In the maelstrom of the climate negotiations in Copenhagen and Cancun, developed countries agreed on transferring money to developing countries in order to help them adapt to climate change. However, the negotiations unfortunately happened during a difficult period for mobilizing “public resources”; several countries had to break their piggy banks just to save their economies from collapse. Crunched for resources, developed countries argued that the money needed for adaptation could not come from public sources alone, funds would need to come from “innovative sources”.
Among these innovative sources proposed by the Advisory Group on Finance (LINK) before Cancun, an old idea! Everyday, billions and billions of dollars are exchanged on the financial markets. Most of these transactions are not taxed and go freely from a country to another one, from one bank to another – without control. Implementing a tax on these transactions, even at a really small scale (0.05% in one proposal) would help to resolve two major issues of our century: adaptation and more transparency in financial transactions.
The Robin Hood tax campaign in the UK, for example, even at such low levels, could generate more than $32 billion per year on UK transactions alone. In Copenhagen and in Cancun, the industrialised countries agreed to come up with $100 billion per year by 2020 to support developing countries’ adaptation and mitigation efforts. Considering that even $100 Billion annually won’t be sufficient (the World Bank – claims that at least $75 billion annually is necessary for adaptation, alone) it is urgent and necessary to develop and implement this innovative source as a new levy for adaptation and mitigation in the developing world.
Furthermore, this tax has an incredible positive side effects. In order to tax these financial transactions, governments will need more clarity and transparency on the exchanges in these markets. This could help right a financial system that is totally opaque and impenetrable. The current lack of transparency is one of the reasons the last financial crisis took such a massive toll on Western government’s coffers (and not only Western).
What makes me happy in this debate is the position of France (my country). Since the Climate Conference in Copenhagen, France has strongly advocated for an international transaction tax. When it was proposed at the G8, prior to the Copenhagen Conference, the idea saw support from many developed countries, including the UK and Germany, but was strongly rejected by the United States of America. In a session at the Climate negotiations today, a NGO representative wanted to hear the (American) chair of the LCA track, Daniel A. Reifsnyder, gave his view on whether or not such a tax could be adopted in the near term. He answered by: “I don’t see it adopted soon”. The American opposition has not changed yet.
At a level of only 0.05%, this tax will generate enough money to cover the adaptation and mitigation needs of the developing countries without having any side effects on the economics or households around the world.
One question still remains in my mind: when do we start?