The Climate Finance Gap Is a Trillion-Dollar Tax Justice Failure

As the climate crisis accelerates, global fault lines are widening. Wealthy nations are gutting aid budgets while pouring fortunes into their militaries. Their climate finance commitments ring empty, masked by claims that public funds have run dry. But the reality is different: the money is there, and a bold tax justice agenda can unlock it. 

Reclaiming tax sovereignty—the power of countries to set and enforce fair tax rules—can shift resources away from billionaires and corporate giants to fund real climate solutions.

This isn’t a funding gap. It’s a sovereignty gap.

New analysis by the Tax Justice Network shows that governments could raise an additional US$2.6 trillion each year by applying a modest wealth tax to the richest 0.5% of households and ending corporate tax abuse. That would be more than enough to meet global climate finance needs and still leave most countries with billions to invest in care, education, and green jobs at home.

The climate crisis is accelerating. Floods, heatwaves, and crop failures are pushing more people into precarity. The costs of climate adaptation, mitigation, and loss and damage are projected to reach US$9 trillion per year by 2030. Yet the global community is still scrambling to honour a US$100 billion pledge first made over 15 years ago.

After the Bonn climate talks and the fourth Financing for Development conference in Seville, climate finance remains a structural void that policy declarations alone cannot fill. On the road to COP30 in Belém, governments face a critical choice: keep chasing inadequate voluntary climate finance handouts, or finally confront the rigged tax systems that let the superrich and big polluters amass wealth while vulnerable communities suffer cascading climate impacts.

The Tax Justice Network research reveals that fair taxation of extreme wealth combined with measures to curb cross-border tax abuse by multinational corporations could raise US$2.6 trillion each year—enough to more than double the US$1.3 trillion annual climate finance goal that United Nations member countries are aiming to reach by 2030. The real issue isn’t where new money will come from, but why governments keep letting existing public resources leak through loopholes in a broken tax system.

By applying a minimal annual wealth tax of 1.7 to 3.5% and reclaiming tax revenue from multinationals that underpay tax, countries could unlock additional tax revenue equivalent to 2.4% of global GDP. This is money that could be raised today.

The Tax Justice Network modelled what countries could raise and contribute based on their historical responsibility for emissions. The results are striking. If countries were to contribute to a global climate finance fund sized at US$300 billion—the lower end of the current debate—then 89% of countries could cover their share through tax reform and still have billions left over for public services. Even if the fund were scaled up to US$1.5 trillion, 58% of countries would still contribute their fair share and have billions to spare.

Take the United States. It could raise enough additional revenue to contribute US$365 billion a year towards climate finance and still be left with US$412 billion to spend at home. China, India, the United Kingdom, and Brazil follow the same pattern.

This is the core message of our climate finance slider tool. Taxing extreme wealth and curbing tax abuse does not pit climate justice against development. It enables both. The interactive tool shows how much countries could raise and how much they could contribute if tax rules were rebalanced in favour of people and the planet.

So why do countries still act as if climate finance is out of reach?

The answer lies in decades of eroded tax sovereignty. Countries have signed away their taxing rights through outdated and unfair treaties, allowed wealth to flow into secrecy jurisdictions, and catered to corporate demands for tax cuts and incentives—often under conditions of debt dependence and economic coercion. In the process, governments have weakened their ability and willingness to tax polluters for fuelling the climate crisis.

Today, 61% of countries have an “endangered” level of tax sovereignty or worse—meaning they are failing to collect tax revenue worth at least 5% of what they already raise, largely from their richest households and from multinational corporations that underpay tax. Nearly a fifth of countries—19%—fall into the “negated” category, missing out on the equivalent of 15% or more of their annual tax revenue. These are not natural constraints. They are political outcomes shaped by an unequal global financial system.

The consequences are acute in the global South, where many governments face impossible tradeoffs—between education and adaptation, between debt service and disaster response. As United Nations independent expert Attiya Waris has warned:

“Across the global South, care and climate responses are being sacrificed to servicing debts that dwarf the funds we need for a just transition. These sacrifices reflect an international financial order that prioritizes creditor claims over human and planetary well-being.”

Climate finance cannot be separated from this wider context of fiscal injustice. When governments are forced to borrow for every disaster or rely on discretionary aid pledges, they lose both agency and time. The race to build resilience becomes a race against the clock—one they cannot win without revenue.

It is time to reframe the debate. Climate finance must not rely on broken promises or voluntary pledges. It must be built into fair, redistributive tax systems that reflect both ability to pay and historical responsibility for emissions.

The upcoming UN Tax Convention offers a once in a generation opportunity to rebalance global tax rules. If done right, it could help all countries reclaim the power to tax their richest residents and corporations fairly. It could end the era of tax havens, profit shifting, and billionaire impunity.

But we do not need to wait for negotiations to conclude. Countries can act now by introducing wealth taxes, renegotiating exploitative tax treaties, increasing transparency, and aligning fiscal policies with climate goals. These reforms are not only possible. They are popular. Polling consistently shows widespread support for taxing extreme wealth to fund public goods.

By reclaiming tax sovereignty from corporate tax abuse, outdated international treaties, and the influence of wealthy elites, governments can do what markets and private finance have failed to deliver: fund climate solutions at scale, protect the most vulnerable, and make those most responsible pay their fair share.

Yielding on taxation isn’t sovereignty—it’s surrendering to the idea that tax systems exist to serve the superrich, rather than safeguard people’s well-being, the planet, and our collective survival.

Cover photo:  Representatives of civil society constituencies pose with large letters at Baku Stadium during COP29 in Azerbaijan, November 2024