As the global climate breakdown accelerates, geopolitical tensions are on the rise, multilateralism is in decline, and governments from the Global North are cutting development aid and increasing military spending.
The promises of impactful climate finance remain largely unmet, with “developed”/rich/Global North countries hiding behind the excuse that there is not enough public finance available. But there is actually plenty of money out there and we have an open door to achieve global climate and development goals: an ambitious tax justice agenda. Alongside other systemic/macro economic reform, fair taxation would help to mobilise domestic public revenues to finance bold public climate action, and to reform current international taxation rules to make big polluters pay, such as multinational fossil fuel corporations and other sectors harmful for the people and the planet.
We are stuck on the road from Baku to Belem*, without a clear path to scale up climate finance to achieve the $1.3 trillion dollars target needed in the Global South to tackle the climate crisis. The motion to provide adequate climate finance for Global South nations is losing steam. International climate finance flows still lag far behind the funding needed to meet the goals of the Paris Agreement. The gap of international climate financing is estimated at US$187-359 billion per year for adaptation financing alone, against the actual $28 billion provided for that purpose in 2022, according to the adaptation gap report 2024. On top of this, Global South countries require up to $500 billion per year to cope with loss and damage.
For taxation to become a core source of climate finance, we need a progressive, climate-aligned, transparent and equitable global tax system. Transforming the rules of global taxation can put an end to tax dodging, tackle natural resource crimes enabling illicit financial flows (IFFs), and incentivize the transition away from fossil fuels. This is where tax justice and climate justice go hand-in-hand: to hold governments, specially from the Global North, accountable for delivering the public funds needed for adaptation, mitigation, and reparations, alongside with accelerating a just transition globally.
* The Baku to Belem Roadmap is a process under the UNFCCC negotiations that mandated the COP29 and COP30 Presidencies to explore how to scale up financing to developing country Parties for climate action from all public and private sources to at least USD 1.3 trillion per year by 2035.
Taxation is the most powerful tool we have to ensure there are enough public financial resources to restore and protect nature and the climate and to finance the necessary infrastructure. But it’s fundamental, in adding tax to an environmental policy toolbox, to avoid regressive impacts. Even taxation that aims to address environmental challenges must be progressive, and guided by equity and the “polluter pays principle.”
So far mainstream interpretation and application of this principle through taxation has had regressive impacts. Tax measures with intended environmental impact, like taxes on fuel, are mostly targeting consumers, directly or indirectly. Lower income households who spend a greater proportion of their income on fuel for transportation, cooking, heating their homes etc. carry a relatively higher share of the tax. This regularly provokes large scale public protests by actors who might generally be in favour of climate action, yet at the same time worry about social justice.
Instead, new progressive environmental taxes should target corporations that are profiting from polluting the climate. Taxing the profits of the fossil fuel industry will make the extraction business models less profitable and discourage the continuation of the business as usual. And tapping into their enormous profits will bring in significant tax revenues that can be channeled back into climate action.
Fiscal policy must respond not only to inequality but also to planetary breakdown. Additional resources to fill the climate financing gap can be found by tapping into the toolbox of progressive tax justice instruments.
On their way to COP 30 in Belem, climate justice advocates should stop by the United Nations in New York. In August, the negotiations on the UN Framework Convention on International Tax Cooperation (UNFCITC) will start in earnest. At stake is nothing less than a historic opportunity to reset global tax rules in a truly inclusive way: to tackle the root causes of tax avoidance, tax evasion and illicit financial flows, to institutionalise tax transparency at the global level, to close loopholes, strengthen tax enforcement, and uphold fairness in the tax system to the benefit of the Global South. And climate justice campaigners will meet allies there in their fight for additional public revenues so urgently needed for climate action.
Blog prepared by Latindadd, Eurodad, CAN International, INESC, WEDO, Financial Transparency Coalition, WWF Brazil, OXFAM, Christian Aid and CCFD-Terre Solidaire
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