INSIGHT by Marco Grasso, Professor of Political Geography in the Department of Sociology and Social Research at the University of Milano-Bicocca | Based on study published in One Earth, 6(5), 459-463 by M. Grasso, R. Heede
The main reason to approach a topic with a growing traction in the climate discourse as climate reparations from this perspective is that we believe that the burden of climate damages should not be borne only by states and individuals, as currently happens. In fact, other agents bear substantial responsibility for the cost of redressing climate harm: fossil fuel companies, those agents that have contributed the most to global climate disruption, while in the meantime greatly profiting.
We argue that fossil fuel companies contributed to climate harm through their operational and product emissions, have a documented history of climate denial and of discourse and practices of delay, disinformed the public and their shareholders on climate science and corporate risks, are complicit in slowing down or impeding climate legislation, and therefore are morally responsible for climate harm and consequently must pay reparations.
The reparations owed by fossil fuel companies are based on their violation of the ‘no-harm principle’, which entails disgorgements proportional to their historical emissions understood as the measure of their contribution for climate harm and by the application of the moral ‘principle of need’, which requires that people with greater need should receive more benefits. We acknowledged to the principle of need a moral primacy over the no-harm principle given the financial means that should be mobilized to ensure poorer people’s right to development amidst a global climate crisis. In particular this principle requires that i) fossil fuel companies in less wealthy countries are charged lower reparations to allow larger contributions (in terms, for example, of tax revenues, domestic subsidies, employment, social programs) to their countries’ people and that ii) companies in poorer countries are exempted from reparations because people of these countries need the maximum benefits from fossil fuel companies not burdened by reparations.
Fossil fuel companies contributed to climate harm through their operational and product emissions, have a documented history of climate denial and of discourse and practices of delay, disinformed the public and their shareholders on climate science and corporate risks, are complicit in slowing down or impeding climate legislation, and therefore are morally responsible for climate harm and consequently must pay reparations.
Based on the moral principles clarified above, we group the top twenty-one fossil fuel companies into the categories ‘High Requirement’ (HR), ‘Low requirement’ (LR), and ‘Exempted’.
HR companies must shoulder the full financial burden of reparations determined by the no-harm principle, since they are established in wealthier countries. HR Companies are IOCs (investor-owned companies) and SOEs (state-owned entities) headquartered in wealthier countries: Abu Dhabi NOC, BHP, BP, Chevron, ConocoPhillips, ExxonMobil, Kuwait Petroleum, Peabody Energy, Saudi Aramco, Shell, and TotalEnergies.
The principle of need assigns LR companies partial reparations on account of the more precarious economic situation of the people of their home countries; they are SOEs headquartered in less wealthy countries: Gazprom, Iraq National Oil Co., Pemex, Petrobras, PetroChina, and Rosneft.
By the same token, given their more indispensable contribution to their weak national economies and poorer people, Exempted companies are absolved from paying reparations and consist in SOEs headquartered in poorer countries: Coal India, National Iranian Oil, Petroleos de Venezuela, and Sonatrach.
HR and LR companies are required to pay reparations over the period from 2025 to 2050 through an annual scheme declining toward zero in 2050 to account for their decreasing capacity to shoulder reparations given their likely less profitable decarbonized business or, for less flexible companies, their dissolution. The postponement to 2025 is meant to allow companies to build up their financial capacity to address their estimated reparations.
Based on a survey of 738 climate economists and using a 2025-2075 growth model, the 2025-2050 cumulative cost of climate damages attributed to all anthropogenic sources based on a model of loss of GDP under a 3 °C scenario amount to $99 trillion, of which $70 trillion is attributed to fossil fuels. We further posit that carbon emissions result from the behaviours of three groups of agents: those who provide the global economy with the products whose combustion generates fossil fuel emissions (producers); those who use their carbon fuels as intended (emitters); and those who, under the weight of scientific evidence and international agreements, should (or fail to) act to reduce emissions (political authorities). There is no objective basis to disentangle the different weight of these three groups and for the sake of simplicity we propose that producers, emitters, and political authorities have equal one-third shares of responsibility, and thus an equal quota of climate damages of $23.2 trillion.
Payment of reparations can help address market failures, such as reduced competitiveness of renewables compared to heavily subsidized fossil fuels, increase cost of companies’ products, restrict expansion of their carbon business, induce them to leave reserves in the ground, and engender greater difficulty in capitalizing and insuring new carbon projects.
Each of the 21 top companies considered is then allocated a share of this $23.2 trillion sum – payable over 2025-2050 – based on its operational and product-related emissions as a percent of global emissions from fossil fuels from 1988 to 2022. Consistent with the moral categorization outlined, HR companies bear the full burden of their reparations, LR companies are attributed half, while Exempted companies are absolved from meeting theirs. As an incentive to early action, we propose that companies are eligible to reduce reparations if they achieve aggressive targets to reduce production of carbon fuels faster than required by a net zero by 2050 pathway under a 1.5°C scenario.
Two specifications are in order. First, the global reparations scheme proposed complements and does not substitute climate finance that states must make available under the UNFCCC or climate-related litigation filed in numerous jurisdictions based on varying legal theories against major fossil fuel companies. Second, the reparations calculated are only the tip of the iceberg of long-term climate damages since they measure only GDP loss to 2050, while ignore the value of lost ecosystem services, extinctions, loss of human lives and livelihoods, and more generally components of well-being not captured in GDP. Additionally, the estimated reparations provided are conservative since, as said, only one-third of future climate costs is attributed to the global fossil fuel industry, while the other two-thirds to governments and consumers.
Based on their 1988-2022 emissions, the 21 largest fossil fuel companies are responsible for $5,444 billion in expected loss GDP over 2025-2050, or $209 billion per year on average.
HR companies would disburse the largest cumulative reparations ($4,217 billion), whereas LR entities account for $1,227 billion, or 77% and 23% of total reparations, respectively.
Saudi Aramco, which has the largest emissions 1988-2022, is attributed annual reparations of $43 billion — substantial but low compared to 2022 revenues of $604 billion and profits of $161 billion. ExxonMobil, the leading investor-owned company, is attributed annual reparation payments of $18 billion — compared to revenues of $399 billion and profits of $56 billion in 2022.
Based on their 1988-2022 emissions, the 21 largest fossil fuel companies are responsible for $5,444 billion in expected loss GDP over 2025-2050, or $209 billion per year on average.
Payment of reparations can help address market failures, such as reduced competitiveness of renewables compared to heavily subsidized fossil fuels, increase cost of companies’ products, restrict expansion of their carbon business, induce them to leave reserves in the ground, and engender greater difficulty in capitalizing and insuring new carbon projects. Reparations would challenge these entities to adopt sustainable business practices – transitioning from profit-maximizing bystanders of climate disruption – while at the same time addressing their historical tortious conduct.
Implementing fossil fuel companies’ reparations would also make it possible, coherent with the increasing interplay between state and non-state agents in climate governance, to challenge old geopolitical groupings (e.g., North vs. South; developed vs. developing; responsible vs. vulnerable), and to complement significantly the so far inadequate international climate financing.
We believe that this work is a starting point for open discussion of shared responsibility for climate harm and in particular of the financial duty owed by the fossil fuel industry to climate victims. Our study aims to lay the groundwork for further investigation into the role of the fossil fuel industry in climate change and should not be understood as a policy proposal. While crucial, for purposes of this analysis we ignored a thorough identification of climate victims, the mechanisms of compelling payment of reparation funds, the governance and distribution of collected reparations, as well as the political feasibility of the approach developed and its relationships with the UNFCCC.
We strongly hope that our study will inform future efforts to direct payments from fossil fuel companies to parties harmed by climate change.
| about
Marco Grasso is Professor of Political Geography in the Department of Sociology and Social Research at the University of Milano-Bicocca. He is the author of From Big Oil to big Green. Holding the Oil Industry to account for the climate crisis (MIT Press, 2022) and has published extensively on climate on climate politics, governance, and ethics in major scientific journals.
Richard (Rick) Heede leads Climate Accountability Institute’s “Carbon Majors” project that traces carbon dioxide and methane emissions to the largest corporations that produce, refine, and market carbon fuels worldwide. The initial work was published in Climatic Change in 2013 with a lead story in The Guardian. Rick has analyzed potential emissions from oil, gas, and coal companies’ proven reserves vis-à-vis the remaining carbon budget. He and colleagues have modeled the atmospheric CO2 concentration, temperature, sea level rise, and ocean acidification attributable to major carbon producers. He is investigating how responsible oil and gas companies can align production and investment objectives with the ≤1.5°C pathway of the Paris Agreement, identify perverse governance policies, and quantified climate reparations owed by leading fossil fuel companies (with Marco Grasso). CAI was founded in 2011 to provide the scientific basis for leveraging climate stewardship by oil, gas, and coal producers. Rick published his thesis A Geography of Carbon with NCAR in 1983, worked on energy efficiency and climate mitigation with Rocky Mountain Institute 1984-2001, and consulted on municipal and industrial emission inventories with Climate Mitigation Services 2001-2011.
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