Brown and Sarkozy propose climate tax on banking sector

The prospect of funding to tackle climate change being raised through a Tobin tax on financial market transactions received a major boost today when British Prime Minister Gordon Brown and French President Nicolas Sarkozy joined forces to back the controversial idea.

The move came as the EU reiterated its pledge to raise its emission reduction target for 2020 form 20 to 30 per cent if a robust deal is agreed in Copenhagen next week, and confirmed leaders had agreed to contribute more than expected to a global "fast track" fund to help poor countries cope with climate change, pledging to provide €2.5bn a year to the fund.

The global fund, which will run from 2010 to 2012 and will help poorer nations fund climate adaptation and low carbon projects, is now expected to top €7bn a year, significantly higher than the €3.3bn a year that had been expected in some quarters.

UN climate chief Yvo de Boer said the move was "hugely encouraging", adding that it would provide developing nations with some of the certainty over the scale of climate funding that they had been seeking.

Meanwhile, the French and British governments issued a joint statement saying they would work together to develop proposals for an international Tobin tax that would help provide the tens of billions of climate funding that will be required in the longer term.

"To ensure predictable and additional finance to 2020 and beyond, we should make use of innovative financing mechanisms, such as the use of revenues from a global financial transactions tax," the statement said.

Significantly, German chancellor Angela Merkel has signalled she would back such a levy, while reports claimed other EU leaders also offered tentative support for the idea.

The main opposition to the proposals is expected to come from the US Treasury. But many rich nations remain concerned about how they will raise the climate funds they will have to commit to if they want a deal to be reached at Copenhagen next week and as such Brown and Sarkozy are confident they can convince the US to consider the idea, particularly given widespread public anger at the banking sector.

"People are saying we need a better relationship between the banks and the societies they serve," said Brown. "There has been a growth in support for this idea."

European leaders will now push for the idea to be formally discussed at the next round of international financial meetings in the spring in South Korea.