Environmentalists urge Philippines to back proposed US$700 billion tax on fossil fuel giants to support loss and damage fund

A levy on carbon majors is being pushed by green groups as one of the sources to operationalise the loss and damage fund in ongoing board meetings leading up to COP29.

rice fields drought
An aerial view of Apsatan village in Gerona, Tarlac, a rice-producing agricultural land impacted by El Niño in the Philippines. Image: Alecs Ongcal/ Greenpeace

Environmentalists have called on Philippine representatives to the board of the United Nations Framework Convention on Climate Change’s (UNFCCC) loss and damage fund to support a mechanism that can help collect money to cover the costs of helping vulnerable nations cope with climate risks. 

Wealthier countries should implement the Climate Damages Tax (CDT) on fossil fuel companies, which could potentially generate over US$700 billion in revenue by 2030. This money could be used as an alternative source for the loss and damage fund, according to a report released on Tuesday by nonprofits including Greenpeace, Action Aid, Climate Action Network, among others. 

“It is very crucial for the Philippines to support the climate damages tax mechanism being a member of the loss and damage board. It can interject its opinion on how the fund should be operationalised,” Jefferson Chua, a Greenpeace campaigner, told Eco-Business during the report’s launch.

Rosa Perez, an independent climate change specialist who was also at the launch, said during the transitional committee meetings in 2022, developing countries had vied for the loss and damage fund to be supplied via public sources, and with direct access for countries in need.

The climate damage tax would be a “good alternative and innovative source” for the loss and damage fund, said Perez, who was the Philippines’ representative to the loss and damage fund’s transitional meetings , before its operationalisation at COP28 last year, 

The Philippines secured a seat on the loss and damage fund’s board at the COP28 summit, and will represent the Asia Pacific Group as a full member for 2024 and 2026.

Jefferson Chua and Rosa Perez

Greenpeace campaigner Jefferson Chua and climate scientist Rosa Perez at the launch of the Climate Damages Tax report on 7 May in Quezon City, Philippines. Image: HAF

The board held its first meeting in Abu Dhabi last month, with the Philippines represented by Mark Dennis Joven, a former undersecretary at the Philippines’ Department of Finance, and Philippines Ambassador to the United Arab Emirates Leila Lora-Santos.

In the run up to COP29 in Azerbaijan this November, the board is currently finalising arrangements such as funding sources, means of access and which of the 125 developing member countries would be eligible to  receive the money. 

The proposed climate damages tax would be a fee on the extraction of each tonne of coal, barrel of oil, or cubic metre of gas, calculated at a consistent rate based on how much CO2e is embedded within the fossil fuel. Fossil fuel companies, which already pay royalties to the states they operate in, would pay an extra amount on the volume they extract to the loss and damage fund.

The report recommended that the climate damages tax be introduced in advanced economies which are part of the Organisation for Economic Cooperation and Development as early as this year, at an initial rate of US$5 per tonne of CO2 emissions, then increasing by US$5 per tonne each year. If implemented at this rate, the tax, would raise US$44.6 billion for the fund in the first year, US$90.1 billion the next and US$119.8 billion by the third year.

By the end of this decade, the cumulative revenue collected from OECD countries through this proposed tax would be about US$892 billion. 

The environmentalists who authored the study recommended a domestic dividend of 20 per cent of this figure to be channelled to the respective OECD countries climate action plans, helping to pay for the necessary support for workers and communities to transition away from fossil fuels, towards green energy and transport.

This would still leave about US$714 billion from OECD countries as their contribution to the loss and damage fund. 

Loss and damage fund not for adaptation and mitigation

The loss and damage fund must be used as an emergency fund, not as a means to finance climate adaptation or mitigation, said Perez, who was also a lead author for the 2022 Intergovernmental Panel on Climate Change (IPCC) report.

Adaptation refers to risk reduction measures like early warning devices, building dykes and  retrofitting infrastructure, while mitigation includes development of renewable energy technology.

“[The loss and damage fund] has to be done with rapid disbursement like providing emergency cash assistance to those who lost everything during a typhoon or funding social protection programmes during severe droughts,” Perez told Eco-Business.

“It cannot be used for adaptation and mitigation activities that could be funded by other financial mechanisms, such as the Green Climate Fund (GCF) where it may take longer  to be disbursed.”

The GCF is a mechanism that finances the adaptation and mitigation needs of poorer nations with annual pooled contributions from developed countries from the UNFCCC totalling a minimum of US$100 billion starting in 2020.

The GCF disbursement can be a tedious process from project origination and approval of the proposal, which could take up to two years.

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