Should permanent taxes on fossil fuel profits be enforced globally?

Within mere days of his re-entry to office earlier this year, Trump withdrew the US from the Paris Agreement, which legally binds all voluntary signatories to commit to limiting global warming to well below 2 degrees Celsius. Trump has also stood by his motto, ‘drill, baby, drill!’ by green-lighting new fossil fuel projects on American soil.

Just this week, US energy secretary Chris Wright announced that his department is set to return to the national treasury billions of dollars allocated for green projects. Wright also said he does not have plans to attend the global climate event COP30 in Brazil, while falsely stating that international climate policy has not lowered global emissions.

In light of all this spewing of disinformation and continuation of fossil fuel funding in the US, a group of 36 former presidents and prime ministers have signed an open letter urging governments to adopt new and permanent ‘polluter profit taxes’.

The structure of these special taxes takes inspiration from a similar scheme enacted during the oil and gas crisis of 2022 – windfall taxes – which successfully raised billions of dollars for local governments.

Unlike these taxes, polluter profit taxes would be permanent, allowing governments to hold oil, gas, and coal companies financially accountable for the environmental destruction caused by emissions.

At present, an estimated $6.5 to 6.7 trillion USD is needed annually to ‘reduce and repair  harm from climate change, and to ensure a fast and just transition’ to renewable energy sources by 2030.

The 38 world leaders argue in their letter that funds created by polluter profit taxes could fill this quota, becoming vital in providing climate finance and relief funds for those vulnerable to climate disasters by generating up to $400 billion USD in its first year.

Club de Madrid, the world’s largest forum of democratic former Presidents and Prime Ministers, organised and led the group of signatories.

The organization is aimed at strengthening inclusive democratic practices and improving the well-being of people globally. It is made up of more than 130 members from over 70 countries, and includes a global network of advisers and partners across all sectors of society.

You might find it hard to believe that this kind of taxation does not already exist on a global scale. It is shocking, considering the insane amount of profits collected by oil and gas companies in the last year alone.

However, some government leaders have begun taking steps to enforce new financial legislation applying to high-emitting sectors – and the 38 authors of the letter penned by Club de Madrid addresses this.

The U.S. states of Vermont and New York have already passed bills that require fossil fuel companies to financial contribute to the state costs of climate adaptation. New York also requires companies to contribute $75 billion USD over 25 years, with 35 percent of this benefitting disadvantaged communities.

On a wider scale, coalitions which apply levies on high-emitting industries like luxury aviation and fossil fuels are being formed between countries. Named ‘coalitions of the willing,’ seventeen countries including Kenya, France, and Barbados have put these levies in motion to collect climate and development finance.

Though these local policies are encouraging, the group of signatories from Club de Madrid say fossil fuel companies must be held accountable on a global level, with conversations about fair taxation placed on the international agenda.

Let’s hope that this proposal gets some much-deserved air time at upcoming G20 discussions in South Africa, at COP30 in Brazil, and at future international tax conventions on the agenda in the very near future.