Rich Countries Could Raise $5 Trillion a Year for Climate Finance, Study Shows

A recent study by Oil Change International reveals that wealthy nations could generate up to $5 trillion annually for climate finance through simple measures such as windfall taxes on fossil fuels, ending harmful subsidies, and introducing a wealth tax on billionaires. This is five times the amount poorer countries are asking for—$1 trillion annually—to address climate change.

Developing nations need these funds to cut greenhouse gases and deal with the consequences of extreme weather. However, wealthy countries have proposed much smaller sums in the form of climate finance, often offering low-interest loans from institutions like the World Bank. Some are discussing new ways to generate finance, such as a tax on shipping and frequent flyers. Brazil, as G20 president, has suggested a 2% wealth tax on billionaires.

According to the research, a wealth tax on billionaires could generate $483 billion, while a financial transaction tax could raise $327 billion. Further, taxes on sales of luxury goods, tech, and arms could contribute an additional $112 billion, while redirecting 20% of military spending would unlock $454 billion globally. Ending subsidies to fossil fuels could free up $846 billion worldwide, and additional taxes on fossil fuel extraction could yield $618 billion.

Laurie van der Burg from Oil Change International emphasized that rich countries can unlock trillions by eliminating fossil fuel subsidies and ensuring polluters pay their fair share. Similarly, Alejandra López Carbajal of Transforma Climate Diplomacy pointed out that the framing of the climate finance debate as a resource scarcity issue by rich nations is misleading, given the substantial resources available.

Finance will be a key topic at the upcoming UN Climate Summit (Cop29) in Baku, Azerbaijan, in November. Brazil's president, Luiz Inácio Lula da Silva, plans to push for stronger UN leadership in global climate and environmental governance. With attention on global carbon targets, the International Energy Agency has urged for a shift from biomass and coal, especially in developing countries, and for more efficient energy standards in buildings and transport systems worldwide.

Despite growing commitments to net-zero targets, many regions and companies still lag behind. For example, Tesla has not yet published its plan for achieving net-zero emissions, and Azerbaijan, which will host Cop29, lacks an emissions reduction target.