The impacts of climate change are becoming clearer than ever, with extreme weather events of ever greater frequency and strength costing lives and livelihoods all around the world.
But what doesn’t often end up on our news feeds are the promising solutions that could alleviate this global crisis and reverse its devastating effects.
One of the solutions that leaders and activists have been pushing for is a global solidarity tax on the world’s biggest polluters.
Through such a tax, the idea is that we could do two things. First, it would make it more expensive for polluters to pollute, and hence encourage them to transition to green solutions. Second, we would be able to build a fund that helps countries — especially those that are disproportionately experiencing the unequal effects of climate change — deal with the impacts of climate change.
Right now, low-income countries hit by climate-related disasters are forced to borrow money at extremely high interest rates just so they can recover and rebuild.
As a result, they are being pushed further and further into debt, which in turn leaves them with even less money to spend on other critical issues like education and health care. If you want to get in-depth on the global debt crisis and what it has to do with climate change, check out our debt crisis explainer.
A solidarity tax on the world’s biggest polluters would tackle this inequality. First of all, it would mean highly profitable fossil fuel companies have to pay for the pollution they cause. Secondly, it would support the needs of people who are most vulnerable to climate change.
Here’s what you should know about the solidarity tax and its potential as a climate finance mechanism.
What Is a Solidarity Tax?
A solidarity tax, in its most general sense, is an extra tax levied by a government to fund a common interest or a societal goal. You can imagine this as a surcharge on fuel to help build roads, for example.
Several countries have used solidarity taxes in the past to rebuild, including after the World Wars, and many governments currently levy extra taxes on the wealthy as a way to reduce inequality.
During the COVID-19 pandemic, the idea of a solidarity tax on wealth grew in popularity as the pandemic worsened inequalities.
A group of the world’s 83 “super-rich” individuals wrote an open letter urging governments to permanently increase taxes on them to better contribute to pandemic recovery. A group of Canada’s 200 wealthiest millennials made a similar ask, calling on their government to impose a wealth tax to help address inequality.
As the world comes together to fight climate change, leaders and activists have been advocating for a new solidarity tax for the purpose of funding climate solutions.
How Can a Solidarity Tax Help Us Tackle Climate Change?
One of the biggest barriers to tackling the climate crisis is financing, particularly for low-income nations. As climate-related disasters hit countries around the world, low-income nations are facing growing debt and shrinking funds for education, health, and more resilient infrastructure — all crucial things in the mission to end poverty and inequality.
A global solidarity tax would be one avenue through which countries could secure more money to deal with the impacts of climate-related disasters. By allowing these countries to recover quickly and rebuild better — and mobilizing grant funding (not just loans that have to be reimbursed) that could be spent on those vital things like education and health care — these funds would also help stop the cycle of poverty.
Besides being a climate finance mechanism, a solidarity tax also serves the purpose of helping ensure that pollution is no longer free of cost. The world’s biggest and most profitable polluters have to pay for exacerbating the climate crisis.
One-third of all carbon dioxide and methane emissions since 1965, for example, can be traced back to just 20 fossil fuel companies around the world. Meanwhile, amid skyrocketing oil prices, the world’s biggest fossil fuel companies announced in early 2023 that profits had more than doubled in 2022 — up to $219 billion.
“The fossil fuel industry is feasting on hundreds of billions of dollars in subsidies and windfall profits while household budgets shrink and our planet burns,” United Nations Secretary General António Guterres said at the UN General Assembly in September 2022.
Windfall profits are large, unexpected profits that result from lucky circumstances. The oil and gas industry can reap these benefits when there’s a price spike or supply shortages. The war in Ukraine, for example, has caused a supply shortage that has led to surging prices and windfall profits for many energy companies.
Guterres, who has been a vocal advocate for a solidarity tax on polluters, said the funds should be redirected “to countries suffering loss and damage caused by the climate crisis, and to people struggling with rising food and energy prices.”
Another example of a similar tax mechanism along a similar vein is an International Maritime Tax, which is also being called for by campaigners.
In the case of a maritime tax, countries would work together to put an international levy on greenhouse gas emissions from shipping — with the funds raised helping to address the impacts of climate change, including through a just and equitable transition of the shipping sector (which currently accounts for just under 3% of global greenhouse gas emissions).
One further example of a tax that campaigners have been calling for is a tax on financial transactions, called a Financial Transaction Tax — or what campaigners are calling a “Robin Hood Tax”.
Just like how most of us around the world pay a Value-Added Tax (VAT) on goods and services, this tax would mean that when someone buys a company share at the stock exchange, for example, they would pay a small tax of 0.5%.
The financial sector in itself is not one of the major polluters, but it is a sector that very often thrives in times of crisis. During the pandemic, for example, the number of transactions increased significantly.
Such a financial transaction tax already exists in some countries — including in places with strong financial markets such as Hong Kong or London. France — which is hosting the Summit for a New Global Financial Pact on June 22 and 23 — is even using the funding raised by the tax to fund global health and international climate action.
Who Are the Key Players in Achieving a Solidarity Tax?
Besides the UN Secretary General’s call to action, many activist organizations have been urging their governments to tax their countries’ biggest polluters. But in order for this climate financing solution to become a reality, we need rich countries around the world to take action.
Some governments have begun to make progress in their own countries. Earlier this year, Spain collected €1.45 billion in its first installment of solidarity taxes from large energy companies and financial institutions in the country, both sectors that made multi-billion profits in 2022.
The UK passed a 25% windfall tax on oil and gas producers in the North Sea, while the EU plans to raise more than €140 billion through a similar windfall tax. US lawmakers have also discussed an additional tax on excess profits from oil and gas, but the proposal is unlikely to pass through Congress.
None of these plans, however, yet redirect this money to the world’s most climate vulnerable countries, although they do give money back to domestic consumers.
How Can We Support a Solidarity Tax?
Global Citizens, artists, and activists everywhere can join the call on world leaders to step up now and support new global solidarity taxes that tackle the mounting climate and debt crises.
You can do this by taking action right now to support our Power Our Planet campaign — find out more about the campaign and the actions you can take to join the call.
Specifically, you can join us in taking action to call on the world’s richest countries to step up for the world’s poorest and deliver urgent climate relief now. You can also join our call on the US and Germany to support a shipping emissions tax.
We can all play our part to Power Our Planet, quicken our transition to clean energy, and strengthen our systems to combat climate change and address poverty.