Industrialized nations previously committed to providing $100 billion annually from 2020 to 2025 for climate mitigation and adaptation. However, these commitments have not been fully met, and funding strategies for the subsequent New Collective Quantified Goal (NCQG) remain unresolved. The study suggests taxing windfall profits-extraordinary earnings spurred by crises, such as the 2022 surge in energy prices following Russia's invasion of Ukraine.
Analyzing 2022 financial data from 93 major oil and gas firms, the study found actual profits reached $1.243 trillion, exceeding projections by $490 billion. "These additional profits from just one year are close to the total amount promised to poorer countries for a five-year period," stated Professor Florian Egli, leading the study at TUM.
The research identified that 42% of windfall profits were accumulated by state-owned companies, predominantly in Norway. Dr. Anna Stunzi of the University of St. Gallen noted, "Governments can directly redirect these crisis-driven profits to combat climate change."
Among private corporations, 95% of windfall gains came from firms based in countries committed to climate financing. U.S.-based companies alone accounted for $143 billion of these profits, with significant shares also reported in the UK, France, and Canada.
Professor Egli emphasized the potential difficulty of enacting global windfall profit taxes, but referenced the global corporate minimum tax agreement from 2023 as a possible template. Funds from these taxes could be set aside for future use, ensuring consistent climate finance. The EU implemented a temporary windfall profit tax in 2022, while the UK's measure extends until 2030.
The study notes that total industry profits are even higher than reported, as figures from major companies in nations like Russia, Iran, and Venezuela were not available. Michael Grubb of University College London highlighted, "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."
Research Report:Harnessing oil and gas superprofits for climate action
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