Between the Rudd Government's 'friendless' ETS and the Federal Opposition's 'climate con job', Australians concerned about global warming have little to cheer about. One consolation, however, is that the debate opens the door to further discussion of a Tobin Tax, mooted by some significant players in the lead-up to and during the Copenhagen climate summit as part of a possible mix of solutions.
Named after the Nobel Prize winning (in 1981) economist James Tobin (pictured), a Tobin Tax is a tax on foreign currency transactions. John Maynard Keynes proposed a similar tax during the Great Depression. Such a tax was last on the public radar in the late 1990s, when social justice organisations such as the broad-based Jubilee 2000 movement made a serious assault on the global financial architecture.
A growing acceptance of the failings of our market based economy, linked to both global warming and the Global Financial Crisis, has put wind in the sails of an idea becalmed for a decade. With powerful backers such as Gordon Brown, Nicolas Sarkozy, Warren Buffett and George Soros, a tax of this nature is a serious proposition.
Set at a tiny 0.005 per cent (the most commonly cited rate), the tax could collect around $76 billion each year, although estimates vary significantly. The funds could assist developing countries cope with the effects of climate change and finance the necessary technological adaptations; it is unlikely any legally binding climate agreement that includes most developing countries will be signed without such commitments.
The money can also be used to finance poverty reduction measures and, hence, make progress on the UN's ailing Millennium Development Goals.
A global financial transactions tax is also being posited as a means of insuring the global financial system against future shocks. A tax at the rate nominated above cannot alone address all these needs, but it can make a substantial contribution. And a more ambitious rate is possible.
Predictably, the European Union is leading the push for a Tobin-type tax; the International Monetary Fund and US Treasury Secretary Timothy Geithner are less enthusiastic.
Developing countries will not line up in support of the proposed tax. S. Venkitaramanan of The Hindu cited the IMF argument that the tax 'would interfere with the flow of liquidity between markets', in contrast to the alternative view that such a tax would stabilise economies by slowing the speculative movement of capital. 'Countries like India may not support a Tobin