Introduction
‘Solidarity Levies’ are taxes on industries and sectors which emit high levels of greenhouse gases. Their function is to raise money for climate financing whilst at the same time encouraging high-polluting industries to clean up their processes and prioritise sustainability.
The clearest and most likely sectors for large-scale international solidarity levies to be implemented in are the aviation, maritime, and fossil fuel industries. There are already numerous levies in place around the world, but typically at a domestic and localised level. For example, more than 30 countries around the world currently implement a financial transaction tax, and at least 21 have a levy on airplane tickets. Further small-scale initiatives such as the International Oil Pollution Compensation Fund have been cited as having demonstrated ‘the feasibility of an international redistribution mechanism’.
The next crucial step will be to implement a feasible and scalable system that can be utilised multilaterally and globally. One of the largest advantages of solidarity levies are their equitability, as they ensure industries and individuals contribute to financing the struggle against the climate crisis based on the pollution they produce.
Shafik Hebous, Deputy Division Chief in the IMF’s fiscal affairs department and author of IMF research concerning cryptocurrency, has specified that ‘the fundamental idea’ of solidarity levies is ‘to increase the cost of pollution so that [those emitters] internalise the cost they impose on others’.
Global Solidarity Levies Task Force: For People and the Planet (GSLT)
The Global Solidarity Levies Task Force (GSLT) has an ostensible two-year lifespan and was created in 2023 by France’s Emmanuel Macron, Barbados’s Mia Mottley, and Kenya’s William Ruto. It aims to advance and consider options for solidarity levies to be implemented on an international scale and prioritises the idea of using the revenue gained from solidarity levies for climate finance. The task force is supported by organisations such as the IMF, World Bank, UN, UNCTAD, OECD, G20, G24, European Commission, African Union, and Coalition of Finance Ministers.
The GSLT was initially launched at COP29 in December 2023, and intends to explore ‘feasible, scalable, and sensible options for climate finance’ to be implemented internationally, thereby helping nations fulfil their commitments to the Paris Agreement.
Over the past year, the task force has launched impact studies and researched options for five possible solidarity levies. These levies were originally a Fossil Fuel (carbon damages) Levy, a Fossil Fuel (windfall profits) Levy, a Financial Transactions Levy, a Private Air Passenger Levy, and a Maritime Fuel Levy.
The GSLT’s research aimed to deduce the technical and political feasibility of each proposed levy, in addition to exploring other unconsidered avenues for further examination. At COP29 the GSLT revealed that although it was beyond their original remit, they had started exploring the possibility of an ultra-high net-worth individual levy, a plastics production levy, and a cryptocurrency levy.
In Baku, the three co-chairs of the GSLT issued a joint declaration agreeing next steps and included solidarity levies as a point of discussion in the negotiations surrounding climate finance. They also launched the Coalition for Solidarity Levies, a group wherein supporting nations can follow, consult, and engage with the GSLT’s work. As of today, the members of the Coalition are France, Barbados, Kenya, Antigua & Barbuda, Colombia, Denmark, Djibouti, Fiji, Marshall Islands, Senegal, Sierra Leone, Somalia, Spain, and Zambia. The plan is to attract further members and for this broader coalition to ‘evolve’ into numerous separate groups, with nations deciding which solidarity levy proposals they support.
US representatives from Biden’s government were allegedly supportive of the GSLT and the notion of solidarity levies at the COP29 summit, but the US is extremely unlikely to implement any green taxes. The recently re-elected Donald Trump, a renowned climate sceptic, historically opposes routing money to other countries in the name of climate change.
The GSLT plans to publish impact assessments for public consultation in the first quarter of 2025. They have stated that they will consist of concrete and scalable proposals which raise at least $100 billion/year, coupled with clear assessments of potential externalities. At the 2025 International Conference on Financing for Development (30th June – 4th July), a ‘coalition of the willing’ will begin negotiations and reach an agreement on the final design and outreach plan. Finally, to conclude the task force’s work, member countries will issue a series of joint declarations at COP30 in Brazil, agreeing to implement a new international solidarity levy (or levies).
The GSLT recently published an interim report detailing which areas and industries they felt could have levies implemented in (shown in the table below). Given the variations and industry differences, the levy proposals will be further discussed in separate sections.
Type of Levy | Quantity of Levy | Potential Revenue Generation per Annum |
Maritime Shipping | $150 – 300/tCO2e | $127 billion |
Aviation Kerosene | €0.33/Litre | $19 billion |
Aviation Ticket | $9 for second flight rising to $177 for twentieth flight each year | $121 billion |
Fossil Fuel Extraction | $5/tCO2e | $216.2 billion |
Fossil Fuel Profit | 50% tax on windfall profits of the 14 biggest fossil fuel companies | $173.4 billion |
Financial Transaction | 0.3 or 0.5% nominal rate | $165 – 275 billion, $423 billion if tax was extended to derivatives and intraday trade |
Carbon Pricing | Cost applied to carbon pollution | $104 billion in 2023 |
Coordinated Minimum Wealth | 2% tax on billionaires | $200 – 250 billion |
Cryptocurrency | $0.045/kWh | $5.2 billion |
Plastics Production | $60 – 90/tonne of primary polymer production | $25 – 35 billion |
TOTAL | Various | $ 1,009,800,000,000 – $1,327,800,000,000 (1 – 1.3 trillion USD) |
Although the GSLT has specified that revenues gained will go towards climate finance, assisting less developed nations in adapting to extreme weather and green energy projects, there is division over where the funding would go. Some officials, for example, have suggested that the money returns directly to industries in order to help them decarbonise quicker – the maritime industry is one of the most obvious examples where this approach could be beneficial.
It is certain that the potential revenue gains from solidarity levies are extremely significant – the two graphs below demonstrate the extraordinary quantity of money that solidarity levies could bring to the fight against climate change.
Maritime Sector
The shipping industry is responsible for roughly 3% of total global emissions, and the solidarity levy closest to agreement at this point in time is one on maritime fuel usage.
Governments are set to debate a series of measures at the annual meeting of the International Maritime Organisation in April 2025, including the introduction of solidarity levies.
There are currently three model proposals, each with significant differences and illustrated in the graph below. The lowest proposal, that of $18.75/tCO2e, is proposed by a number of countries which include the Bahamas and Liberia. The EU and Japan favour a middle ground of $100/tCO2e, whereas the Pacific Island states and Caribbean nations support a figure of $150/tCO2e which rises every five years.
Assuming a figure of $150 – 300/tCO2e, this levy on fuel could generate $127 billion each year from 2027 – 2030. If the predictions of UNCTAD (UN Trade and Development) are correct, then this revenue would fall to $103 billion from 2031 - 2040 and $36 billion from 2041 – 2050 as ships become less polluting. It is worth noting that according to UNCTAD’s upper estimate, the cost of decarbonising the entire global maritime industry would be at most $118 billion per year (shown on the graph below as a horizontal blue line).
Aviation Sector
Various airlines around the world already charge a ‘green tax’ on passengers. For example, surcharges from Lufthansa and Swiss Air range from €1 - 72 depending on the length of flight and class travelled. With the increasing focus on net zero, and the urgent need for the aviation industry to reach its climate change goals, more airlines are considering charging passengers an ‘environmental cost surcharge’.
The new proposals tend to focus on frequent flyers, increasing each time an individual flies in a year-long time period. However, another option under consideration is a modular rate depending on the class of ticket purchased. At COP29 in Baku, the GSLT advocated for both a ticket levy, ‘which would be mandatory at a higher rate on luxury tickets (business, first, private)’, coupled with ‘a frequent flying levy with a rate that would progressively increase with the number of flights taken by a passenger each year’.
With frequent flyers, the GSLT's proposal was that for a second return flight within a year passengers would be charged $9 on top of their airfare. This surcharge would then progressively increase for each additional flight, up to $177 for the twentieth flight within the same year. This green tax is estimated to raise around $121 billion each year.
The suggested flat levy on ticket prices, ‘a levy of $30 on economy seats and $120 on premium class seats’, would raise $164 billion/year - assuming global coverage on both domestic and international flights. A staggering statistic is that this levy would reach $58 billion per annum even if the tax was applied only to high-income countries and international flights.
Environmental campaign groups such as Stay Grounded and the New Economics Foundation have been pushing for frequent flyer taxes for a considerable length of time. One study conducted by Stay Grounded found that 52% of respondents in Western Europe do not fly at all in any given year, in comparison to 11% who fly more than three times (return and not singular flights). Travel habits are further skewed towards the wealthy. In households earning over €100,000 euros or equivalent, 35% take three of more return flights per year, as compared to just 5% of households which earn €20,000 or less.
A third option for solidarity levies in the aviation sector is to tax the use of kerosene – the fuel used in aviation. This levy could be implemented on a global scale, or solely on private jets. If implemented on all aircraft then a levy of $0.35/litre would raise nearly $134 billion every year. Even if solely private jets had to pay the levy, then nearly $3 billion would be raised per annum.
Fossil Fuel Sector and Plastics Production
Countries already impose levies on fossil fuel usage. Indirectly, fuel brought at pumps is taxed through VAT, carbon taxes and emissions-trading schemes, whereas royalties and taxes on oil companies delineate a direct levy on the use of fossil fuels.
Further revenues could be generated through a levy on extraction or ‘windfall’ taxes on energy company profits. Action Aid published a report which stated that a 50% tax on windfall profits of the 14 biggest fossil fuel companies by market value would have generated $173 billion over the past two years.
Fossil fuel extraction is a clear area for taxation. A 2024 Greenpeace report showed that a Climate Damages Tax of $5/tCO2 extracted would generate an estimated $216 billion every year given current rates.
A levy on plastics production was not in the original remit of the GSLT, but at COP29 the task force announced that they were assessing it's viability along with a cryptocurrency levy and a ultra-high net-worth individual levy.
It is important to note that the levy on plastics producers is slightly different to the other proposals - the GSLT confirmed that they were evaluating plastics producers in the context of negotiations for an internationally legally binding instrument on plastic production.
Although it is difficult to come up with an accurate estimate, the GSLT have theorised that a tax of $60 - 90/tonne of primary polymer production could raise a sum in the region of $25 - 35 billion each year.
Financial Sector
A 0.3 or 0.5% rate of taxation on financial transactions concerning fossil fuels, if imposed globally, would raise a sum in the region of $165 - 275 billion a year. If this tax was extended to derivatives and intraday trade, then the figure could reach a total of $423 billion.
Multiple countries already impose a tax of some kind on financial transactions involving fossil fuels. However, the revenue gained from these current levies does not necessarily go towards the fight against climate change. One of the primary barriers to this levy may well be what the revenue gained is utilised for.
Ultra-high net-worth Individuals
The 2024 G20 summit in Rio de Janeiro raised an important question. All nations present agreed that it was essential for governments ‘to ensure that ultra-high net-worth individuals are effectively taxed’. The resultant communique from the summit suggested that multilateral cooperation could involve ‘exchanging best practices, encouraging debates around tax principles, and devising anti-avoidance mechanisms’.
A minimum effective taxation standard on billionaires of 2% could make $200 - 250 billion a year. Although not within the original remit of the GSLT, the task force felt that it should still be recommended given the increasing discourse surrounding ultra-high net-worth individuals avoiding tax to unprecedented levels.
Cryptocurrency
The quantity of energy that bitcoin and crypto mining uses is staggering. One source has theorised that mining bitcoin may have accounted for close to 1% of global energy demand in 2023, and The Cambridge Bitcoin Electricity Consumption has postulated that the Bitcoin network uses an extortionate 175.14 TWh/year. This energy usage is more than a majority of the world’s countries use individually per annum, and is roughly equivalent to the energy usage of the entirety of Australia or Spain. In comparison, Poland uses around 158.2 TWh/year, whereas Egypt uses 168.3TWh/year.
Projections made by the IMF’s Shafik Hebous suggest that the electricity demands of crypto miners will remain consistent or even increase.
He believes that cryptocarbon alone may contribute to 0.71% of global CO2 emissions, and that when emissions from large data centres are included the figure reached could be 1.2% of the global total.
Implementing a solidarity levy on cryptocurrency would not solely provide funding, but also incentivise crypto mining companies to clean up their operations and reduce energy usage.
Kazakhstan is one of the world’s top Bitcoin mining hubs. According to the Cambridge Centre for Alternative Finance, in January 2022 the US contributed 37.84% of the total global Bitcoin hash rate, as compared to 21.11% in China and 13.22% in Kazakhstan. The Kazakhstani government introduced taxes on digital mining from January 1 2022 based on electricity consumption by mining entities, and over the course of the year received 3.07 billion tenges (approximately $7 million) in tax payments. It is important to note that the motivation behind the introduction of this tax was not focused on climate, but rather on tax evasion and concerns surrounding electricity inequality. Nonetheless, the success of the tax suggests that an international standard could be implemented effectively at minimal cost.
Research conducted by the IMF found that a corrective tax on crypto to make up for the climate impact it causes would be $0.045/kWh. This figure is based on the consequences of GHG emissions contributing to climate change and exacerbating extreme weather events, predominantly through the usage of electricity. If other considerations are taken into account, such as air pollution, the necessary corrective tax figure rises to $0.085/kWh.
Authenticating a single Bitcoin transaction requires as much electricity as a person in Ghana might use over three years, or as a person in Germany might use in three months. This extraordinary energy usage results from the fact that Bitcoin miners operate big data centres which are filled with energy-intensive specialised hardware working around the clock. A solidarity levy could incentivise miners to use more efficient hardware, or alternatively turn to less energy-intensive methods for validating transactions.
As mentioned above, a significant proportion of bitcoin mining happens in the USA. The Biden administration originally proposed a 30% tax on crypto miners’ electricity consumption. However, this proposal is likely to fail given the re-election of Donald Trump. Trump is a known climate sceptic, and his election campaign was partially funded by prominent crypto investors. Since his victory in the election, the price of Bitcoin has soared with expectations that he will look favourably on the industry.
Conclusion
In conclusion, solidarity levies represent a transformative opportunity to address climate change across a variety of sectors and industries. By targeting areas with significant environmental footprints, these levies hold polluters accountable and also generate substantial funding for global climate initiatives - whether climate finance or decarbonisation.
The potential revenue to be gained, exceeding $1.3 trillion annually, could help bridge critical gaps in climate finance, enabling developing nations to adapt to the growing impacts of extreme weather while accelerating the global transition to clean energy. It is worth nothing that at COP29, developing nations and IMF research argued that $1 - 1.3 trillion was the necessary figure for climate finance worldwide.
However, the success of these levies hinges on successful implementation and multilateral cooperation on an almost unprecedented scale. Transparent allocation of the funds gathered will also be crucial.
Although political and logistical challenges remain, the momentum created by the GSLT and the expanding 'coalition of the willing' provides a hopeful outlook. As the world moves toward decisive action concerning climate change at COP30 and beyond, solidarity levies are one of the methods which may help realise the long-held dream of sustainable, equitable, and effective climate finance.
References
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