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Fossil fuel firms owe climate reparations of $209bn a year, says study
By Nina
Lakhani
May
19, 2023
Groundbreaking analysis by One Earth is first to quantify economic
burden caused by individual companies
Saudi Aramco, Saudi Arabia’s state oil company, owes
reparations worth $43bn annually, the report said. Photograph:
Ahmed Jadallah/Reuters
The world’s top fossil fuel companies owe at least $209bn in annual
climate reparations to compensate communities most damaged by their
polluting business and decades of lies, a new study calculates.
BP, Shell, ExxonMobil, Total, Saudi Arabia’s state oil company and
Chevron are among the largest 21 polluters responsible for $5.4tn
(£4.3tn) in drought, wildfires, sea level rise, and melting glaciers
among other climate catastrophes expected between 2025 and 2050,
according to groundbreaking analysis published in the journal
One Earth.
It is the first time researchers have quantified the economic burden
caused by individual companies that have extracted – and continue to
extract – wealth from planetheating fossil fuels.
Amid growing debate about who should bear the economic cost of the
climate crisis, the paper, titled Time
to Pay the Piper, presents a moral case for the carbon
corporations most responsible for the climate breakdown to use some of
their “tainted wealth” to compensate victims.
The study considers this to be a substantial yet conservative price
tag, as the methodology excludes the economic value of lost lives and
livelihoods, species extinction and other biodiversity loss, as well
as other wellbeing components not captured in GDP.
“This is only the tip of the iceberg of long-term climate damages,
mitigation, and adaptation costs,” said co-author Richard Heede,
co-founder and director of Climate Accountability Institute.
The study builds on the carbon
majors database, which records the emissions of individual oil,
gas and coal companies since 1988 – the year the Intergovernmental
Panel on Climate Change (IPCC) was established and industry claims of
scientific uncertainty about the climate crisis became untenable.
The world’s top 21 fossil fuel companies are estimated
to owe at least $5.4tn in reparations
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The creation of an evidence-based “polluter pays” price tag has been
welcomed as an important step towards achieving climate justice for
communities and countries which have contributed the least, but are
losing the most as the climate breaks down.
“As increasingly devastating storms, floods and sea level rise bring
misery to millions of people every day, questions around reparations
have come to the fore,” said Harjeet Singh, head of global political
strategy at Climate Action Network International, a group of almost
2,000 civil society groups across 130 countries.
“This new report puts the numbers on the table – polluters can no
longer hide from their crimes against humanity and nature.”
Mohamed Adow, director of Power Shift Africa, a climate and energy
thinktank based in Kenya, said: “The case is clear for oil and gas
companies to pay reparations for the harm their fossil fuels have
caused. Not only has their dirty energy wrecked the climate, they have
[in many cases] spent millions of dollars on lobbying and
misinformation to prevent climate action.”
In the painfully slow world of international climate talks, the
question of who should pay to tackle climate impacts has predominantly
focused on the role and responsibility of nation states. This view is
widely held, since the richest 1% of the world’s population is
responsible for twice the amount of greenhouse gases as the world’s
poorest 50%, who suffer the brunt of the harms.
So far, the rich countries of the global north are regarded as having
promised too little – and delivered even less – for climate adaptation
efforts in poorer countries.
Demands for reparations have been mounting as the planet’s warming
climate inflicts death and destruction at an ever faster pace.
Last year at the UN’s Cop27 summit, after decades
of pressure from the climate justice movement, states agreed to
establish a “loss and damage” financing fund that should eventually
partially compensate poor countries for the irreparable and
unavoidable economic and non-economic costs of extreme weather events
and slow-onset climate disasters such as sea level rise and melting
glaciers.
The deal in Egypt came after unprecedented floods left a third of
Pakistan underwater, drought left 37 million people in the Horn of
Africa facing hunger and starvation, and heatwaves across Europe were
likely to have caused more than 20,000 excess deaths.
The new study, which reframes the debate on international climate
funding by focusing on the financial responsibility of fossil fuel
companies for climate harm, could help move the dial in the loss and
damage negotiations, according to Margaretha Wewerinke-Singh,
associate professor of sustainability law at the University of
Amsterdam.
How companies are assigned responsibility based on home
country income bracket
Estimated % of global emissions (1988-2022) v home
country gross national income
“This evidence and the underlying methodology could provide
policymakers and negotiators with a concrete framework for allocating
responsibility for climate-related costs to the world’s biggest
historical polluters,” said Wewerinke-Singh.
Overall, global economic damages to be expected from the
climate crisis are estimated at $99tn between 2025 and 2050 – of which
fossil fuel emissions are responsible for $69.6tn, according to more
than 700 climate economists.
The study conservatively attributes one-third of these future
climate costs to the global fossil fuel industry, and one-third each
to governments and consumers.
This means the global fossil fuel industry is held to be to
blame for at least $23.2tn of the climate-related economic losses
expected over the next 25 years, or $893bn annually.
The price tag on climate damages owed by the worst 21 oil, gas
and coal producers is based on each company’s operations and
product-related emissions since 1988 – and on the economic situation
of their home countries. About half of the warming experienced so far
has happened since 1988 – when Nasa scientist James Hansen testified
about the human role in climate breakdown in front of the US Senate.
The companies could afford the reparations:
Saudi Aramco, the state-owned company with the largest
emissions, would owe $43bn annually – equivalent to just over a
quarter of its 2022 profits.
ExxonMobil would owe $18bn in annual reparations, compared with
record profits of $56bn in 2022.
British oil giants Shell and BP, which together made $68bn for
shareholders last year, would be collectively liable for $30.8bn in
annual climate reparations, according to the study.
The authors exempt four companies in low-income countries
(India, Iran, Algeria and Venezuela) and halve the liability for six
producers in middle-income countries (Russia, China, Mexico, Brazil
and Iraq), using the moral argument that this would permit them to pay
more taxes and make other progressive contributions.
Prof Marco Grasso, a co-author at the University of
Milano-Bicocca, said: “The proposed framework for quantifying and
attributing reparations to major carbon fuel producers is grounded in
moral theory and provides a starting point for discussion of the
financial duty owed by the fossil fuel industry to climate victims.”
As climate litigation moves forward in jurisdictions across the
world, it is hoped that the evidence-based methodology may also assist
courts in attributing blame and calculating damages, according to
Erika Lennon, a senior attorney at the Center for International
Environmental Law’s energy and climate programme.
“It’s a complement to – not a substitute for – climate finance
being discussed in policy spaces, but would help fill the massive gap
[left] by states in covering the scale and costs of climate harms,”
said Lennon. “This is the next step in holding fossil fuel companies
accountable for their trillions of dollars of climate impacts.”
The fossil fuel companies named in the study were contacted for
comment. Shell said: “The energy system is the result of society’s
choices about everything from transport to land use over many decades.
Addressing a challenge as big as climate change requires unprecedented
collaboration where everyone has a role to play. For our part, we are
reducing our own emissions and working closely with our customers to
help them reduce theirs.” Saudi Aramco declined to comment, and the
others did not respond.
This article was amended on 19 May 2023 to correct the figure
of annual reparations in the study. It is $209bn, not $281bn.
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