphasized at COP 28, and even before and after it,” he said.

There are growing calls for a carbon tax on maritime shipping, which transports around 90% of global trade and accounts for nearly 3% of global carbon dioxide emissions.

Aviation, which accounts for about 2-3% of emissions, is not directly covered by the Paris Agreement, but the air transport sector has pledged to align itself with its targets.

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The panel estimated that emerging and developing economies excluding China would need a total investment of $2.4 trillion annually by 2030 – four times current levels – to achieve the energy transition, adapt their economies and deal with climate damage.

Although the bulk of this amount can be raised locally, the report called on rich countries – which are already at least two years behind on their promise to provide $100 billion to help poor countries confront climate change – to triple the amount of soft loans offered by 2030.

The report described private financing in emerging and developed countries as “very low,” while development banks were criticized for their weak cooperation with the private sector, as they often competed with it for projects that were easier to launch.

Writing and reporting by Mark John. Edited by Barbara Lewis

Our standards: Thomson Reuters Trust Principles.

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