Fossil Fuel Companies Should Pay Trillions in ‘Climate Reparations,’ New Study Argues

One of the most contentious climate policy debates revolves, unsurprisingly, around money. Who should pay the monumental sums needed to protect against extreme weather and transition to clean energy, particularly because the damage has been caused by fossil fuel pollution from the rich, while the costs will be borne disproportionately by the poor?

Add to that a disparity in time: Older people have enjoyed the benefits of burning fossil fuels. The youth and unborn will suffer the harms.

While much of the focus is on having wealthy governments pay their fair share, a new study argues that fossil fuel companies should pay “climate reparations,” too.

In a peer-reviewed paper published Friday in One Earth, researchers used data on emissions tied to the world’s 21 top polluting companies to determine just how much, and landed on a total of $5.4 trillion over a period of 26 years. The largest sum would come from Saudi Aramco, Saudi Arabia’s state-owned oil company, which would be responsible for $1.1 trillion, or $42.7 billion per year, followed by Russia’s state-owned Gazprom, ExxonMobil, Shell, BP and Chevron.

Those six companies earned more than $354 billion in profits last year, a record-high total.

Richard Heede, a co-author on the study, pointed to all the shoreline globally that will need to be protected from climate-induced sea level rise or abandoned. “Who’s going to help pay for those costs?” he said. “Taxpayers only? Residents? People who are insured? People who are uninsured? I think the fossil fuel companies need to contribute.”

It is not simply that the companies’ sold the products that have fueled climate change, the paper argues, but that executives at the companies worked to delay or dilute efforts to phase out fossil fuels even when they knew they were causing harm.

“They successfully shaped the public narrative on climate change through disinformation, misleading ‘advertorials,’ lobbying, and political donations to delay action directly or through trade associations and other surrogates,” the authors wrote.

Heede is director of the Climate Accountability Institute, a research group focused on fossil fuel companies’ carbon production. The other author was Marco Grasso, a professor of political geography at the University of Milan-Bicocca.

The paper is not the first to suggest that oil companies pay for climate damages. Last year, Prime Minister Mia Mottley of Barbados proposed a tax on fossil fuel production that would go towards a global fund to help developing countries recover from climate disasters. Lawmakers in Congress and New York State have introduced similar proposals for the national and state levels. And dozens of cities, states and counties in the United States and other countries have filed lawsuits against fossil fuel companies seeking compensation for climate impacts, which, in the case of Exxon, the company’s own scientists predicted decades ago.

The new paper builds on earlier work by Heede that tallied the total emissions generated by the world’s top polluting companies, mostly oil, gas and coal producers. That work has been cited in some of the lawsuits filed against the companies and provided the basis of the new paper. Heede’s work has been supported by the Rockefeller Brothers Fund, which is also a funder of Inside Climate News.

To arrive at a figure for reparations, the researchers used a survey of 738 economists that estimated the total future costs of climate change from sea level rise, flooding and other damage from extreme weather events if temperatures continue to warm at the current trajectory. For the period 2025-2050, the median estimate of economic damages was $99 trillion, of which $70 trillion can be attributed to fossil fuel emissions (with the rest driven by emissions from other sources, like agriculture).

The authors then divided that figure by three, proposing that the total costs should be shared equally by the governments that allowed companies to pollute, the consumers who bought fossil fuels and the corporations that produced them.

For production data by company, the paper reached back to 1988, the year that nations formed the Intergovernmental Panel on Climate Change and when scientist James Hansen testified to Congress about the threat posed by global warming.

The researchers also decided that companies from less wealthy countries, including Gazprom and Mexico’s Pemex, should pay only half the sum their emissions would suggest. Those from developing nations, including Algeria, India and Venezuela, were deemed not responsible for reparations at all.

“It seems arbitrary and it is,” Heede said. But the point was less to enshrine specific figures, he said, than to fuel a discussion. “This is just a trial balloon anyway. We have no rational mechanism for raising funds, or managing funds or allocating funds to victims of climate change,” he said. “And so we expect a vigorous debate about which approach is fair.”

Aramco, BP and Shell declined to comment for this article. Chevron and Exxon did not respond to requests for comment. Gazprom could not be reached immediately.

The idea of climate reparations is not new, said Olúfẹ́mi Táíwò, an associate professor of philosophy at Georgetown University who has written about the topic but was not involved in the new research. But he said the paper made an important contribution to an effort to expand the focus beyond government-to-government transfers to include corporations, too.

“Especially understanding the centrality of capitalism and corporations to the political problem at issue here,” Táíwò said, “it’s very important to shine the spotlight on the private sector.”

Táíwò has argued that climate reparations need to achieve more than simple cash transfers, with the goal ultimately being not only to redistribute wealth more equitably but also access to technology and the power to make political decisions.

“The target is creating a just world order,” he said, or ensuring that the burdens and benefits of climate change are distributed equally.

The new research does not recommend specific mechanisms for how companies should pay or who specifically would receive money. The United Nations has established the Green Climate Fund as a tool for wealthy nations to channel finance to developing countries to pay for clean energy and climate adaptation projects. That fund has struggled to attract the money that nations pledged, however, and much of what has been provided has come in the form of loans that need to be repaid, sometimes from private banks. Many of the countries receiving that money are already saddled with debt.

At last year’s U.N. climate summit, nations agreed to establish a “loss and damage” fund through which rich countries would compensate poor ones for irreversible climate damages. But that effort faces a long path to formation, and contributions would be voluntary. A committee led by a majority of developing countries is preparing for a meeting in June with an aim to map out how the financing would work before the next annual climate summit in November. They also hope to determine who will pay into loss and damage funds and who will receive them.

Heede said he hopes the new research will inform the development of both of those funds, with the possibility that fossil fuel companies would contribute, too. Doing so could even help the companies themselves, the authors argue, by helping them retain their “social license to operate.” The paper suggests that companies could pay less in reparations if they accelerate their own shifts away from fossil fuels.

“It’s not so much a way of saying ‘You owe X number of dollars per year,’” Heede said, as much as it is a call for companies to reorient their businesses “to the global call for climate sanity.”