European Capacity Building Initiative

Professor Jeffrey Sachs Discusses New Approaches to Financing Loss and Damage

On 21 October 2024, Professor Jeffrey Sachs (Columbia University), having been approached by ecbi Director Benito Müller, gave a special lecture under the aegis of the Oxford Climate Research Network on the topic of New Approaches to Financing Loss and Damage. He proposed a number of principles for a suitable policy response to loss and damage due to the adverse impacts of climate change, including that:

  • Loss and damage, as well as adaptation, funding should be based on international levies rather than on national voluntary contributions; and
  • Sources for international levies could come from international shipping, international aviation, and CO2 emissions, both historical (cumulative) and current, of high-income countries and upper middle-income countries.

He also pointed out that loss and damage finance, and indeed climate finance, should be embedded in a more general framework for financing the Sustainable Development Goals (SDGs), for which reform of the global financial architecture is key. Having said that, he also highlighted the importance of innovative pilots, such as the Global Fund for HIV/AIDS, which he helped set up in 2002, and which has been benefitting from the French solidarity air ticket levy, which is the inspiration for the Climate Solidarity Levies and the Climate Solidarity Alliance proposed for replenishing the new multilateral Fund for Responding to Loss and Damage.

Photo (left): Professor Benito Müller and Professor Jeffrey Sachs

In a personal message after the event, Professor Sachs explained his views as follows:

“Financing global public goods, such as funding for Losses and Damages or for medicines to fight AIDS, TB, and malaria, remains a vexing problem. The challenge arises because the cost of these public goods vastly outstrips the budgets of the low-income countries, which of course is why the Global Fund to Fight AIDS, TB, and Malaria, and the Fund for responding to Loss and Damage were created in the first place. In our rich world, it would not take much for the high-income countries to amply fund the needs of low-income countries, but generosity is not the strong suit of our world today.  Very few countries ever honored the 0.7 percent of Gross National Income (GNI) target for Official Development Assistance, and that number is now declining. Other sources of revenues are needed.
 
Taxes on global goods – such as international shipping and aviation – have long been looked at as possibilities for funding global public goods.  Indeed, many countries, led by France, and joined by the UK, Norway and others, levied taxes on international air travel to fund UNITAID, a program to supply drugs to low-income countries. The programme raised a few hundred million dollars per year, a very nice contribution, but not a decisive breakthrough in global health financing.
 
The question today is whether such international taxation could be made comprehensive and compulsory (levied by all high-income countries) as part of an international tax treaty, for example, under UN auspices. There are various proposals for a comprehensive tax on air travel, ocean shipping, CO2 emissions (both current and historical), international financial transactions, and other possible tax bases. The UN will take up this idea, though it is bound to be strongly resisted by some countries, almost surely the United States among them. 
 
Taxes levied by individual countries that volunteer to do so, as with the French airline tax for UNITAID, may be the best that can be accomplished in this way, though a comprehensive and compulsory tax paid by all high-income countries (and perhaps also upper-middle-income countries at a lower rate) would be vastly preferable in that it would raise much larger revenues than a voluntary, country-by-country system.”

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