Living in the COVID World ... and Beyond #27: Why There Should Be a Windfall Tax on Oil and Gas Companies

We all know that there is a climate crisis.  

We can see it and feel it in our own lives.  

We read about it happening around the world – floods, droughts, famines, icecaps melting, hurricanes, etc.   The extent of climate -related damage that the world is facing each year is huge.  The United States suffered 18 climate-related disasters in 2022 and the estimated cost of those events is $165biion.  And that does not even include the loss of species and biodiversity for which we cannot calculate a price.

And we know that the extraction of fossil fuels and the subsequent burning of fossil fuels releases carbon dioxide into the atmosphere and is the biggest contributor to the climate crisis.

At the same time, the oil and gas industry had record profits in 2022. It is estimated that the top investor-owned fossil fuel companies generated $190billion of total profits.  (Note: there are other privately-held fossil fuel companies, like Koch Industries.)  

You can see in the table below the profits of the five largest oil and gas companies in 2021 and 2022.   They created more than double the profits in 2022 than what they had made in 2021.

Profits of Five Biggest Oil & Gas Companies

  2021 (U.S. Billion $) 2022 (U.S. Billion $)

ExxonMobil $23.1B $55.7B

Shell $19.3B $39.9B

Total $18.1B $36.2B

Chevron $15.6B $35.5B

BP $12.8B $27.7B

And given these profits, many oil and gas companies have announced plans to increase extraction and therefore the burning of fossil fuels in the coming years.

Meanwhile, the oil and gas industry spent about $124million lobbying the United States federal government in 2022, according to OpenSecrets.   As reported by Inci Sayki and Jimmy Cloutier of OpenSecrets, “the industry targeted a range of issues that will impact oil and gas companies as the global economy weans itself off fossil fuels, including rules governing methane emissions, oil and gas development on federal land and waters, and subsidies for carbon capture technology.”  

Lobbying has an impact.   There were $5.9trillion of global government subsidies for fossil fuel production in 2020.

It is also well-documented that the big oil and gas companies were aware of the dangers associated with fossil fuels and not only refused to modify their business strategies but also intentionally engaged in a propaganda campaign to confuse the public and policy makers.   Exxon’s knowledge of climate change dates back to July 1977, when its senior scientist James Black told Exxon’s management committee: “There is general scientific agreement that the most likely manner in which mankind is influencing the global climate is through carbon dioxide release from the burning of fossil fuels."  A year later Black warned Exxon that doubling CO2 gases in the atmosphere would increase average global temperatures by two or three degrees—a number that is consistent with the scientific consensus today.

Instead of heeding Black’s warning,  by 1989 Exxon had helped create the Global Climate Coalition (disbanded in 2002) to question the scientific basis for concern about climate change. Their propaganda campaign extended far beyond the Unites States and influenced many countries and the content of global treaties regarding climate.  

Given the huge profits made by the oil and gas companies, the magnitude of the climate crisis, and the need for funds to support climate adaptation and resilience and the transition to greener energy sources, the United States and other countries around the world in which fossil fuel companies operate should place windfall taxes on the fossil fuel industry.  The money generated from these taxes could be deployed to help countries suffering the most from the climate crisis.  Those countries that are experiencing the greatest damage to date are in the Global South, especially Africa.  

UN Secretary General António Guterres said at the UN General Assembly in New York in September 2022: “Today, I am calling on all developed economies to tax the windfall profits of fossil fuel companies…. Those funds should be redirected in two ways: to countries suffering loss and damage caused by the climate crisis, and to people struggling with rising food and energy prices.”

Windfall taxes on oil and gas companies are just one method that could be implemented to help generate the funds necessary to address the climate address.   Other ideas to be considered include taxing financial transactions, additional taxes on billionaires, lenders forgiving debts to frontline nations, and many more.

What would be difficult for you about advocating publicly in support of windfall taxes on oil and gas companies to address the climate crisis?