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Views from the Center

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$57 Trillion Additional Climate Debt Calls for Policy Action by G20

While a drastic reduction in carbon emissions is necessary to contain climate change, countries still have not reached a consensus on a fair division of responsibilities in reducing them. While advanced economies were the biggest emitters in the past, emerging economies, such as China and India, account for an increasing share of new emissions. From the standpoint of fiscal policy, these carbon emissions, which adversely affect the world’s well-being, are a negative externality. At present, countries do not bear the full cost of these externalities. The cumulative sum of these liabilities can be viewed as a “climate debt” a country owes to the global community.

An image showing bank notes and a calculator to refer to tax

What Influences Tax Rates in Sub-Saharan Africa?

The Addis Ababa Agenda for financing development pays special attention to domestic revenue mobilization to help finance the Sustainable Development Goals (SDGs) in developing countries. In the case of sub-Saharan African countries, much of the discussion has centered on improving their overall revenue performance, and while they have, there is still a long way to go.

Chart showing estimates for additional spending by 2030

Tax Revenues in Africa Will be Insufficient to Finance Development Goals

The IMF estimates that on average, low-income countries (LIC) will need additional resources amounting to 15.4 percent of GDP to finance the Sustainable Development Goals (SDGs) in education, health, roads, electricity, and water by 2030. These resource requirements are even greater in sub-Saharan Africa than in a typical LIC: the median sub-Saharan African country faces additional spending of about 19 percent of GDP. In the average LIC, the IMF estimates that of the required additional financing, 5 percentage points of GDP would have to come from domestic taxes.

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