The finance ministers of Brazil and France pushed this week for a tax on US-dollar billionaires of at least 2% of their wealth each year, with the $250 billion it could raise going to tackle poverty, hunger and climate change.
Brazil’s Fernando Haddad and France’s Bruno Le Maire promoted their proposal at the Spring Meetings of the World Bank and International Monetary Fund (IMF) in Washington, alongside IMF head Kristalina Georgieva and Kenyan finance minister Njuguna Ndung’u.
“In a world where economic activities are increasingly transnational, we have to find new and creative ways to tax these activities [and] thus direct the revenues to common global endeavours such as ending hunger and poverty and fighting climate change,” said Haddad.
He called on world leaders to show “political courage”, embrace “innovative solutions based on evidence” and give their people “hope”. “Without courage, there’s no good politics that can be done,” he said.
Speaking next at a briefing in Washington, Le Maire said overhauling the taxation system was “a matter of efficiency and a matter of justice”, and that a levy on the super-rich should follow already-agreed measures for a digital tax and global minimum corporation tax. “Everybody has to pay his fair share of taxation,” he added.
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French economist Gabriel Zucman is drawing up a proposal for a billionaires tax that will be presented to G20 finance ministers and central bankers when they meet in the Brazilian city of Rio De Janeiro in July.
Haddad, whose government will host that meeting as G20 chair, said he wanted the Group of 20 big economies to issue a statement of support. Le Maire said he hoped the wealth tax would be in place by 2027, ten years after reform of the international taxation system began.
But at a separate press conference in Washington this week, Germany’s finance minister Christian Lindner rejected the proposal. “We do not think it is suitable,” he said. “We have an appropriate taxation of income.” Lindner is from the free-market Free Democratic Party, part of Germany’s governing coalition with the centre-left and Greens.
Who will spend it?
Zucman said not all countries needed to agree to a measure for it to be implemented. If some countries don’t tax billionaires, others can tax them more to make up for it, he said, adding that is how the global minimum corporation tax rate of 15% – which went into effect this year – works.
While Haddad spoke of tackling hunger and climate change, it is not yet clear who would be in charge of spending the money raised from billionaires or what it would be spent on.
Esther Duflo in 2009 (Photos: PopTech)
Esther Duflo, another French economist who addressed G20 ministers this week, told journalists the money should be given to developing countries to deal with climate change.
The best use, she said, is for the money to go to poor people before a climate shock like a heatwave hits, for their communities to protect them through measures like air-conditioned public spaces, and to governments for reinsurance against climate disasters.
From academia to politics
A billionaires tax has long been pushed by progressive economists like Zucman and Joseph Stiglitz. But it has been taken from academia onto the political agenda by the G20 presidency of Brazil’s left-wing government led by President Luiz Inácio Lula da Silva and Haddad.
Zucman presented the proposal at a G20 finance ministers meeting in Sao Paulo in February. It was the “first time these issues of inequality, progressive taxation [and] extreme wealth concentration were discussed in such a forum”, he said, adding that the “vast majority praised Brazil for putting those issues on the agenda”.
The main barrier, he said, is that billionaires will fight back against it. “They have a particular hatred for any kind of tax based on wealth. Why? Because that’s the one tax that really works for them,” he said.
Gabriel Zucman speaks at the World Economic Forum in Davos last year (Photos: World Economic Forum)
But E3G analyst Sima Kammourieh, a former economic adviser to the French government, was more pessimistic about the prospect of a billionaires tax being implemented. She “wouldn’t completely rule it out, but it’s something which could take many many years to come to fruition”, she said.
Although Zucman insisted the tax could go ahead without the US on board, Kammourieh warned that a Donald Trump victory in the US elections in November would be damaging. Joe Biden has called for higher taxes on billionaires, while Trump is one of the world’s nearly 3,000 billionaires.
Elsewhere at the Spring Meetings in Washington this week, France, Kenya and Barbados launched a taskforce to examine how to fill the gap in climate finance for developing and vulnerable countries – excluding China – which will need investment of $2.4 trillion per year by 2030, according to economists Vera Songwe and Nicholas Stern.
The taskforce will consider taxes on wealthy people, plane tickets, financial transactions, shipping fuel, fossil fuel production and fossil fuel firms’ windfall profits. It will also mull redirecting state fossil fuel subsidies to a new global loss and damage fund and windfall taxes on fossil fuel producers when prices are exceptionally high.
The plan is for one or more proposals to be presented to governments with the aim of securing international agreement at the COP30 UN climate summit in Brazil in late 2025.
(Reporting by Joe Lo; editing by Megan Rowling)
The post Global billionaires tax to fight climate change, hunger rises up political agenda appeared first on Climate Home News.
Global billionaires tax to fight climate change, hunger rises up political agenda
With the U.S. bombing Iran and the Strait of Hormuz closed, energy experts say countries transitioning to renewables will be more resilient in the “face of the shock.”
The United States’ war on Iran could fundamentally alter how countries consume and generate energy and hamper international progress in combating climate change, a panel of energy experts said today.
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One month into the US and Israel’s war on Iran, at least 60 countries have taken emergency measures in response to the subsequent global energy crisis, according to analysis by Carbon Brief.
So far, these countries have announced nearly 200 policies to save fuel, support consumers and boost domestic energy supplies.
Carbon Brief has drawn on tracking by the International Energy Agency (IEA) and other sources to assess the global policy response, just as a temporary ceasefire is declared.
Since the start of the war in late February, both sides have bombed vital energy infrastructure across the region as Iran has blocked the Strait of Hormuz – a key waterway through which around a fifth of global oil and liquified natural gas (LNG) trade passes.
This has made it impossible to export the usual volumes of fossil fuels from the region and, as a result, sent prices soaring.
Around 30 nations, from Norway to Zambia, have cut fuel taxes to help people struggling with rising costs, making this by far the most common domestic policy response to the crisis.
Some countries have stressed the need to boost domestic renewable-energy construction, while others – including Japan, Italy and South Korea – have opted to lean more on coal, at least in the short term.
The most wide-ranging responses have been in Asia, where countries that rely heavily on fossil fuels from the Middle East have implemented driving bans, fuel rationing and school closures in order to reduce demand.
‘Largest disruption’
On 28 February, the US and Israel launched a surprise attack on Iran, triggering conflict across the Middle East and sending shockwaves around the world.
There have been numerous assaults on energy infrastructure, including an Iranian attack on the world’s largest LNG facility in Qatar and an Israeli bombing of Iran’s gas sites.
Iran’s blockade of the Strait of Hormuz, a chokepoint in the Persian Gulf, is causing what the IEA has called the “largest supply disruption in the history of the global oil market”.
A fifth of the world’s oil and LNG is normally shipped through this region, with 90% of those supplies going to destinations in Asia. Without these supplies, fuel prices have surged.
Governments around the world have taken emergency actions in response to this new energy crisis, shielding their citizens from price spikes, conserving energy where possible and considering longer-term energy policies.
Even with a two-week ceasefire announced, the energy crisis is expected to continue, given the extensive damage to infrastructure and continuing uncertainties.
Asian crunch
Carbon Brief has used tracking by the IEA, news reports, government announcements and internal monitoring by the thinktank E3G to assess the range of national responses to the energy crisis roughly one month into the Iran war.
In total, Carbon Brief has identified 185 relevant policies, announcements and campaigns from 60 national governments.
As the map below shows, these measures are concentrated in east and south Asia. These regions are facing the most extreme disruption, largely due to their reliance on oil and gas supplies from the Middle East.
Nations including Indonesia, Japan, South Korea and India are already spending billions of dollars on fuel subsidies to protect people from rising costs.
At least 16 Asian countries are also taking drastic measures to reduce fuel consumption. For example, the Philippines has declared a “state of national emergency”, which includes limiting air conditioning in public buildings and subsidising public transport.
Other examples from the region include the government in Bangladesh asking the public and businesses to avoid unnecessary lighting, Pakistan reducing the speed limit on highways and Laos encouraging people to work from home.
Europe – which was hit hard by the 2022 energy crisis due to its reliance on Russian gas – is less immediately exposed to the current crisis than Asia. However, many nations are still heavily reliant on gas, including supplies from Qatar.
The continent is already feeling the effects of higher global energy prices as countries compete for more limited resources.
At least 18 European nations have introduced measures to help people with rising costs. Spain, which is relatively insulated from the crisis due to the high share of renewables in its electricity supply, nevertheless announced a €5bn aid package, with at least six measures to support consumers.
Many African countries, while also less reliant on direct fossil-fuel supplies via the Strait of Hormuz than Asia, are still facing the strain of higher import bills. Some, including Ethiopia, Kenya and Zambia, are also facing severe fuel shortages.
There have been fewer new policies across the Americas, which have been comparatively insulated from the energy crisis so far. One outlier is Chile, which is among the region’s biggest fuel importers and is, therefore, more exposed to global price increases.
Tax cuts
The most common types of policy response to the energy crisis so far have been efforts to protect people and businesses from the surge in fuel prices.
At least 28 nations, including Italy, Brazil and Australia, have introduced a total of 31 measures to cut taxes – and, therefore, prices – on fuel.
Even across Africa, where state revenues are already stretched, some nations – including Namibia and South Africa – are cutting fuel levies in a bid to stabilise prices.
Another 17 countries, including Mexico and Poland, have directly capped the price of fuel. Others, such as France and the UK, have opted for more targeted fuel subsidies, designed to support specific vulnerable groups and industries.
These measures are all shown in the dark blue “consumer support” bars in the chart below.
Such measures can directly help consumers, but some leaders, NGOs and financial experts have noted that there is also the risk of them driving inflation and reinforcing reliance on the existing fossil fuel-based system.
Christine Lagarde, president of the European Central Bank, spoke in favour of short-term measures to “smooth the shock”, but noted that “broad-based and open-ended measures may add excessively to demand”.
Measures to conserve energy, of the type that many developing countries in Asia have implemented extensively, have been described by the IEA as “more effective and fiscally sustainable than broad-based subsidies”.
So far, there have been at least 23 such measures introduced to limit the use of transport, particularly private cars.
These include Lithuania cutting train fares, two Australian states making public transport free and Myanmar and South Korea asking people to only drive their cars on certain days.
Clean vs coal
At least eight countries have announced plans to either increase their use of coal or review existing plans to transition away from coal, according to Carbon Brief’s analysis. These include Japan, South Korea, Bangladesh, the Philippines, Thailand, Pakistan, Germany and Italy.
These measures broadly involve delaying coal-plant closure, as in Italy, or allowing older sites to operate at higher rates, as in Japan – rather than building more coal plants.
There has been extensive coverage of how the energy crisis is “driving Asia back to coal”. However, as Bloomberg columnist David Fickling has noted, this shift is relatively small and likely to be offset by a move to cheap solar power in the longer term.
Indeed, some countries have begun to consider changes to the way they use energy going forward, amid a crisis driven by the spiralling costs of fossil-fuel imports.
Leaders in India, Barbados and the UK have explicitly stressed the importance of a structural shift to using clean power. Governments in France and the Philippines are among those linking new renewable-energy announcements with the unfolding crisis.
New renewable-energy capacity will take time to come online, albeit substantially less time than developing new fossil-fuel generation. In the meantime, some nations are also taking short-term measures to make their road transport less reliant on fossil fuels.
For example, the Chilean government has enabled taxi drivers to access preferential credit for purchasing electric vehicles (EVs). Cambodia has cut import taxes on EVs and Laos has lowered excise taxes on them.
Finally, there have been some signs that countries are reconsidering their future exposure to imported fossil fuels, given the current economics of oil and gas.
The New Zealand government has indicated that a plan to build a new LNG terminal by 2027 now faces uncertainty. Reuters reported that Vietnamese conglomerate Vingroup has told the government it wanted to abandon a plan to build a new LNG-fired power plant in Vietnam, in favour of renewables.
The post Iran war analysis: How 60 nations have responded to the global energy crisis appeared first on Carbon Brief.
Iran war analysis: How 60 nations have responded to the global energy crisis
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