When President Obama wrangled an agreement in the waning hours of the Copenhagen climate change summit, left unsaid was how agreed-upon subsidies from wealthy nations to poor nations will be paid.
The ambiguity of the agreement, which calls for $100 billion to be doled out annually beginning in 2020, along with an appeal from several European Union members to tap into the financial markets, has given momentum to the prospect of a worldwide financial transaction tax to help pay the freight for climate change solutions.
Supporters say the money would be a boon to the environmental movement, helping developing nations deal with the ramifications of climate change.
“We support the fund, and we think it needs to be paid for and we think the U.S. ought to do its part,” said Bob Deans, of the National Resource Defense Council. Deans said the council has not taken a specific position on the tax, adding that it is one of many ways aid to developing nations could be funded. “There are several hundred million people right now dealing with the ravages of climate change, so we feel this needs to be funded in some way.”
If imposed, the tax would tack on a fee – 0.25% is the number mentioned most, but some envision it as high as 0.5% – to most financial transactions worldwide, including stock and bond purchases, currency transactions and derivative trades.
Estimates from various groups put the amount of potential revenue from the tax in the hundreds of billions of dollars annually, with more than $170 billion coming from the United States alone.
Also known as the Tobin tax, it is named for late economist James Tobin, who first proposed it in the 1970s when the United States abandoned the gold standard for its currency. Tobin theorized that an additional fee on currency transactions would discourage speculators and keep exchange rates stable.