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Abstract
Developed countries have pledged to mobilise $100 billion per year by 2020 for climate
change action in developing countries. Progress on financing is necessary to ensure
broader progress on climate change cooperation. Supporting the global commitment is in
Australia’s interests, since climate finance can harness low-cost mitigation opportunities
and help vulnerable countries in the Asia-Pacific region adapt to climate change. Based
on Australia’s wealth and emissions, we find that a fair share for Australia may be
around 2.4 per cent, or $2.4 billion a year by 2020. We analyse possible sources of
finance in Australia. Carbon markets could provide large financial flows but their shortterm
prospects are uncertain, and additional public finance is needed in any event. While
Australia currently draws its climate finance from a growing aid budget, a large scale-up
of climate change aid could raise concerns that aid is being diverted from existing
development priorities. A carbon levy on international transport could provide
considerable revenue and could be implemented unilaterally ahead of a global scheme.
Reducing tax breaks for fossil fuel using and producing activities could raise revenue well
in excess of Australia’s total climate finance commitment, while improving economic
efficiency and cutting carbon emissions. Further, Australia’s exports of coal and other
resources provide a very large tax base which could be tapped to a greater extent.