Kenya leads global push to raise Sh322tr from climate taxes

A global task force co-chaired by Kenya has proposed major taxes and levies on polluters.

Different countries are expected to adopt the proposal to raise trillions of dollars annually to be channelled towards climate adaptation and mitigation. 

The taxes and levies on such industries as oil and air travel could mean more pain for consumers around the world, including Kenyans, should they be adopted.

While local pump prices have come down in recent months, they are still high when compared to a year ago.

The International Tax Task Force, which is led and co-chaired by Kenya, Barbados and France, is targeting to raise $2.4 trillion (Sh322 trillion at the current exchange rate) annually in new climate levies, private air travel, financial transactions, maritime fuel, carbon damages, fossil fuel profits and reinvesting fossil fuel subsidies in efforts to avert the negative effects of climate change.

The funds raised through these taxes and levies, the task force said, could provide significant additional revenue and make the financial system fairer and more equitable.

The International Tax Task Force, which met on Wednesday in Washington DC, was established at COP28 by President William Ruto, his French counterpart Emmanuel Macron and Prime Minister Mia Mottley of Barbados, to mobilise finance for equitable climate justice.

It has over the last one and a half years been researching and undertaking public consultations.

“The task force is keen to find practical solutions that raise much-needed financing to tackle climate change while having minimal impact on ordinary people. The goal is to develop innovative sources of financing that can be implemented by any country that wants to make a difference,” said Climate Change Envoy for Kenya and representative to the task force Ali Mohamed after the meeting.

Some tax categories earmarked include a fossil fuel levy or carbon damages tax to be imposed on fossil fuel producers, which could raise $210 billion (Sh27 trillion) annually.

A levy on unexpected fossil fuel profits during periods of exceptional price increases is also under consideration. The committee estimates a 10 per cent tax on 2022 profits would have raised $300 billion (Sh39 trillion).

The committee members are also exploring a phase-out of the fossil fuel subsidy, aiming to divert the existing subsidies to a global loss and damage fund.

The lead countries estimate this could generate up to $43.91 billion (Sh5.7 trillion) annually towards closing the climate funding gap.

Other tax measures include a financial transactions tax to either be administered globally or confined to developed economies, which would contribute $418.8 billion (Sh54.4 trillion) annually and a private air passenger levy aiming to raise about $150 billion (Sh19.5 trillion). They also propose a maritime fuel levy for using fossil fuels in shipping estimating this would bring in $80 billion (Sh10.4 trillion) annually.