Can we expect a boom in environmental taxation by 2025?

Countries, especially those in the global South, face interconnected crises involving climate change and consequently; biodiversity loss and water, health and food threats. These crises are becoming more frequent.

In the current context, characterized by rising debt, declining investment, reduced development aid and increased trade tensions, sustainable development faces unprecedented headwinds. The consequences are stark: 3 billion people live in countries that use their resources more in financial interest payments than investments in health or education.

1. The commitment of Seville and the Global South

Addressing Fiscal Constraints: Many countries in the Global South face severe fiscal limitations due to high debt burdens and inadequate tax sovereignty. COP 30 is seen as an opportunity to address these systemic challenges and promote fairer international tax rules, debt relief, and increased grants or concessional finance. With Brazil hosting COP 30, the focus is on protecting critical ecosystems like the Amazon and on finding solutions at the intersection of climate, biodiversity, and social crises. The conference is seen as a pivotal moment to make transformative decisions, including those related to fiscal policy and environmental taxation.

Despite  the strong headwinds from international crisis and temptations of unilateral policies, Several recent developments and international commitments support this expectation:

At the Climate talks in June 2025 Bonn for example, leaders endorsed innovative fiscal tools such as carbon taxes, levies on polluting transport (such as aviation and shipping), and taxes on extreme wealth to boost climate finance[i]. These measures are gaining traction as essential mechanisms to fund climate action and resilience, especially in developing countries, and were followed by the Roadmap of Seville, which we will discuss here:

In Seville, from June 30 to July 3^rd the 4^th International Conference  on Financing for Development  (FFD4)  produced a landmark report. “A roadmap for solidarity levies”[ii], with concrete proposals for new taxes to fund climate and development goals, focused on polluting or under-taxed sectors. These include levies on aviation targeting private jets (“a private jet flight from London to Pariis is 6 times more polluting per passenger than a commercial flight, and 180 times more polluting than a train”) , taxes on luxury air travel (Kerosene fuel for international aviation is generally not taxed at all) and to advance the taxation of the super-rich, with countries like Brazil, Spain, South Africa, and Kenya taking initiatives. These initiatives aim to generate new streams of revenue for climate adaptation and mitigation, as well as to address fiscal and administrative obstacles to effective environmental taxation.

With five years left to achieve the SDGs in increasingly uncertain times, the Sevilla Commitment charts a path on three fronts:

1. Catalyzing investment at scale for sustainable development.
2. Addressing the debt and development crisis and
3. Reforming the international financial architecture.

In this sense, the Roadmap suggest the following lines of action:

-585 of the world’s largest and most polluting fossil fuel companies made $583 billion in profits in 2024, which is a 68% increase since 2019. Some countries have already taken action to address excessive profits from oil and gas companies at a regional level, like the EU commission applying a 33% taxes on “surplus profits” by fossil fuel companies, defined as profits above 120% of the past five years average.

-Currently, 30 countries apply Taxes on financial transactions, more specifically on the trading of shares, raising around $17 billions annually. This represents a very small portion of the total volume of transactions, estimated to over 170 trillions in 2022, based on data from the World Bank and Refinitiv.

– Shipping levy: The International Maritime Organization (IMO) sets out measures advocated for by the Least Developed countries (LDCs) whereby ships emitting polluting gases above a certain threshold will have to purchase remedial units to offset these emissions, while those using clean technologies are eligible for financial rewards. Estimate suggests that these measures should generate 10-12 billion per year.

-Integration into National Budgets: The “Sevilla Commitment,” adopted by 192 governments, explicitly calls for integrating environment, nature, climate, and food security considerations into national budgeting processes. This approach encourages countries to align fiscal policy, including taxation, with sustainability goals.

2. Artificial intelligence and technologies for climate positive finance

Financial institutions such as banks and tax agencies are increasingly using digital technologies and AI tools to support the management of sustainability-linked funds in everyday transactions. These innovations are transforming how money is tracked, allocated and reported for sustainability goals. [iii]

Key digital technologies help banks and tax agencies to make sustainable and climate-aligned decisions regarding lending and investments, and taxation.  Big data analytics enables aggregation and analysis of transaction data to monitor the flow of funds towards climate-positive projects and identify sustainable opportunities that are not detected by traditional analysis methods.[iv]

In terms of transparency and traceability, Blockchain ensures traceable, immutable records of climate finance transactions, such as carbon credits or green bonds, preventing double-counting and fraud.
Internet of things (IoT) sensors and satellite imagery provide data on project performance (such as energy output or forest conservation). This allows financial flows to be linked to verified climate outcomes.
These technologies, known as “Climate fintech” can increase climate finance. Even if they are only a partial solution, they can address financing challenges for climate investments and provide much needed fiscal support[v].

In conclusion, while ambitious commitments are being discussed and coalitions are forming, the ultimate effectiveness of COP 30 in driving improvements in environmental taxation will depend on political will, international cooperation, and the ability to overcome entrenched fiscal and administrative barriers.  Overall, COP 30 is likely to significantly advance environmental taxation, particularly as part of broader efforts to address the climate, biodiversity, and resource crises. However, the scale of impact will depend on the outcomes of negotiations and subsequent implementation by participating countries.

References:

• [i] https://www.climatechangenews.com/2025/07/03/un-development-conference-backs-innovative-ways-to-boost-climate-finance/
• [ii] https://solidaritylevies.org/app/uploads/2025/06/GSLTF-FFD4-Seville-Report-June2025.pdf
• [iii] https://www.theglobaltreasurer.com/2024/04/09/ai-the-keystone-of-sustainability-in-modern-banking/?amp=1
• [iv] https://prism.sustainability-directory.com/term/digital-climate-finance/
• [v] https://www.elibrary.imf.org/view/journals/066/2024/008/article-A001-en.xml

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