“Innovative financing” is one of those phrases you’re always hearing in development, but that never quite seem to live up to the hype. It refers, in case you’re not familiar with it, to the idea of raising international public finance not from traditional sources like aid, but from zappy new sources like the Robin Hood Tax, or flogging off IMF gold, or capitalising Special Drawing Rights, or introducing new global taxes on things like marine bunker fuels.
In particular, you often hear the idea mooted as a way of financing global public goods (GPGs) – stuff like agricultural research and development, vaccine production and distribution, technology cooperation, UN peacekeeping, biodiversity and rainforest preservation, and so on – as for instance in this excellent CGD paper by Nancy Birdsall and Benjamin Leo.
Which would be a Good Thing, because GPGs are woefully underfunded. In their paper, Birdsall and Leo totted up the total amount spent on them in 2011 and it came to about 12 billion dollars – about a tenth of global ODA spending, in other words. And three quarters of that goes to pay for the UN peacekeeping budget, leaving not a whole lot for everything else.
And yet… for all the talk, not much ever really seems to happen. True, the EU has agreed a financial transactions tax that will apparently generate €57 billion, but that’s more likely to fund European farmers than global public goods. And while France did persuade a handful of countries to sign up to an airline ticket levy, that’s raised less than a billion dollars since it launched.
But wait! At the Assembly of the International Civil Aviation Organisation earlier this month, member states agreed to go ahead with developing a ‘market based mechanism’ to reduce greenhouse gas emissions from the aviation sector by 2016.
While most of the media coverage was about what this would mean for aviation emissions (and for the EU Emissions Trading Scheme, which controversially covers them), there’s also another question: how much money might such a mechanism raise, and where would it go?
Obviously, it’s impossible to answer that without knowing the details of the new scheme – which will depend on negotiations over the next three years. But the IMF has previously estimated that an aviation fuel excise tax of $0.20 per gallon could yield up to $9.5 billion per year if implemented globally, while a separate analysis undertaken by the 2010 UN High-level Advisory Group on Climate Change Financing estimated that an aviation fuel emissions tax could generate $2 billion a year by 2020 – so we could potentially be talking about doubling the amount of GPG financing, if that’s where the money goes.
Here’s hoping that campaigning groups are getting saddled up for some serious lobbying to make sure that the money’s used to maximum effect. Just think how many acres of rainforest conservation that could finance, or new vaccines it could develop, or sustainable agriculture techniques it could develop, or…