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Daily-current-affairs / 01 Dec 2022

Tobin Tax for Loss and Damage Fund : Daily Current Affairs


Date: 02/12/2022

Relevance: GS-3: Climate Change and International Conventions.

Key Phrases: Climate Change, Climate Adaptation, COP (Conference of Parties), UNFCCC, Developed Countries, Mitigation Efforts, Global Warming, Climate Adaptation Cost, Credibility, UNEP, Climate Challenge, GHGs Footprint, Carbon Neutrality, Net Zero Emission, Tobin tax.


  • Recently, COP27 Parties proposed the “Loss and Damage Fund Facility” to assist developing countries in responding to loss and damage. But there are high chances of failure of financial commitment as past trends but here Tobin tax can be a hope for the success of Loss and damage fund facility.

Key Highlights:

  • This was the first time climate change loss and damages were part of the official agenda for the world's largest climate conference.
  • When the Paris Agreement was adopted in 2015, loss and damage were referred to as the "third pillar" of climate action.
    • However, the Paris Agreement made no mention of any financial commitments to support countries facing significant loss and damage.

Loss and Damage Fund Facility

  • It refers to the finance facility to assist developing countries that are particularly vulnerable to the adverse effects of climate change in responding to economic and non-economic loss and damage associated with the adverse effects of climate change, including extreme weather events and slow onset events.
    • Loss and damage are often divided into economic loss and damage including livelihoods and property and non-economic loss and damage including loss of life and losses to biodiversity and cultural heritage.
  • Its disproportionate consumption of the planet’s resources has created a historical, moral and legal obligation to pay for it.

Tobin Tax as a source of Financing the Fund:

  • Author argued that the Tobin tax can be seen as a source of financing in Loss and damage fund facilities.
  • In essence, it would be an obligation on financial institutions to pay a cess on their currency transactions, but not investment flows.
  • The ultimate aim would be to raise money for development and climate finance and make a sustainable economic recovery more feasible.
  • The daily global currency trade is worth $6 trillion approximately.
    • In this context, a Tobin tax that would be levied on spot currency transactions appears very desirable.
    • This significant amount can fund sustainable development goals (SDGs) and easily enable climate adaptation and mitigation for developing countries.
    • Such capital will also be more resilient, given that recessionary conditions do not gravely affect foreign exchange markets, at least in comparison with global stock and bond markets.

27th Conference of Parties (COP27)

  • The 2022 United Nations Climate Change Conference, also known as COP27, is the 27th United Nations Climate Change conference.
  • It was held in Sharm el-Sheikh, Egypt from November 6 to November 18, 2022.
  • It was an important meeting because the latest science shows that climate change is moving much faster than we are, pushing ecosystems and communities to their limits.
  • The Conference of Parties comes under the United Nations Climate Change Framework Convention (UNFCCC) which was formed in 1994.
  • The UNFCCC was established to work towards the “stabilisation of greenhouse gas concentrations in the atmosphere.”

Outcomes of COP 27

  • Loss and Damage Fund Facility
    • A breakthrough agreement was proposed to provide “loss and damage” funding for vulnerable countries hit hard by climate disasters.
    • Governments also agreed to establish a ‘transitional committee’ to make recommendations on how to operationalize the new funding arrangements.
  • Operationalization of the Santiago Network
    • Parties agreed on the institutional arrangements to operationalise the Santiago Network for Loss and Damage, to catalyze technical assistance to developing countries that are particularly vulnerable to the adverse effects of climate change.
  • Technology
    • COP27 saw the launch of a new five-year work program at COP27 to promote climate technology solutions in developing countries.
  • Mitigation
    • A mitigation work programme was launched in Sharm el-Sheikh, aimed at urgently scaling up mitigation ambition and implementation.
    • The work programme will start immediately following COP27 and continue until 2030, with at least two global dialogues held each year.
    • Governments were also requested to revisit and strengthen the 2030 targets in their national climate plans by the end of 2023, as well as accelerate efforts to phase down unabated coal power and phase out inefficient fossil fuel subsidies.

Opportunity for India:

  • India can galvanize much needed support for a global Tobin tax by making it a part of its G20 agenda.
  • A consensus at the G20 will in turn lead to greater acceptance by the international community at large, and remove problems that could arise from a unilateral or limited imposition of this tax.
  • India’s interest in finding international coherence around the regulation of crypto assets, a global Tobin tax applicable to such digital assets could be a great starting point.
  • Introducing a Tobin tax will not only help in raising resources, but also help financial regulators track global currency flows.

Tobin Tax (‘Robin Hood Tax’)

  • A Tobin tax was originally defined as a tax on all spot conversions of one currency into another.
  • It was suggested by James Tobin, an economist who won the Nobel Memorial Prize in Economic Sciences.
  • In past, Tobin tax was also recommended for addressing the global poverty and dealing with Covid-19.

Way Forward:

  • We require an imaginative approach to raise funds without burdening any government, and not by robbing the rich to pay the poor.
  • Renewed expressions of support for this tax are required from governments, non-governmental organizations and also civil society.
  • Countries must now work together to ensure that the new fund can become fully operational and respond to the most vulnerable people and communities who are facing the brunt of the climate crisis.
  • Developed countries must honour their long-standing obligations under the UNFCCC and the Paris Agreement, including the provision of climate finance, technology transfer, and capacity building to the developing countries.


  • “Loss and Damage Fund Facility” is an opportunity to further strengthen international cooperation and solidarity whilst delivering justice and protecting human rights.
  • A modern and resilient international financial architecture that is responsive to the needs of the hour can ensure environmentally sound and equitable development for future generations.

Source: Live Mint

Mains Question:

Q. What do you understand by “Loss and Damage Finance Facility”? In which way the Tobin tax can help to finance the facility? (150 Words)