In 2022 Aramco announced what its CEO called “probably the highest net income ever recorded in the corporate world.”
Supply disruptions resulting from the illegal invasion of Ukraine by Russia - the largest gas supplier to Europe - led to huge spikes in price for gas, which then bled into demand for other fossil fuels, tightening energy markets around the world and pushing up prices for goods across supply chains.
Meanwhile, unprecedented disasters fuelled by climate change made the case for a robust funding mechanism for loss and damage more pressing. The 2022 United Nations’ climate conference saw a breakthrough, with the agreement to establish both a new fund for loss and damage and new funding arrangements.
In this report we explore who could pay for loss and damage through the lens of responsibility for historic emissions, and the financial gains generated from selling oil and gas.
We use a well-established methodology - the social cost of carbon - to calculate damage estimates from the 25 biggest emitting oil and gas companies in the world from 1985 to 2018, and compare it with the financial gains made over the same period. We look at Scopes 1, 2 and 3 emissions in our estimate of the total damages resulting from emissions attributable to fossil fuel companies.
To account for the potential responsibility of other actors such as consumers and policymakers, we also explore an established approach that uses a clean third split between producers, emitters and policymakers. We refer to this as partial damage allocation.
Between 1985 and 2018, we estimate partial damages of the combined CO2 emissions from 25 companies - oil and gas carbon majors - of about 20 trillion USD. Over the same time period, their financial gains were about 50% larger - roughly 30 trillion USD.
Carbon majors could have paid for their damages and still made 10 trillion USD.
The dirtiest dozen
The dirtiest dozen of the carbon majors account for about 15 trillion USD in damages and 21 trillion USD in gains.
Saudi Arabia, Russia, Iran, China and the United Arab Emirates are home to the largest state-owned carbon majors with both the largest financial gains and damages incurred. Of the private companies, ExxonMobil, Shell, BP, Chevron and TotalEnergies were responsible for the highest damages and saw the biggest financial gains.
For a subset of seven carbon majors including Aramco, Exxon Mobil, and Shell, we provide estimates for 2022. These seven carbon majors together amassed 497 billion USD in financial gains in 2022 compared to 260 billion USD in partial damage estimates. In other words, financial gains were almost twice the estimated partial damages.
Self-perpetuating fossil wealth
Several countries channel parts of their fossil fuel gains into some of the biggest sovereign wealth funds world-wide. The sheer size of the funds, and their returns, points to the persistence of fossil-accumulated wealth well beyond extraction.
The United Arab Emirates is home to the biggest combined sovereign wealth funds in the world. Half of its funds could pay for the damages associated with its oil and gas industry, and it would still have 700 billion USD in wealth.
The United Nations Secretary General and leaders of vulnerable countries have called for the use of windfall taxes to redistribute huge profits from carbon majors (which look set to continue) for loss and damage funding. Governments that are home to these carbon majors, or perhaps the companies themselves, could well be called on to contribute to a loss and damage fund. It’s clear they are good for it.
Coastal loss and damage for small islands
This commentary on a paper in Nature Sustainability reviews how the study quantifies the impacts of sea-level rise on small island states and estimates the impacts in terms of cost, land loss and population exposure across all small islands worldwide.
The effects of political knowledge use by developing country negotiators in Loss and Damage negotiations
This article traces how developing country negotiators used knowledge to further their interests in loss and damage negotiations from 2003 to 2013.
Research agenda for the loss and damage fund
This piece in Nature discusses what research could contribute to the design of the loss and damage fund.
Climate justice and loss and damage: Hurricane Dorian, Haitians and human rights
Haitian communities were the locus of the majority of deaths and missing people attributed to the 2019 Hurricane Dorian and faced a series of distributional, procedural and recognition injustices. We investigate the historical factors and contemporary conditions of Haitian communities in The Bahamas that resulted in significant inequities, disproportional impacts and infractions of human rights.
Loss and damage implications of sea-level rise on Small Island Developing States
This review assesses the regional nature of sea-level rise for Small Island Developing States, highlights associated impacts and risks, and reviews limits to adaptation and resultant economic and non-economic loss and damage.
Making sense of the politics in the climate change loss & damage debate
This article looks at the politics of loss and damage and inquires into negotiators' perceptions of the most contentious issues surrounding loss and damage negotiations.
Two steps down the debt spiral: COVID-19 and tropical cyclones severely limit the fiscal space of many Small Island Developing States
With tourism being one of the sectors most affected by Covid-19, many SIDS economies find themselves critically hit by the pandemic, adding to the continued financial stress through tropical cyclone-induced losses. Climate models project further risks.
Loss and damage research for the global stocktake
The impact of climate change on incomes and convergence in Africa
This study estimates climate-induced losses in Africa by accounting for the dimensions of risks: exposure, vulnerability and hazards.
Towards a solid science base: loss and damage in the IPCC special reports
This briefing takes a look at how issues relevant for loss and damage, and particularly important to Small Island Developing States and Least Developed Countries, have increased in prominence in the recent IPCC Special Reports.