Fact of life# 156: Your hard-earned money is going towards subsidies for the biggest pollutors- Big Oil companies.

Even today, the fossil fuel industry remains one of the biggest contributors to release greenhouse gases into the atmosphere, raising the temperature of the earth by 1.5 degrees which is lethal for life to survive. For these ‘Big Oil’ companies are bringing about an economic cost for the world in terms of impact of climate change. But these companies are not required to pay that cost. The poorest nations, the low lying countries are the ones who are bearing the brunt and paying the costs.

Pic credit: www.enincon.com

In 2011, fossil fuel use created 33.2 billion tonnes of carbon dioxide emissions worldwide.1

The 3 types of fossil fuels that are used the most are coal, natural gas and oil. Coal is responsible for 43% of carbon dioxide emissions from fuel combustion, 36% is produced by oil and 20% from natural gas.2

Source: Le Quéré, C. et al. (2013). The global carbon budget 1959–2011, www.whatsyourimpact.org

In many cases, the impacts will come to the fore after many years of the emissions. Several countries like the European Union have given heavy subsidies to the Big Oil companies but have cut the subsidies for the renewable sector.

In the COP 22 to be held at Morocco this year, several International organizations, countries will come together to discuss issues of importance in relation to Climate change and making a legislation where the Big Oil is asked to pay for damages they cause is imperative.

Big Oil getting subsidies?

The International Monetary Fund, (IMF) recently issued a report saying that total worldwide subsidies to energy, mainly fossil fuel energy, amounted to $5.2 trillion a year. This includes the unpaid cost of carbon pollution and the social costs imposed by businesses (including climate damages) that they don’t have to pay for.

It is one of the most chilling facts from the above report that the industry which is one of the biggest culprits responsible for GHG emissions is the one getting the most amounts of subsidies.

Pic credits: yasincrow.deviantart.com

Climate change is getting worse and the chance to avoid harsh impacts is reducing. Therefore governments are getting serious about putting some sort of price on carbon emissions, whether explicit (a tax) or implicit (regulations). Soon, 1/3rd of the world’s carbon emissions will be priced in some way. Businesses that now emit carbon pollution for free (or cheap) will soon see their costs rise.

With proper accounting, the fossil fuel business doesn’t look like such a profitable industry at all.

Burden on Tax-payers:

It’s also a good reminder that we are, in carbon terms, making hay when the sun is shining, using up resources that only appear cheap because we’re shifting the costs to poor and future people, who don’t have the political power to stop us. It is grossly irresponsible.

One of the most serious aspects of the climate crisis is the fact that fossil fuel companies are passing on huge financial risks to taxpayers and politicians are simply turning their backs on the problem instead of holding those companies accountable.

At each stage of the fossil fuel product life cycle, taxpayers in various countries are increasingly burdened with a string of costs such as those associated with fracking-induced earthquake swarms, pipeline explosions, abandoned infrastructure, diseases, water pollution and of course the costs of climate change.

Alongwith the social costs of climate change which the people are paying for, they also have to face some serious hazards of pollution caused by fossil fuel industry like asthma, bronchitis, cancer, nasal congestion, pulmonary inflammation, acidic rain, earthquakes, pipeline explosions.

Fossil Fuel Bond programs:

A concept called Fossil fuel risk bond programs — a policy innovation proposed by Center for Sustainable Economy, USA — can help reverse this glaring inequity by shifting the economic risk back where it belongs: on the polluters.

As stated in its latest report, fossil fuel risk bond programs are essentially systematic efforts by state and local governments to evaluate and respond to the financial risks they face at each stage of the fossil fuel lifecycle in their jurisdictions.


The benefits would be tremendous for districts, states and cities and countries struggling with rising climate-related costs with no clear way to pay for them. For example, consider a district in which coal extraction takes place that is also suffering the severe effects of climate change in the form of regular floods.

Climate risk trust funds maintained by that district could be used to: (1) compensate homeowners for fracking-related earthquake damage which occurs in countries like United states and Canada; (2) pay for the costs of filtering water contaminated by the reservoir leaks; (3) pay for the increased public service cost burden associated with oil towns; and (4) relocate infrastructure from floodplains.

In particular, fossil fuel risk bond programs provide a way to speed up the funding necessary to put scores of people to work — including displaced oil, gas, and coal workers — while reducing fossil fuel consumption, decommissioning obsolete fossil fuel infrastructure, restoring mines, and implementing climate adaptation projects to help make communities safe in the face of climate disasters.

Glaring examples:

To take a very practical example, Fort McMurray, a place in Alberta, Canada has experienced one of the scariest signals of climate change in 2015 — an huge wildfire of epic proportions that burned large portions of the city to the ground. Over 1,600 structures were lost. The economic toll is more than $1 billion. The irony, of course, is that the city lies at the epicenter of the tar sands industry, producing oil that packs an enormous climate change cost.

If fossil fuel risk bond programs would have been in place, the city, province, and federal governments would have adequate funding to respond to this disaster, help residents rebuild, and invest in a future beyond fossil fuels. Instead, they are left with a blackened landscape and a mountain of debt that has yet to be tallied.

Pic credit: www.oilandgasjobsadvise.com

Talking about India:

To take a very local example, every year in India, the Brahmaputra river causes heavy destruction in Assam. From 2012 to 2016 itself, 8900 villages have been destroyed, more than 1 crore people were affected and 1,34,000 houses were destroyed, 15.36 lakh hectares of land was destroyed due to the swelling up and floods caused by the river Brahmaputra as reported by an article in the Indian Express. “Whenever we take one step forward towards development, floods and erosion push us two steps backwards. While we spend around Rs 12,000 crore on development every year, floods and erosion cause a loss of about Rs 10,000 annually,” says Assam Chief Secretary V K Pipersenia.

Part of this loss could have been reduced if there would have been strictures on the fossil fuel and Coal companies in India to pay for the damage they are causing and those funds would have been put towards providing rehabilitation to the 8900 villages in Assam!

Pic credit: www.indiatoday.intoday.com
Pic credit: http://www.indianwhitepaper.com/news/info/news/sports/assam-floods-over-90000-affected-brahmaputra-flowing-above-danger-mark

Adaptation is therefore necessary to minimise climate change vulnerability and threats to life, human health, livelihoods, food security, properties, amenities, species and ecosystems.

Sadly, most developing countries cannot afford the cost of putting in place adaptation measures.

Climate Change adaptation:

To mitigate climate change, the world agreed in Paris to cut greenhouse gas emissions to keep global warming below 1.5oC to avoid tragic impacts in the COP21 which was held there.

The annual adaptation costs are projected to rise to US$50 billion per year in Africa and US $250–500 billion across all developing countries by 2050 even if global warming is limited to 2oC this century.

Nonetheless, even in the best mitigation and adaptation scenario, climate instigated loss (irreversible impacts of climate change such as deaths, extinction of species, loss of heritage) and damage (recoverable impacts of significant economic cost such as damage to property and infrastructure) are likely to remain for years.

The cost of loss and damage is high and rising.

The global cost of residual damage is estimated at US$275 trillion between 2000 and 2200 for all countries. This does not include non-economic losses though. The cost is extremely high if very little or absolutely no action is taken (~US$1,240 trillion).

What can we do?

Make the Big Oil pay for the large scale damages that they are causing to the environment. The industry should either be fined or a legally binding framework should be established to make the companies finance Loss and Damage from an impact and legal point-of-view.

As a way of phasing out fossil fuels, after stopping the industry from the climate negotiations, we need to take the second and an important: to make the perpetrators pay for adaptation, loss and damages. The fossil fuel companies have not only contributed to climate change but also amassed huge profits in the process whereas the common folks and the poorest countries are paying the price!