To generate new sources of climate finance, this project assesses the design and implications of an international oil extraction levy. Unlike downstream carbon pricing policies, the levy would be applied at the point of oil extraction and based on the embedded carbon in crude oil. By internalising part of the climate costs of fossil fuels, the mechanism aligns with the polluter pays principle.

This project quantifies the potential revenue, macroeconomic, and household-level distributional impacts of the levy under a range of scenarios. It also assesses political feasibility, explores alternative approaches such as consumption-based levies, and provides design recommendations for the extraction levy.

Commissioned with the support of the Global Solidarity Levies Task Force and in collaboration with external experts, the Ecologic Institute leads this project, including its analytical and policy design work. The results of this study are expected to inform ongoing international discussions about innovative finance tools for climate and development goals.