Stopping deforestation with a Tobin tax

Money is needed to preserve a vital part of the carbon cycle. It's there even in a recession, if only we sort out our priorities
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Every day, the Amazon basin rainforests pump about 20bn tonnes of moisture into the Earth's atmosphere. This forms clouds that create rain and is just one of the vital environmental services provided by the vast shimmering forest that stretches from the Atlantic to the Andes. The creation of the rain clouds is one vivid reminder of how the human economy is really a wholly owned subsidiary of nature.

The rain waters crops on farmland across South America, including the globally important grain baskets of southern Brazil, northern Argentina and Paraguay. The rain also fills the rivers that power the hydroelectric dams, which in turn supply some 80% of the electricity that sustains Brazil's fast-growing economy.

The forests are also a vital part of the carbon cycle. As these and other tropical forests are cleared and burned they contribute some 20% of human-induced carbon dioxide emissions. The forests also soak up about 10% of our emissions, as the trunks of giant forest trees grow thicker and organic matter accumulates in peat. Saving these forests must be a vital component in our efforts to avoid dangerous climate change.

If we are to have any chance at all of reducing our emissions to about 20bn tonnes carbon dioxide equivalent by 2050 (going down from about 50bn tonnes now), deforestation needs to be quickly slowed down, stopped and then reversed.

Realising this, a group of governments recently produced a report setting out how it would be possible to reduce tropical deforestation by about 25% between 2010 and 2015. They set out a proposed new scheme that would provide financial rewards to countries in relation to their performance in cutting forest loss, or not starting it in the first place. Securing this level of reduction, as a first step on a more ambitious plan, would cost, the report estimates, about €20bn.

The recession poses something of a problem, however. Many of the developed countries face tight budgets and public spending constraints. So there has not been a rush of offers to pay the bill. While some, including Norway and the US, have put money on the table to make such a scheme work, there is still nowhere near enough yet pledged to make the difference needed.

This is, however, odd. For there is apparently not a shortage of money in the world, it is more a matter of how it is distributed. One example of how we have got our priorities out of line comes in the form of this year's bonus packages for Goldman Sachs employees – worth about $21bn.

So while the forests continue to fall, and in the process imperil our economic prospects in the decades ahead, societies continue to allow obscene rewards for behaviour that recently brought on the recession that now prevents us from paying to save vital environmental assets. I think it's time we changed our priorities, and got our economics the right way around, protecting those key services that have enabled human civilisations to flourish (including rainforests) and to move money in order to do that. But how?

One way of beginning to correct this particular imbalance would be through a so-called Tobin tax. This widely supported measure would work through a levy on international currency transactions, which now amount to about £560tn annually. Proposals from some development groups for a tax on this activity of 0.005% would net around £28bn a year.

Such a tax would thus divert money from a part of the economy that serves little social function, other than to enrich risk-taking currency speculators, and deliver it to saving the economy through bolstering some of nature's vital functions. So in the five years to 2015, and through this measure alone, about £140bn could be raised. In addition to saving the rainforests, this kind of money could make a serious difference for climate change adaptation, poverty alleviation, education and technology transfer. It would have the added fringe benefit of damping down some of the risk-taking behaviour that recently brought economic ruin.

I wonder if any world leaders will mention this idea during their meeting in Copenhagen, and if they don't, then why not?

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