Fossil fuel tax proposed to cover rising costs of wild weather

A 'climate damages tax' levied on oil, gas and coal companies could raise $300 billion a year by 2030 to bail out hard-hit communities, green groups say.

south kalimantan coal project2
Coal mining project by one of the country’s largest fossil fuel company in South Kalimantan, Indonesia. Image by Dominik Vanyi,unsplash

Taxing the extraction of fossil fuels could help pay for the growing costs of damage from harsher storms, wildfires, floods and rising seas, while providing a stronger incentive to wean the world off carbon-heavy energy, green groups said on Monday.

A “climate damages tax” levied on oil, gas and coal companies could raise $300 billion a year by 2030 to bail out communities bearing the brunt of global warming, said a proposal supported by WWF, Practical Action and others.

The tax would lay the cost of rising disaster losses directly on the industries most responsible for them, they said in a report released at UN climate negotiations in Poland.

Besides assisting those in need overseas, at least half of the funds raised from the government-levied tax would help poorer groups at home switch to green jobs, energy and transport, its backers said.

Spending on social justice measures is seen as crucial to avoiding the kind of protests France has seen in recent weeks over rising living costs, sparked partly by hikes in fuel taxes.

“The injustice of climate change is that the impacts are felt first and hardest by those with the least responsibility for its causes,” said Ralph Regenvanu, Vanuatu’s foreign affairs minister.

His Pacific island nation lost 64 percent of its GDP - about $450 million - during Cyclone Pam in 2015, and has struggled to recover financially, he noted.

“We cannot sustain the level of public expenditure we need to keep recovering,” he said.

As the pace of disasters picks up, “we’re now on a permanent state-of-emergency footing” and new sources of finance are needed to help meet costs, he said.

Saleemul Huq, head of the Bangladesh-based International Centre for Climate Change and Development, said that with cash to help poorer countries in short supply, fossil fuel companies that profit from driving climate change are an obvious source of additional money.

Right now, “the fossil fuel industry is causing this problem and getting out of paying for it”, he added.

From 2021, the proposed tax would levy $5 on each tonne of heat-trapping emissions expected to be generated by oil, coal and gas deposits that are extracted from the ground.

The money would flow through existing national systems for royalty payments where fossil fuel companies operate, with a share going through a body set up under the Green Climate Fund to help pay for losses around the world, the report said.

Part of the levy would stay in nations with fossil fuel industries, to help their workers find new jobs and pay for cleaner infrastructure for low-income communities, it said.

Poorer fossil fuel-producing states, such as Indonesia and Nigeria, would keep all the funds raised, with middle-income nations such as China and Colombia retaining a larger share of income than richer countries, which would keep about half.

The injustice of climate change is that the impacts are felt first and hardest by those with the least responsibility for its causes.

Ralph Regenvanu, foreign affairs minister, Vanuatu

Lawsuit ‘tsunami’

The tax would rise by $5 a year until 2030, jumping to a $10 annual increase after that through 2050, when fossil fuels must be largely phased out of global energy systems to meet government commitments made under the 2015 Paris climate accord.

“The world must wean itself off fossil fuels if we are to protect the planet - and we must do so quickly,” Manuel Pulgar-Vidal, WWF’s climate and energy head and former Peruvian environment minister, said in a statement supporting the tax.

Julie-Anne Richards, one of the report’s authors, said the tax was “a practical way to address the injustice at the heart of climate change”.

The fossil fuel industry makes “hundreds of billions in profits while the true costs of their products are paid by the rest of society”, she added.

There are precedents for such taxes on tobacco, oil spills and the nuclear industry, she noted.

And as losses mount from wilder weather, a fossil fuel levy could become more politically palatable, particularly as companies face a rising tide of costly lawsuits over their responsibility in causing climate change.

“This tsunami of litigation that is coming down the line will make the climate damages tax look more appealing,” Richards said on the sidelines of the UN talks.

Storm damage in the United States and the Caribbean alone last year amounted to more than $220 billion, representing nearly two-thirds of global losses caused by natural disasters in 2017, the United Nations said last week.

This story was published with permission from Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, resilience, women’s rights, trafficking and property rights. Visit


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