The Detailed Concept of the FTT
The Financial Transaction Tax: A Dual Lever for Climate and the Economy
The proposal for a global Financial Transaction Tax (FTT) for the environment is not a radical idea that appeared out of nowhere. It is rooted in a long history of economic regulation and represents a pragmatic adaptation of a proven tool to meet the most pressing challenge of our time. By understanding its origins and its dual impact mechanism, it becomes clear that the FTT is much more than a simple tax: it is an instrument of systemic re-engineering capable of realigning global finance with long-term sustainability goals.
A Historical Idea for a Modern Challenge
The idea of imposing a tax on financial transactions is almost as old as financial markets themselves. Its origins trace back to the stamp duties introduced in England in 1694 and a federal tax on stock transactions applied in the United States from 1914 to 1965. These early forms of FTT establish a clear historical precedent: governments have long recognized the legitimacy and feasibility of taxing financial activity.
The concept was formalized and popularized by the economist John Maynard Keynes in 1936. While reflecting on the causes of the Great Depression, Keynes proposed an FTT as a means to curb excessive speculation, which he believed destabilized markets and disconnected them from the real economy. His goal was to introduce a "grain of sand" into the wheels of finance to discourage short-term betting and encourage long-term productive investments. This historical perspective is fundamental, as it shows that FTTs have always been designed with a dual objective: generating revenue for the state and serving as a corrective tool to temper market excesses.
Interest in FTTs saw a dramatic resurgence after the 2008 global financial crisis. Faced with massive failures of the financial system, influential figures from diverse backgrounds, from Bill Gates to George Soros to Pope Benedict XVI, advocated for their implementation. Their motivations were multiple: to deter excessive risk-taking, to have the financial sector contribute to repairing the damage caused to the global economy, and, above all, to generate substantial revenues to finance global public goods like health and the fight against climate change. It was during this period that the FTT earned the nickname "Robin Hood Tax," highlighting its progressive nature (targeting a highly profitable sector) and its social purpose (redirecting a tiny fraction of financial wealth toward the common good).
A Dual Strategic Impact
The proposed global environmental FTT follows this tradition by pursuing a dual strategic objective, where each objective reinforces the other.
Generation of Massive and Predictable Revenue
The primary goal is to address the immense financing gap for climate action. The most credible estimates suggest that a global FTT, applied at a very low rate (between 0.01% and 0.05%) on a broad base of transactions, could generate up to $650 billion per year.
More importantly, unlike voluntary national contributions, which are by nature volatile and subject to political and budgetary uncertainties, the FTT would provide a stable and predictable source of revenue. This predictability is essential for long-term planning and for undertaking large-scale adaptation and mitigation projects, which often span several decades.
Market Stabilization and Promotion of "Patient Capital"
The second objective is a powerful lever for systemic transformation. Modern financial markets are often optimized for speed and volume, rewarding very short-term speculative gains.
This structure is fundamentally misaligned with the needs of the ecological transition, which requires massive, stable, and long-term investments. The FTT acts here as a re-engineering tool.
By introducing a minimal friction cost on high-frequency trading, currency speculation, and high-leverage derivatives (or "stock-flipping"), the tax makes these strategies marginally less profitable.
Consequently, it makes longer-term productive investments comparatively more attractive. This mechanism encourages the emergence of "patient capital," that stable, long-term financing that is absolutely essential for major green infrastructure projects, renewable energy, or reforestation, whose returns on investment are not immediate.
This is not just a theory. The introduction of the FTT in France in 2012, despite its imperfections, provided concrete proof of this mechanism. Studies have documented a notable shift in asset portfolios from short-term to long-term investors, confirming that even a modest tax can alter behaviors and redirect capital flows.
The FTT, therefore, does not just collect funds from the existing financial system; it actively helps to transform it to be more conducive to the very investments it aims to finance.
This verifiable contribution then directly improves the company's "green" ranking within the global carbon calculator. This public and auditable score becomes a true intangible asset. It signals to investors, clients, and regulators the company's concrete commitment to sustainability. By co-opting market forces like reputation, brand value, and ESG ratings, this mechanism encourages a "race to the top" in environmental performance.
Furthermore, by financing projects that reduce emissions throughout value chains, the FTT funds collectively help companies manage their own Scope 3 emissions, a notoriously complex challenge. The FTT thus becomes a tool for climate risk management and a catalyst for the decarbonization of the entire economic ecosystem. This conceptual reframing is essential: it aligns the interests of the financial sector with the public interest, transforming an obligation into an opportunity for leadership and value creation.
This figure must be put into perspective. The climate finance gap for developing countries is estimated to be between $1,000 and $1,300 billion per year by 2030. The FTT could therefore close a significant portion of this gap on its own, becoming a cornerstone of the global climate finance architecture.
"Carbon Valorization": Transforming the Tax into a Strategic Investment
To overcome the major political obstacle of private sector opposition to any new tax, the project incorporates a crucial conceptual innovation: "carbon valorization." This mechanism is designed to shift the perception of the FTT from a mandatory cost to a strategic and quasi-voluntary investment in a company's reputation and competitiveness.
The principle is simple yet powerful. The tax paid by a financial institution is not considered a dead loss. Instead, the system records and quantifies this payment as a direct and measurable contribution to the global effort to reduce greenhouse gas (GHG) emissions. The amount of FTT paid is linked to the offsetting of a certain tonnage of CO2, based on a reference price set by the UN Department.
