Harnessing oil and gas superprofits for climate action

Abstract

Climate change disproportionately harms low-income countries, whilst international climate finance to support them remains inadequate. Negotiations about the New Collective Quantified Goal (NCQG) centre around how to cover increasing needs of developing countries. Windfall profits of the fossil fuel industry, which benefits from this dominant source of greenhouse gas emissions, could contribute to mobilizing more finance, both for the NCQG and wider needs of domestic and international climate finance. We find that the energy crisis of 2022 led to oil and gas industry ‘superprofits’ in the same year–defined as being above the stated expectations at the beginning of the year–amounting to about half a trillion dollars (US$490 bn above the $753 bn projected by the companies). Over $200 bn of this accrued to companies directly controlled by governments, two-thirds of which do not have a historical commitment to contribute to international climate finance. The remaining $280 bn of superprofits went to privately controlled companies, of which over 95% are headquartered in countries currently contributing to international climate finance. We argue that there is a clear case to include fossil fuel profits on the agenda of UNFCCC climate finance negotiations and to pursue an international agreement on minimum fossil fuel production taxes. Given that most privately controlled superprofits occurred in G20 countries and the group's ability to reach agreement on corporation taxes recently, the G20 could be a natural forum to pursue such policy action.