Taxing Big Oil could boost UN loss and damage fund by 2000%

Targeting the world’s seven largest publicly traded oil and gas companies—ExxonMobil, Shell, Chevron, TotalEnergies, BP, Equinor, and ENI—the tax would hold major polluters accountable for their contributions to the climate crisis.

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Image Credit: DeSmogUK

The United Nations Loss and Damage Fund, created to assist vulnerable nations grappling with the devastating effects of climate change, is critically underfunded. With a current total of $720 million in pledges, the fund falls drastically short of the financial resources needed to address escalating climate-related disasters. However, a recent analysis by Greenpeace International and Stamp Out Poverty proposes a transformative solution: a Climate Damages Tax (CDT) targeting the fossil fuel industry. This modest tax could raise hundreds of billions of dollars by the end of the decade, boosting the fund by over 2000 percent and providing critical support to communities bearing the brunt of climate impacts.

The CDT would impose a fee on fossil fuel extraction, calculated per tonne of coal, barrel of oil, or cubic meter of gas, based on the carbon dioxide equivalent (CO2e) emissions embedded within these resources. Starting at $5 per tonne of CO2e, the tax would increase annually by $5 plus inflation, ensuring a steady rise in revenue.

Targeting the world’s seven largest publicly traded oil and gas companies—ExxonMobil, Shell, Chevron, TotalEnergies, BP, Equinor, and ENI—the tax would hold major polluters accountable for their contributions to the climate crisis. These companies collectively earned $148.2 billion in adjusted profits in 2023 and generated over 3 billion tonnes of CO2e emissions, according to the analysis.

The revenue generated by the CDT could be staggering. In the first year alone, the tax would raise $15 billion from the seven companies. Incremental increases in the tax rate could push annual revenue to over $37 billion within three years and hundreds of billions by 2030. By comparison, the $720 million currently pledged to the Loss and Damage Fund is woefully inadequate to address the scale of climate disasters globally.

Greenpeace and Stamp Out Poverty highlighted how this tax could offset the costs of recent extreme weather events. For example, taxing ExxonMobil’s 2023 emissions would raise $3.19 billion—enough to cover nearly half the $6.6 billion in damages caused by Hurricane Beryl, which struck the Caribbean, Mexico, and the U.S. Gulf Coast.

Other examples include:

Shell: Taxing its 2023 emissions could significantly offset the $2.9 billion in damages caused by Typhoon Carina in Southeast Asia.

TotalEnergies: A CDT on its emissions could cover over 30 times the $1.1 billion damages from flooding in Kenya in 2024.

These examples underscore the potential of a CDT to address the financial burden of climate disasters while holding polluters accountable.

Extreme weather events in 2024 alone cost an estimated $64.6 billion, according to the analysis. This figure represents only a fraction of the total global damages attributed to climate change. Events like India’s deadly heatwaves ($25 billion in damages), Brazilian floods ($10 billion), and devastating hurricanes and typhoons have highlighted the urgent need for financial mechanisms to support affected communities.

Without sufficient funding, vulnerable nations are left to bear the disproportionate costs of a crisis they did not create. The CDT aims to redistribute this burden, ensuring that those responsible for the crisis contribute to its mitigation and recovery.

Advocates argue that the CDT is more than just a funding mechanism; it is a matter of climate justice. David Hillman, Director of Stamp Out Poverty, emphasized this point: “While oil and gas giants keep raking in grotesque levels of profit from exploiting resources, the damages resulting from the industry’s operations are disproportionately borne by people who did not cause the crisis. A climate damages tax… will make polluters pay for the cost of climate impacts.”

Similarly, Abdoulaye Diallo, Co-Head of Greenpeace International’s Stop Drilling Start Paying campaign, called the proposal “fundamentally an issue of climate justice.” He added, “It is time to shift the financial burden for the climate crisis from its victims to the polluters behind it.”

The proposal for a CDT comes as the COP29 summit in Baku, Azerbaijan, focuses on addressing the glaring funding gap in the Loss and Damage Fund. UN Secretary-General António Guterres has called for urgent action, stating, “In an era of climate extremes, loss and damage finance is a must. And we must get serious about the level of finance required.”

Many environmental organizations and over 100 NGOs support the CDT, highlighting its feasibility and necessity. Stamp Out Poverty noted that many governments already collect volume-based revenue from fossil fuel producers, demonstrating that the CDT could be implemented on a global scale.

Opposition from the fossil fuel industry is expected, with companies likely to argue that such a tax could impact economic growth and energy security. However, proponents counter that the unprecedented profits of oil and gas giants make the tax both fair and necessary. In 2023 alone, these companies collectively earned $148.2 billion while contributing to record-breaking global emissions.

The CDT also aligns with broader goals for climate resilience and sustainability. Revenue generated by the tax could fund clean energy transitions, green jobs, and infrastructure development in affected regions, providing long-term benefits for communities worldwide.

The Climate Damages Tax represents a groundbreaking opportunity to address the funding shortfall in the UN Loss and Damage Fund. By holding polluters accountable, the CDT could provide a sustainable, long-term solution to the escalating costs of climate disasters. Advocates emphasize that the CDT is not just a financial mechanism but a step toward global climate justice.

“Our analysis lays bare the scale of the challenge posed by climate loss and damage and the urgent need for innovative solutions to raise the funds to meet it,” said Abdoulaye Diallo. 

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