This report explores the design and implications of an international oil extraction levy as a mechanism to mobilize new sources of climate finance. The assessed levy places a price on the embedded CO₂ in extracted crude oil, increasing production costs and likely raising oil prices for final consumers. By internalising part of the climate costs of fossil fuels, the mechanism aligns with the polluter pays principle.

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.