One of the headlines coming from COP30 in Belém over the past week has been a discussion on adding a so-called ‘solidarity’ tax to airline tickets. This has, in fact, not been part of the official UNFCCC negotiations, but the COP process has attracted a whole range of side discussions over recent years that are not included in the main body of deliberations. On the sidelines of COP28 in Dubai, the International Taxation Task Force was established by the leaders of France, Kenya and Barbados and a few months later it changed its name to the Global Solidarity Levies Task Force (GSLTF) (presumably they thought the word tax would scare people away).
It was established as part of a broad and important process to look at sources of climate financing. At COP29 in Baku a year later, the world’s governments agreed on a new target for climate finance: $1.3 trillion a year by 2035 to fund climate mitigation, adaptation and loss and damage, predominantly in the developing world. Around $300 billion will come from public sources (direct contributions from mainly the developed economies). The rest would be a mix of private investment in green projects, multilateral development banks and so-called ‘innovative sources’ such as taxes on billionaires, oil and gas company profits, financial transactions, the shipping sector and aviation.
The GSLTF was given two years to explore options in these innovative areas, but so far really has only concentrated on one: air transport. They have decided to focus on premium passengers on commercial flights — business and first class — and private jet use. Those passengers make up around 5% of all air travellers. The GSLTF team have been calling this a tax on luxury travel, although somewhat ironically, the last GSLTF meeting was held at a truly luxurious French chateau a few weeks before COP30. One has to wonder if the delegates from those developing countries in attendance at this all-expenses-paid retreat pondered luxury taxes on fine wines, Birkin bags and Chanel perfumes at the same time?
Nevertheless, they have progressed with the idea of a premium flyers tax and gave an update to COP30 over the last weekend. The COP30 update was fairly short on details and there was no time for questions, so I thought it might be useful to share the questions I was planning to pose to the meeting:
Is this really solidarity?
The UN Secretary General’s climate special advisor, Selwyn Hart, noted during the briefing the importance of transparency in the process. Part of that philosophy will be transparency over where the money raised is being spent. How is the GSLTF guaranteeing that the revenue from these new taxes will actually go to developing nations? The main proponent of this new tax is France, which has had a solidarity levy on air passengers (not just premium flyers) since 2008. For the past couple of years, this money has been redirected to help fund the massive fiscal hole in the French budget and has not been used for activities in developing nations. So much for solidarity. So the question is, will those developed nations which have signed up so far (France and Spain) really be using this money to help developing nations in a steady flow of finance? Or are they pushing developing nations to take the burden (five out of the nine countries which have joined this coalition actually have UN “least developed country” status) and making themselves look good in the process?
Where will the money be used?
The GSLTF is being sold as a climate project, but are there guarantees that the money will actually be used for climate purposes, or simply be redirected into national treasuries (the way France has done)? There is a strong likelihood that this will not reduce aviation CO2 emissions at all, which is the core focus of the market-based measure that already exists for international aviation — ICAO’s CORSIA. That is already established, has been agreed by 193 countries through the United Nations, has a robust accounting methodology and sustainability standards system and is already generating financing for climate mitigation projects in developing economies. The time spent on developing the GSLTF could more usefully go towards encouraging more States to support CORSIA implementation through the generation of CORSIA emissions units.
Which countries are involved?
The GSLTF has been engaged in a significant lobbying effort to try and bring more countries on board since its official launch in June, when eight member countries were announced (France, Spain, Kenya, Barbados, Somalia, Benin, Sierra Leone, Antigua & Barbuda). Since then, Barbados seems to have had second thoughts and is no longer included on the literature. Antigua & Barbuda is now only listed as an observer. Djibouti and Nigeria have joined. But there has not been a groundswell of support after months of lobbying efforts by the GSLTF, which has been courting governments around the world. Confirmed members of the coalition are now Benin, Djibouti, France, Kenya, Nigeria, Sierra Leone, Somalia, South Sudan, and Spain.
What are the details of the new tax?
Is the coalition all going to implement one standard tax rate? What will it be? Has a proper impact assessment been done on the effect that might have on travel and connectivity? Because all those countries signing up to this new tax are being a little irresponsible agreeing to implement a tax before assessing what effect it may have. I can’t help but think the GSLTF staff (which is run by a European environmental group) are giving promises of billions of dollars of funds to least developed countries without the full picture being divulged. Additionally, will this new tax revenue all flow through a new international fund? If so, who decides where the money is allocated?
Is this proportional?
There are at least a dozen estimates of how much could be raised through this premium flyers levy. At the GSLTF briefing alone we heard estimates of $140 billion, $123 billion, $38 billion, $23 billion, $17 billion and $34 billion a year. It all depends how many countries apply it and at what level of course. But it is an interesting comparison with the total profits made by every airline in the world last year ($32.4 billion — in what was actually a good year for airlines) and even the amount of ticket taxes paid by passengers already (over $60 billion — whilst aviation fuel itself is generally not taxed it doesn’t mean that aviation as a whole is untaxed, far from it). The GSLTF has developed a simplistic simulator with a basic fundamental flaw — it doesn’t allow you to choose “$0” as an option, so you are stuck with a ticket tax AND a fuel tax which would not be implemented at the same time. It doesn’t allow you to only put the tax on premium passengers and includes the highlight price sensitive economy passenger. Once again, overpromising on the amount that could be raised. It also doesn’t show what the negative effects might be of such a tax on connectivity, business and family connections of such a tax.
Nobody is saying that climate finance is not important. It is vital to the fight against climate change and developing economies need all the help they can get to mitigate and adapt for the future. After two years of work, the GSLTF has only just started to look at other options including a cryptocurrency levy (good luck with that — isn’t the whole point of cryptocurrencies to evade control and taxes?) and a financial transaction tax.
At the GSLTF briefing in Belém over the weekend, the idea of a fossil fuel levy was said to be “too politically difficult” and yet everyone knows the fossil fuel companies are at the heart of the climate crisis. They also are making record profits (just the 10 largest oil and gas companies made $226.5 billion in profits last year alone). Surely the GSLTF should have spent the last two years finding a way to ensure they are part of the financing solution?
Or maybe the European roots of this (the work is being financed by the European Climate Foundation) are clouding the view of GSLTF. After all, the French luxury goods behemoth LVMH (home of champagnes, watches, $60,000 handbags and perfumes) made a profit of $20.4 billion last year. That’s just one luxury goods company compared to every airline in the world making a combined $32.4 billion.
Maybe it really is time for a tax on champagne?