The Climate Damages Tax: a guide to what it is and how it works (2024)

There is a price for heating up the planet. Currently it is borne to a vast extent by the populations affected by ever-intensifying climate impacts. Although their products are the root cause of the crisis, to date, the fossil fuel producers have gotten away with not paying. The Climate Damages Tax (CDT) proposal, underpinned by the Polluter Pays principle, makes the case that it is high time for the producers to bear a substantial proportion of the costs for losses and damages that result from the burning of fossil fuels. The CDT is a fee on the extraction of each tonne of coal, barrel of oil, or cubic meter of gas. The report proposes that the substantial additional revenue raised is allocated in two ways. Firstly, to boost finance for the newly set up Loss & Damage Fund allowing richest, most polluting, countries to make 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. The report sets out how the CDT would work and its considerable revenue potential.

EXECUTIVE SUMMARY: Executive Summary – The Climate Damages Tax: A guide to what it is and how it works (2024)

REPORT: The Climate Damages Tax: A guide to what it is and how it works (2024)

CDT Data Tables

For the following data, all figures should be taken as indicative only, and are based on the following assumptions:

  1. the CDT is introduced in 2021 in every jurisdiction globally
  2. the rate is increased as described in the report: introduced at $5 per tonne of CO2e, then increasing by $5 per tonne of CO2e each year until 2030, when it will be reviewed with the expectation of increasing by $10 each year up to 2050.
  3. the fossil fuel phase out follows the average of pathways P1, P2 and P3 in the IPCC Special Report on 1.5°C
  4. countries do not shift between income brackets or change their share of each fossil fuel usage globally over time

 

For the full methodology and sources, please see the report Appendix.

Potential CDT revenues globally by year

Year Just Transition revenues ($bn) Loss and Damage revenues ($bn) Total CDT revenues ($bn)
2021 141 69 210
2022 256 125 381
2023 349 171 520
2024 423 207 631
2025 481 236 717
2026 526 258 783
2027 559 274 833
2028 582 285 867
2029 597 292 889
2030 605 296 902
2031 663 325 988
2032 706 346 1,052
2033 738 361 1,099
2034 759 372 1,130
2035 771 378 1,149
2036 777 380 1,157
2037 776 380 1,157
2038 771 378 1,149
2039 762 373 1,135
2040 749 367 1,116
2041 734 359 1,093
2042 717 351 1,068
2043 698 342 1,040
2044 678 332 1,010
2045 658 322 980
2046 637 312 948
2047 615 301 916
2048 594 291 884
2049 572 280 853
2050 551 270 821

Potential CDT revenues across all countries in 2021

Country of fossil fuel extraction Just Transition revenues remitted to governments for domestic use ($m) Loss and Damage revenues contributed to solidarity fund by fossil fuel extractors due to extraction activity within country ($m) Total ($m)
US 12,789 12,789 25,578
Canada 3,034 3,034 6,068
Mexico 1,514 649 2,163
Total North America 17,337 16,472 33,809
Argentina 386 386 772
Bolivia 170 0 170
Brazil 1,732 742 2,474
Colombia 1,413 605 2,018
Ecuador 294 126 419
Peru 146 62 208
Trinidad & Tobago 200 200 401
Venezuela 1,381 592 1,973
Other S. & Cent. America 118 51 168
Total S. & Cent. America 5,839 2,765 8,604
Bulgaria 339 145 484
Czech Republic 316 316 632
Denmark 75 75 149
Germany 1,263 1,263 2,525
Greece 266 266 532
Hungary 56 56 112
Italy 57 57 114
Netherlands 182 182 364
Norway 1,266 1,266 2,533
Poland 913 913 1,826
Romania 362 155 517
Serbia 393 169 562
Spain 20 20 39
Turkey 982 421 1,403
United Kingdom 572 572 1,145
Other Europe 552 552 1,104
Total Europe 7,613 6,427 14,040
Azerbaijan 527 226 753
Kazakhstan 2,178 933 3,111
Russian Federation 14,180 6,077 20,258
Turkmenistan 560 240 800
Ukraine 674 0 674
Uzbekistan 624 0 624
Other C’wealth of Independent States 141 0 141
Total C’wealth of Independent States 18,884 7,476 26,360
Bahrain 75 75 150
Iran 3,971 1,702 5,673
Iraq 2,356 1,010 3,365
Kuwait 1,161 1,161 2,322
Oman 510 510 1,021
Qatar 1,461 1,461 2,922
Saudi Arabia 4,690 4,690 9,379
Syria 47 0 47
United Arab Emirates 1,599 1,599 3,197
Yemen 37 0 37
Other Middle East 178 76 255
Total Middle East 16,084 12,283 28,390
Algeria 1,322 566 1,888
Angola 1,205 0 1,205
Chad 80 0 80
Republic of Congo 216 0 216
Egypt 961 0 961
Equatorial Guinea 98 42 140
Gabon 103 44 147
Libya 500 214 715
Nigeria 1,872 0 1,872
South Africa 2,482 1,064 3,546
South Sudan 79 0 79
Sudan 62 0 62
Tunisia 36 0 36
Zimbabwe 41 0 41
Other Africa 487 209 696
Total Africa 9,544 2,139 11,683
Australia 4,056 4,056 8,111
Bangladesh 264 0 264
Brunei 100 100 200
China 37,678 16,148 53,825
India 10,943 0 10,943
Indonesia 7,838 0 7,838
Japan 10 10 20
Malaysia 877 376 1,253
Mongolia 696 0 696
Myanmar 179 0 179
New Zealand 21 21 41
Pakistan 401 0 401
South Korea 10 10 21
Thailand 602 258 860
Vietnam 866 0 866
Other Asia Pacific 970 416 1,385
Total Asia Pacific 65,510 21,393 86,903
Total World 140,811 68,956 209,790
High income 35,638 35,638 71,276
Upper middle income 77,741 33,318 111,059
Lower middle income 27,432 0 27,432
Low income 283 0 283

The SDGs need real solutions, not failed ideas

Instead of the same old failed ideas, we need real solutions to the SDGs funding gap more urgently than ever. Public services – whether in high or low income countries – are best funded through public money, which can be spent where need is greatest rather than chasing profit. These solutions include Global Solidarity Levies – alongside cracking down on huge global companies that dodge paying taxes in low income countries, and wiping out unpayable debts for the lowest income countries.

Yet over the last decade, politicians in high income countries have tried to fob us off with failed ideas. Their favourite is the so-called ‘Billions to Trillions’ approach, which lets high income country governments off the hook by relying on huge global companies to voluntarily fill the SDGs funding gap.

They claim that if these companies are offered profit guarantees, backed up by $100 billion from the aid budget, they will invest one trillion dollars into essential public services in low income countries. But this approach has been called ‘mathematical gymnastics’ – experts suggest this sort of private investment could only double the aid budget at best.

Click here to read our report: Billions to Trillions: A Reality Check

More and more evidence – from both high and low income countries – also shows that public services such as hospitals and roads do not generate big profits. Guarantees then leave governments on the hook for sky-high payments decades to come.

In Lesotho, annual payments for one hospital built through a ‘Public Private Partnership’ (PPP) ended up costing half the country’s entire health budget. In 2018, Chancellor Philip Hammond vowed not to sign another ‘Private Finance Initiative’ (PFI) deal for UK public services for this reason, and the French Court of Auditors recommended the strategy be abandoned in 2017.

And private funding also neglects the most vulnerable.

The ‘Billions to Trillions’ approach ignores the evidence that low income countries are often left worse off, wastes scarce aid money, and doesn’t reach those most in need. And every day spent talking about ‘Billions to Trillions’ is a day wasted, when real solutions to fill the SDGs funding gap are being ignored. It’s time for governments to get real, and force those who can best afford to pay a bit more, to do so.

Published 15/04/19   2:44 am

Billions to Trillions: A Reality Check

Our new report, Billions to Trillions: A Reality Check authored by Sony Kapoor of the think tank, RE-DEFINE, was launched during the 2019 UN Financing for Development Forum in New York.

The report outlines why the mobilisation potential of blending has been oversold through the Billions to Trillions agenda by a factor of ten, and how continued blending evangelism is unhelpful in reaching the Sustainable Development Goals.

Read the report

The Climate Damages Tax: a guide to what it is and how it works (2019)

Our original Climate Damages Tax report was been launched during COP24 in Katowice, Poland.

The report outlines how a Climate Damages Tax on the fossil fuel industry – those overwhelmingly responsible for the climate problem – could raise approximately $300 billion a year in revenues for loss and damage to help the most vulnerable people deal with the worst impacts of climate change, and billions more for just transition to renewable energy, jobs and transport.

REPORT: The Climate Damages Tax: A guide to what it is and how it works

EXECUTIVE SUMMARY: Executive Summary – The Climate Damages Tax: A guide to what it is and how it works

OPED: It’s time for those who caused climate change to pay for it

Please click here for the full data estimating potential CDT revenues.

Climate Damages Tax video

It’s time to make the fossil fuel industry pay for the damage it has caused.

See this short film to find out more:

 

Published 16/05/17   3:47 pm

Labour Pledges to Introduce Robin Hood Tax

Labour have announced they will modernise the current Stamp Duty on shares to bring in an extra £26 billion over the course of the parliament.

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The Banker

See Bill Nighy starring in our brilliant (even if we say so ourselves) launch film, seen by more than 1 million people. 831