Rich polluter profits tax could raise up to $400 billion and help phase out fossil fuels

Oxfam has modelled what such a ‘rich polluter profit tax’ could look like.  Looking at the return on their assets for the mega-rich fossil fuel corporates, the first 3% would be taxed at a rate of 20%. Any profits above this would be deemed excessive and taxed at a rate of 50%. These taxes would only be charged on the fossil fuel segments of their businesses and on top of existing corporate taxation. 

Such a tax could raise up to $400 billion globally in its first year based on 2024 figures, comparable to the estimated $290-$1045 billion needed annually by 2030 to pay for the loss and damage caused by climate change in the Global South. This type of tax would apply permanently, unlike ‘windfall profit taxes’ that some countries impose when a company’s profits in a sector rise significantly above normal levels.

As companies shift to renewables, polluter profit tax proceeds would decline, but would be critical during the transition. 

The tax should make fossil fuels less profitable [Link to methodology note] than renewable energy, creating a clear incentive to shift investment flows and stop the advertising and promotion of fossil fuels.

Beyond fossil fuel corporations, all excess profits should be taxed, to fight inequality and build a fairer economy. The main beneficiaries of high corporate profits are the richest people who own the majority of financial assets, so excess profits mean ever higher extreme wealth inequality. 

Oxfam has modelled an excess profits tax that would apply when the return on a corporate’s assets is above 10% a year; any profits above this level would be taxed at a rate of 50%. This could generate up to $681 billion globally per year. This model is intended to show the potential of such an excess profits tax rather than to prescribe a specific rates and design.

Revenues from these taxes should be used to fund climate action such as emissions reduction, adaptation costs and recovery from loss and damage, along with universal public services to reduce inequality. Global North countries should dedicate a significant portion of these revenues to help fund such spending in the Global South, for the same purposes.

We are facing a climate emergency, therefore governments should each impose this tax swiftly. Countries across all continents should form a ‘coalition of the willing’ to coordinate and speed up their efforts and counter fossil fuel company lobbying and tax avoidance. 

Global polluter and excess profit taxes should eventually be negotiated, agreed and formalized at the United Nations, which is currently negotiating a transformative international tax treaty.