Companies took in half a trillion dollars more than expected in 2022

Windfall profits from oil and gas could cover climate payments

To assess whether governments could have redistributed these excess profits, the researchers considered the countries where they are domiciled and whether they are publicly or privately owned. 42 percent of the windfall profits were earned by state-controlled companies, with the largest proportion earned in Norway. “The governments have the ability to take direct action to skim off the profits earned due to a crisis and use them to fight the climate crisis,” says the second study leader Dr. Anna Stünzi of the University of St. Gallen.

Of the private companies that earned windfall profits, 95 percent were headquartered in countries that have made commitments to contribute to climate protection financing. “With a tax on windfall profits from oil and gas, at least some industrialized countries could generate income to meet their commitments to the poorer countries,” says Florian Egli. Among the private companies, companies in the USA accounted for around half of these profits (143 billion dollars). An additional 37 percent of the profits were taken in by companies in the UK, France and Canada. Nearly all of the companies are located in G20 countries.

“More than half of the worldwide greenhouse gas emissions result from the burning of oil and gas. At the same time, the oil and gas industry has been one of the most profitable sectors for a long time,” says Florian Egli. “It would undoubtedly be hard to reach an international agreement to tax these profits. But the agreement on a global minimum tax rate for companies, reached by more than 130 countries in 2023 under the auspices of the OECD and G20, could be a role model.” The taxes could flow into a fund, for example, so that money would also be available in years without windfall profits. So far, the EU had introduced a temporary windfall profits tax on fossil fuels in 2022; in the UK, such a tax will apply until 2030.

The researchers note that the worldwide profits of the industry are larger than those stated in the study. That is because some of the biggest companies, for example in Russia, Iran, South Africa and Venezuela, do not publish their figures and could therefore not be included in the study.

“Taxing superprofits could tamper and phase down investment in oil and gas, building a stable and efficient clean energy market and helping to align financial flows with the goals of the Paris Agreement” says study author Michael Grubb, professor at University College London (UCL). “The reorientation of fossil fuel revenues for consistency with climate goals should be next on the global agenda.”