Researchers have for the first time put a price tag on climate damages owed by leading fossil fuel producers including Saudi Aramco, ExxonMobil, Shell, BP and Chevron.
Their study, published today in journal One Earth, finds 21 coal, oil and gas companies responsible for $209 billion a year in compensation for extreme weather and other climate change impacts predicted to occur around the world between 2025 and 2050.
Emissions from these companies’ operations and the use of their products between 1988 and 2022 contributed significantly to that harm, the study concludes. Global emissions surged over that 34-year period, despite the IPCC’s increasingly urgent warnings about the need for concerted action.
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The study was led by Marco Grasso, professor of political geography at the University of Milan-Bicocca, and the Center for Climate Accountability’s Richard Heede. Heede produced the landmark Carbon Majors study, which in 2013 quantified for the first time the amount of historical carbon emissions attributable to the fossil fuel industry.
Building on the Carbon Majors database, which continues to record data on emissions from the largest polluters, and a survey of 738 climate economists, the new study estimates climate change will cause $99 trillion global economic damages between 2025 and 2050.
Of this, it attributes a “conservative” $23.2 trillion per year in GDP loss to the coal, oil and gas industry, and the rest to non-fossil polluters, governments and consumers. That works out at $893 billion a year. The study then focuses on the world’s 21 largest fossil fuel companies, pinning them down to a collective $209 billion annually.
By far the biggest sum ($43 billion) is attributed to Saudi Aramco, which produced the most emissions between 1988-2022. The researchers describe this as “substantial but low” compared to the $161 billion the company made in profit last year.
Exxon is next with attributed annual reparation payments of $18 billion.
However, the researchers exempted four state-owned fossil fuel companies in low-income states: National Iranian Oil Co, Coal India, Petroleos de Venezuela and Algeria’s Sonatrach. And they halved the liability for companies in six middle-income countries.
They did this to avoid penalising people in poorer countries who are more vulnerable to the impacts of climate change and have contributed much less historically.
'Tip of the iceberg'
While substantial, the researchers say the sums do not take into account the value of lost ecosystem services, extinctions, loss of human lives and livelihoods, and other aspects of wellbeing not captured by GDP. “This is only the tip of the iceberg of long-term climate damages, mitigation and adaptation costs,” said co-author Heede.
The study only includes emissions from 1988 because that's when "claims of scientific uncertainty about the consequences of carbon emissions [became] untenable", as the Intergovernmental Panel on Climate Change was set up and scientist James Hansen testified on humans role in causing climate change to the US Senate. Many of these firms were polluting long before 1988.
The researchers say fossil fuel companies have a “moral responsibility” for remedying climate harm through their contribution to global greenhouse gas emissions, and their history of climate denial and misinformation which has slowed down global action.
They do not see a global reparations scheme as a substitute for climate finance under the United Nations (UN). But, with the UN's Green Climate Fund failing to provide sufficient funding for adapting to climate change and the loss and damage fund agreed at Cop27 yet to get up and running, they conclude that existing mechanisms should be complemented by money from fossil fuel firms.
Lead author Grasso said he hoped the work would inform future efforts to direct payments towards harmed parties. “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”, he said.
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Nations vulnerable to climate change have increasingly been calling for polluting companies like fossil fuel producers to pay for the loss and damage caused by climate change. The influential prime minister of Barbados Mia Mottley, in particular, has led the debate on this issue, while United Nations secretary general António Guterres suggested a windfall tax on oil and gas profits to fund loss and damage.
Mottley's finance advisor Avinash Persaud told Climate Home: "I don’t feel talking in terms of compensation is helpful to achieving the contribution we want. Issues compensation raises is should it be producers or consumers, current or past shareholders? Gas versus oil?"
"But," he added, "the industry and its consumers do have a responsibility and a contribution of $209bn would meet the bill for those things that you can’t easily borrow against without sinking under oceans of debt, like loss and damage and biodiversity protection".
"If spread across global exports, linked to carbon content, and supplemented with contributions from other sectors, I feel this number is in the right ball park for those things that cannot be borrowed for," he said.
A UN-commissioned report estimated that developing countries need to spend $2.4 trillion a year responding to climate change. But of this, Persaud estimates that all but around $350 billion can be funded by private companies seeking profit.
This includes projects like solar farms, which companies can develop and make money from, but excludes projects which are harder to profit from like re-training fossil fuel workers and building seawalls to protect people and property from rising sea levels.
A reparations scheme would also exist alongside the wave of climate-related litigation occurring around the world against fossil fuel companies.
The researchers said that, while a reparations scheme would not indemnify the industry from legal action “it may, for companies that pay reparations and show strong progress on reducing operational and product emissions, defer or even avoid being named as defendants in future law”
As an incentive to act, the researchers propose that companies could be eligible for reduced payments if they stop producing polluting fuels soon or meet their verified net zero targets.