Oil Majors Could Pay Trillions in ‘Loss and Damage’ 

New research on the environmental damage of the fossil fuel industry leaves “no doubt” that developed nations must financially assist climate-vulnerable countries. 

Oil and gas majors could have paid for the social and environmental damages of their emissions over 33 years, and still have made US$10 trillion in profit over that period, according to new research from Berlin-based NGO Climate Analytics.  

The findings come as the ‘loss and damage’ debate intensifies ahead of COP28, with the United Nations Framework Convention on Climate Change looking for new and innovative source of funding besides rich donor countries.  

Loss and damage refers to climate impacts that are felt regardless of adaptation action. The latest assessment cycle from the Intergovernmental Panel on Climate Change (IPCC) provides the most comprehensive scientific overview of loss and damage to date. It shows that loss and damage is anticipated to increase with every increment of warming and is disproportionately concentrated in the poorest and most vulnerable populations. 

At COP27 in Egypt last year, an agreement struck in the final hours to establish a loss-and damage fund to compensate those countries most vulnerable to climate change was considered a major breakthrough. Funding arrangements for the fund are set to be agreed at COP28 in Dubai in later this month. 

Social cost of carbon   

Climate Analytics used the social cost of carbon (SCC) methodology to calculate damage estimates from the 25 biggest emitting oil and gas companies in the world from 1985 to 2018 and compare it with the financial gains made over that period. It covered Scope 1, 2 and 3 emissions and, to account for the potential responsibility of other actors such as consumers and policymakers, it calculated a “partial damage allocation”.  

Between 1985 and 2018, Climate Analytics estimated that the partial damages of the combined CO2 emissions from 25 oil majors to be US$20 trillion. Over the same period, their financial gains were roughly US$30 trillion – meaning the companies could have paid for their damages and still made US$10 trillion in profit.  

Speaking on a webinar about the findings, Dr Carl-Friedrich Schleussner, Head of Climate Science at Climate Analytics, said while “there’s no doubt” that developed countries “first and foremost” must provide public financial resources to assist developing countries with climate impacts.  

“This year, we saw record profits from the oil and gas industry. Leaders, including the UN Secretary General [António Guterres] and the Prime Minister of Barbados [Mia Mottley] have since called for a windfall tax on fossil fuel profits to fund loss and damage from climate change.”  

He added that in addition to its carbon emissions, the fossil fuel industry has been aware of the risks of climate change, has engaged in activities to “spread misinformation and undermine political support” for technologies that would reduce emissions.  

The analysis of 25 oil companies showed that Saudi Arabia’s Aramco made the largest gains and is also the biggest polluter, followed by state-owned firms in Russia, Iran and the host of COP28 the United Arab Emrites (UAE).  

Among investor-owned companies, Exxon Mobil, Shell and BP topped the charts. 

Marina Andrijevic, Researcher at Climate Analytics, said: “If you look at the numbers from last year, the ratio is even more pronounced […] there were two records – record global temperatures and record profits from fossil fuel producers.” 

She added that the seven largest oil majors amassed more than US$500 billion in financial gains – or US$1 million a minute all year – when the gross domestic product (GDP) of the Caribbean or Pacific small island states combined is US$100 billion.  

“If we calculated the oil major emissions and the damage from those emissions, it is equal to US$260 billion,” she said, adding that these companies could have paid those damages and still be left with US$200 billion in profit combined.  

“These oil and gas companies are unabashedly flaunting their profits, and some even walking back on their climate commitments, which is of course very concerning for all of us.”  

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