Pakistan won the ‘Robin Hood’ award at the UN climate talks for proposing financial transaction tax (FTT) as an innovative source of financing the Green Climate Fund (GCF), on Saturday.
The award was given to Pakistan by the youth constituency of the UNFCCC, known as YOUNGO.
“The Green Climate Fund is very important for developing countries. Finding sources and channels to mobilise money into the fund is crucial,” said Director UN-II Mirza Salman Babar Beg, who is part of the negotiating team in Durban.
“Out of all the options relating to innovative sources on long-term finance that are on the table, the FTT is easy to implement and monitor and can raise money in hundreds and billions,” added Beg. “There are various studies that support this argument, and so we feel this option should be considered in the negotiations.”
The Financial Transaction Tax, also known as the Robin Hood tax, is a small levy of 0.01%-0.05% imposed on the trade of stocks, derivates, currency, and other financial instruments.
Although different estimates have been proposed, global economists believe that potential revenues can range from $176 billion to $650 billion per year. These revenues can significantly contribute to the GCF, which will help developing countries to tackle poverty and climate change. It has also been proposed that the tax has the ability to discourage high frequency financial trading that causes big risks to the global economy.
Pakistan has been lobbying to include FTT as a long-term source of finance in the GCF. Earlier this week, it made an intervention in the informal meeting on finance at COP17 saying, “one of the biggest sources of innovation finance is going to be from a financial transaction tax”, and that there must be openness by parties to look at all sources with flexibility”.
The FTT has so far gathered support from many developed and developing countries; but discussion about having it as a long term financing option for the GCF is still pending.
It is also not clear at this stage how this fund will be used and what areas will be specifically addressed through it. There seems to be some debate over distribution too, if it gets materialised.
However, Beg believes that the FTT is practical and a good option, which his delegation is pushing for in the talks.
Published in The Express Tribune, December 4th, 2011.