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UN chief asks wealthy nations to impose windfall taxes on fossil fuel industry

UN chief asks wealthy nations to impose windfall taxes on fossil fuel industry

United Nations Secretary-General António Guterres had just returned from a visit to flooded Pakistan when he stepped before the UN General Assembly to give a speech on Tuesday. Poverty-stricken regions experiencing the most severe climate change impacts, like Pakistan, were front-of-mind when he declared, “Today, I am calling on all developed economies to tax the windfall profits of fossil fuel companies.”

Guterres made it clear how taxing fossil fuel companies could help struggling countries recover, recommending that developed economies convert rocketing oil and gas industry profits into funds to help struggling nations recover. By redirecting funds “to countries suffering loss and damage caused by the climate crisis and to people struggling with rising food and energy prices,” he suggests “polluters must pay” for the damage that reports have shown fossil fuel companies are largely responsible for.

The Guardian called Guterres’ appeal his “most urgent, and bleakest, speech to date.” However, Guterres suggested that “by acting as one, we can nurture fragile shoots of hope” and overcome “loss and damage from disasters” and reverse a “once-in-a-generation global cost-of-living crisis” that he said is “unfolding” and “turbocharged by the war in Ukraine.”

The fossil fuel industry has long been criticized for allegedly misleading the public on the full extent of harm caused by its greenhouse gas emissions. Carroll Muffett, CEO of the nonprofit the Center for International Environmental Law, told Ars that it’s “striking” that Guterres’ speech came one day after the US House Committee on Oversight and Reform released “yet another wave of documents showing the profound disconnect between what the oil and gas industry says it’s doing to address the climate crisis and what its own internal discussions reveal its true intentions are.”

That committee’s investigation surfaced memos from companies like Exxon and Chevron. It announced that the fossil fuel industry is “issuing misleading climate pledges to cover up the failure to take adequate steps to reach the goals of the Paris Agreement.” Experts testified that “the fossil fuel lobby combats climate action on every single level—global, national, state, and regional” and that corporate climate pledges are “insincere.”

Ars could not immediately connect with the UN, Exxon, and Chevron for additional comment.

As it stands, experts say the fossil fuel industry has continued raking in profits while lobbying to block legislation that could impose taxes or other penalties for climate damages. The independent nonpartisan policy institute American Progress reported that five US oil companies alone tripled their profits in the first quarter of 2022.

Redirecting funds from fossil fuel companies to struggling countries, Guterres said, “must be the first priority of every government” if the planet plans to “have any hope of reaching net zero” global greenhouse gas emissions by 2050.

In the past, critics of climate reparation proposals like Guterres’ call for windfall taxes on fossil fuel companies have said it’s wrong to blame the industry for producing products that are in high demand by consumers. Muffett aligns with Guterres, telling Ars, “if there was ever a moment to hold this industry accountable, that moment is now.”

How could the US respond?

Climate experts this summer told Ars that it’s a “now or never scenario” when implementing ethical solutions to climate change. But the US has only rarely considered regulations like Guterres recommends.

Head of a Climate Accountability Institute project that attributes emissions to the biggest corporations in the oil and gas industry Richard Heede told Ars that the US did attempt to enact a policy like Guterres recommends in 2021, the “Polluters Pay Climate Fund Act.” But that law has been stalled, as the Inflation Reduction Act—nicknamed a “dirty deal” by some climate advocates because it could prompt new fossil fuel industry projects, but hailed by others for potentially cutting US emissions by 40 percent as early as 2030—recently passed.

Heede provided background calculations on the stalled 2021 law. He estimated then that, based on operational and product-related emissions from 18 years of fossil fuel industry production—the US should allocate “climate taxes of $50 billion per year for ten years to the largest fossil fuel producers.”

While those calculations have not been updated for 2022, new research due out soon from Heede looked through the same lens globally. Heede told Ars that based on economists’ consensus estimate of climate damages and loss of global GDP through 2050—totaling approximately $99 trillion—approximately $13 trillion can be allocated to the top 20 fossil fuel producers, and $23 trillion can be allocated to oil, natural gas, and coal producers. Heede’s calculations could help governments quantify how much money should be redirected to vulnerable nations by taxing large oil producers, as Guterres has encouraged.

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