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The case for a green financial transaction tax
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DOI：10.1016/j.ecolecon.2026.109192.png)
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Abstract
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The aim of this article is to assess whether and how the financial transaction tax (FTT) could be “greened” – that is, adapted to support environmental objectives and the transition towards a more sustainable economy. While traditionally conceived as a regulatory tool, the FTT holds unexploited potential as an instrument for climate finance and broader environmental alignment. This paper outlines five complementary arguments in favor of a green FTT: (1) its capacity to mobilize stable, international funding for global public goods; (2) its relevance in light of the financial sector's role in recent economic, social and environmental crises; (3) its ability to modestly lengthen investment horizons and counteract excessive short-termism; (4) its potential to enhance public trust in finance by matching rhetoric about sustainable finance with contributions; and (5) its use as a differentiated tool to reward environmentally responsible investors and issuers. The paper also includes an exploratory calibration of potential revenues from a tiered green FTT, intended to provide illustrative orders of magnitude rather than forecasts, and to show how such a mechanism could operationalize the principle of common but differentiated responsibilities and respective capabilities in climate finance. While recognizing practical limitations (in terms of governance, data reliability, and risk of complexity), the paper concludes that a well-calibrated green FTT could be a simple and useful complement within the broader climate policy mix.
Keywords:
Financial transaction tax
Securities transaction tax
Tobin tax
Innovative financing
Green finance
Climate finance
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