One of the major consequences of the advance of global warming will be the financial cost incurred from the effects that climate-based catastrophes, such as extreme weather events and sea level rise, have on humanity, including our health, property and infrastructure. So far, that financial burden has been borne by governments, insurance companies—and especially individuals. But shouldn’t the agencies that are primarily responsible for the growing climate crisis—the fossil fuel companies—be made to help foot the bill?
A survey of 738 climate economists conducted by sociologists Marco Grasso and Richard Heede attempted to answer the question of what share of the financial burden falls on the fossil fuel industry when it comes to addressing the fallout from climate change; based on the projected loss of global GDP under a 3°C scenario, that cost is expected to be $99 trillion between 2025 and 2050 across all sources, with $70 trillion of this total being attributable to fossil fuels; based on how much each of the top twenty-one fossil fuel companies’ product has contributed to global warming since 1988, they would collectively owe over $5.44 trillion over the same time period.
“The proposed annual reparations are comparable to industry net profits in recent years,” according to the study. “For instance, ExxonMobil third quarter 2022 profits of $19.7 billion exceed its annual reparation payment” of $18.4 billion. “The global oil and gas industry has, according to recent research, amassed ‘profit without effort’ (i.e., rents) of $1 trillion per year ($2.8 billion per day) since 1970.”
The study takes into account whether or not each individual company is an investor-owned company (IOC) such as Saudi Aramco, BP or Exxon-Mobil, or a state-owned entity (SOE) like Russia’s Gazprom or PetroChina; SOE companies are often based in less affluent countries and contribute more directly to their local economies, while IOCs tend to be based in wealthier countries with profits that are geared almost solely toward benefiting shareholders. Thus, the authors propose that IOCs pay more in reparations than their state-owned counterparts.
Although fossil fuel companies, being the agencies that have profited the most from the climate change situation, are the main focus of the study paper, the authors have identified three main groups responsible for the production of greenhouse gas emissions: aside from the fossil fuel companies (producers) there is also “those who use their carbon fuels as intended (emitters); and those who, under the weight of scientific evidence and international agreements, should (or fail to) act to reduce emissions (political authorities).”
“There is no objective basis to disentangle the different weight of these three groups and for the sake of simplicity we propose that producers, emitters, and political authorities have equal one-third shares of responsibility, and thus an equal quota of climate damages of $23.2 trillion.”
The results of the survey, as they appear in Cell Press’ scientific journal One Earth, are presented as the basis of a policy proposal that could be used to not only alleviate the financial burden that global warming is causing, but also to incentivize fossil fuel companies with lower reparation rates if certain milestones are met in any potential carbon reduction efforts.
The authors admit that this system would be difficult to implement and enforce, along with the logistics of managing a system that would potentially handle more currency than some existing financial institutions. But they point out that as climate-related disasters become more frequent and extreme, a source of funds will be needed to address the problem.
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