Barbados Prime Minister Mia Mottley speaks up for augmenting the resources of climate finance. Credit: Isaac Atkin-Mayne|UK Foreign, Commonwealth & Development Office

By Margaret López
BAKU, Nov 19 2024 (IPS)

The global climate aid fund is not the only option discussed at the World Climate Change Conference (COP29). Imposing a new tax on cryptocurrencies and the plastics industry could help close the money gap needed to address the impacts of climate change, especially in the countries of the Global South.

The pool of proposals presented by the Global Solidarity Levies Task Force at COP29 speaks of a potential combined collection of USD 41 billion per year between these two sectors, which are high-polluting industries in the release of greenhouse gases.

This organization, led by France, Kenya and Barbados, promotes the idea that these new “solidarity levies” are fundamental to making the international arena “more inclusive, equitable, and responsive to the needs of countries most affected by the climate crisis.”

Barbados Prime Minister Mia Mottley noted that these solidarity levies could help raise up to USD 690 billion per year if new taxes on fossil fuel extraction, maritime shipping, and global financial operations are also considered.

“We must change the rules of the game, shock-proof vulnerable economies, and indeed, review debt sustainability while at the same time augmenting resources,” said Mottley at the COP29 in Baku, Azerbaijan.

Crypto Pays

These proposals to increase climate resources include a cryptocurrency tax that can be set between 0.1 percent and 20 percent of financial transactions made with Bitcoin, which is the cryptocurrency that just broke a price record by reaching USD 80,000 per unit, or Tether (USDT), which is the cryptocurrency used for financial hedging in Latin American countries with high inflation such as Venezuela or Argentina.

The collection potential is between 15.8 and 323 billion dollars per year only when considering transactions with cryptocurrencies, according to a report prepared by the International Monetary Fund (IMF).

Another option is to impose a tax on Bitcoin cryptocurrency mining activities, which is an electricity-intensive activity. The proposal is to create a tax of USD 0.045 per kilowatt hour (kWh) of electricity consumption that could raise USD 5.2 billion per year, as reported in the same IMF report.

Although the Global Solidarity Levies Task Forces recognise that the nature of anonymity inherent in the world of cryptocurrencies works against the effective collection of this tax, especially in countries with less monitoring of these operations.

Focus on Plastics

Another of the Global Solidarity Levies Task Force’s innovative proposals speaks about a new tax of between 5 percent and 7 percent of the final price of plastics, which it estimates could help raise between 25 and 35 billion dollars per year.

“Implementing a levy on polymer production has several strategic advantages, particularly when applied upstream in the production chain where the product is homogenous and involves fewer companies. If designed accordingly, the levy could also narrow the price difference between virgin plastics and the currently more expensive recycled or biobased plastics, encouraging a shift toward more sustainable options,” explained the report.

The group’s goal is that the discussion of the Global Plastics Treaty (INC5) at the end of November and December 2024 will also include some mention of taxation for the sector and its interconnection with climate change impacts.

The document presented at COP29 also addresses one new 2 percent tax on the wealth of billionaires. The proposal is that it should be set as a global minimum standard and that a percentage of its collection should be earmarked for climate finance. In the end, Global Solidarity Levies Task Forces propose to shift the debate on climate finance from “voluntary contributions” to “systematic, fair, and impactful funding” mechanisms.

IPS UN Bureau Report