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Saturday, June 3, 2023
Analysis by Sanjay Suri
ST. ANDREWS, Nov 7 2009 (IPS) - It has been a bad week for the climate change summit in Copenhagen next month. During the week the last meeting in the formal round of pre- Copenhagen talks collapsed in Barcelona. Then, meeting here on the weekend, the G20 finance ministers put the seal on that failure by failing to agree a financial package.
The G20 is clearly a platform, not a group. And inevitably, the developed nations as they are labelled, and the emerging economies, stuck to their positions, that have conflict and differences built into them.
It is in the nature of these summits that – after all this – everyone still announces an agreement.
“We committed to take action to tackle the threat of climate change and work towards an ambitious outcome in Copenhagen, within the objective, provisions and principles of the United Nations Framework Convention on Climate Change (UNFCCC),” the G20 ministers declared.
“We discussed climate change financing options and recognised the need to increase significantly and urgently the scale and predictability of finance to implement an ambitious international agreement.
“To deliver this financing, coordinated equitable, transparent and effective institutional arrangements will be needed. Coordination of support for country-led plans and reporting of this support should be ensured across all financing channels, multilateral, regional and bilateral. We discussed a range of options and, recognising that finance will play an important role in the delivery of the outcome at Copenhagen, we commit to take forward further work on climate change finance, to define financing options and institutional arrangements,” announced the ministers.
The meeting in St. Andrews in fact “turned out to be a mostly irrelevant sideshow on the way to the talks in Copenhagen,” says Richard Dixon, director of WWF Scotland. “This is a group that can throw money at collapsing banks but cannot find adequate figures for the far worse challenge to the global economy of a collapsing climate system.”
The collapse came after British Prime Minister Gordon Brown stepped into the meeting to make what many considered a bold, if carefully worded, suggestion.
Brown spoke sharply against the culture of banks, saying, “it cannot be acceptable that the benefits of success in this sector are reaped by the few, but the costs of its failure are borne by all of us.” He then mentioned a financial transactions tax as a possibility, that would also tax banks.
“I believe we should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society. There have been proposals for an insurance fee to reflect systemic risk, or a resolution fund, or contingent capital arrangements, or a global financial transactions levy.”
The fact that he mentioned the last of these is significant, arising as it does from ideas of the Tobin tax. Proposed by economist James Tobin, this would be a tax on all currency trade across borders. Brown spoke beyond that of a “global financial transactions levy.”
The yield could be massive. A tax of 0.05 percent on financial transactions could produce 700 billion dollars a year, Oxfam estimates. This would be enough to pay for climate change mitigation and adaptation actions, and a good deal of development work besides.
It is as significant that the proposal came from Britain, which has long wrapped that kind of suggestion in cold silence. Oxfam estimates that 60 percent of the kind of financial transactions Brown spoke of take place in Britain, where the City of London – the financial district of the capital – is a global centre for bank and currency transactions.
Brown’s proposal did not get anywhere during the meeting. “Talk of a financial transaction tax has the potential to raise hundreds of billions in new funding every year, but turned out to be a red herring without solid political support,” Dixon stressed.
Germany and France have supported such a tax. But, with financial powerhouse Britain now indicating that it should be considered, this opens up a new division between major European economies on one side, and the U.S. principally on the other – the U.S. very clearly is not supportive of this family of tax proposals.
This was not the only possibility raised, and dumped. At the London G20 summit in April the developed countries spoke of action against tax havens, to enable developing nations to use money saved for development. The communiqué from St. Andrews, ActionAid points out, speaks only of “the possible use of a multilateral instrument” to that end.
The possibilities here are huge, Martin Hearson from ActionAid tells IPS. “What is needed is for developed countries to set up a system and to force tax havens to participate. At the moment information is available to developed countries bilaterally, but developing countries often lack information or the means to protect their money.”
The implications for development, including action on climate change, can be huge, Hearson says. “We believe that potentially 160 billion dollars a year can be saved for developing countries through action on tax havens, and that money can be used for development and for actions over climate change. It’s a sum of money that dwarfs aid budgets.”
Campaigners are now looking more for such collaborative actions, and for actions on suggestions such as Gordon Brown’s, rather than hoping for governments to dish out money directly.
Several campaigners believe these proposals will bear fruit later, even if they did not find instant agreement during the course of a day. “Gordon Brown today signalled that payback time for banks could be just round the corner,” says Max Lawson, Oxfam senior policy adviser. “A tax on banks would be a major step towards clearing up the mess caused by their greed.”
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