Oil and gas producers’ 2022 revenues were five times larger than the budget predicted in global climate finance commitments, according to new work published in the journal Climate Policy. The authors indicate that the scale and structure of these gains should be part of the discussions at the United Nations Climate Change Conference (COP29). They ask political leaders to exercise their power “to use these ‘super benefits’ in favor of those most affected by the environmental crisis.”
Researchers explain that the Russian invasion of Ukraine caused an international increase in fossil fuel prices. They analyzed the expected and actual profits of 93 of the industry’s main producers to determine how the effects of the war have favored their business. They concluded that The conglomerates surpassed their profit forecasts by almost $500 billion combined.. The figure is equivalent to five times the global investment agreement agreed at the Copenhagen Climate Summit in 2009. The agreement had the objective of mobilizing 100 billion dollars annually to support climate mitigation and adaptation actions in developing countries from 2020.
Florian Egli, leader of the Public Policies for the Green Transition division at the Technical University of Munich and lead author of the study, recalls that one of the great challenges to combat climate anomalies is obtaining resources. He notes that “research shows that there is a lot of financing potential in the hands of fossil fuel companies.”
Climate financing: between rhetoric and commercial interests
The oil and gas producers examined collectively generated $1.2 trillion in 2022. This represents profits 2.6 times higher than the $753 billion recorded in the immediate previous year. The report indicates that about 42% of the surplus was generated by entities controlled by governments. 70% of the proceeds benefited state-owned companies from countries that have not made international climate financing commitments.
58% of the additional net profit was in the hands of private corporations, mostly based in nations that have agreed to subsidize pro-environmental initiatives. The Firms originating from the United States controlled almost 50% of the turnover linked to the business sector and about 37% came from organizations established in the United Kingdom, France and Canada.
Michael Grubb, Professor of Energy and Climate Change at University College London, points out that “taxing ‘super profits’ could help reduce investment in oil and gas. It would facilitate the creation of a stable and efficient clean energy market and help align financial flows with the goals of the Paris Agreement. Greater taxation of fossil fuel companies should be considered for moral and economic purposes. “This should be the next item on the global agenda.”
Simon Stiell, executive secretary of the office of the United Nations Climate Change Organization (UN Climate Change), has said that “the next two years are essential to save our planet.” He points out that the ecological initiatives instituted so far will only be able to reduce emissions until 2030. “Many countries will only be able to implement new and solid plans if this year there is a qualitative leap in financing the fight against climate change,” he adds. A report from the United Nations Environment Program estimated that the funding gap for adaptation to the planetary crisis is between $194 billion and $366 billion annually. It is the largest deficiency ever recorded.
“For years, the international community has struggled to meet its climate finance goals, even though some of the world’s richest countries have committed to financing it. Much of the gap between rhetoric and action could be closed if governments taxed the windfall profits of fossil fuel firms and used those resources to combat climate change,” reiterates Anna Stünzi, a researcher at the University of St. Gallen.
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