Key elements of a levy on the Carbon Majors

Oil pump on sunset background

Big Coal, Oil and Gas Producers Paying for their Climate Damage

 

The climate change already being experienced is the result of the emissions that have been released into the atmosphere since the start of the Industrial Revolution. The Carbon Majors report released in November 2013 established that 63% of carbon emissions in the atmosphere have come from the coal, oil, and gas extracted and cement manufactured by only 90 entities – the Carbon Majors. The Carbon Majors include Chevron, ExxonMobil, Saudi Aramco, BP, Gazprom and Shell. These entities have made massive profits while billions of people in poor communities are already suffering from loss and damage caused by climate change. It is proposed that a levy be established on historical and current emissions by the Carbon Majors to fund activities by the Loss and Damage Mechanism that support the world’s poor.

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Big Coal, Oil and Gas Producers Paying for their Climate Damage

Roda Verheyen and Peter Roderick, ‘Beyond Adaptation: The Legal Duty to Pay Compensation for Climate Change Damage’

A groundbreaking report by Richard Heede released in 2013 revealed that 63% of global carbon emissions can be traced back to the 90 biggest oil, gas and coal producers and cement manufacturers.

The Carbon Majors have made massive profits from selling fossil fuels. Taxpayers for Common Sense have calculated that, in the decade to 2012, the top five oil and gas companies alone made more than US$1 trillion in profits.

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Big Coal, Oil and Gas Producers Paying for their Climate Damage

Heede, Richard, ‘Carbon majors: Accounting for carbon and methane emissions 1854–2010: Methods and results report’ (2013)
Heede, Richard, ‘Tracing anthropogenic carbon dioxide and methane emissions to fossil fuel and cement producers, 1854–2010 (2014)’ 122(12) Climatic Change 229–241.
Greenpeace, ‘Fact sheet on the Carbon Majors report’ (2013)
Taxpayers for Common Sense, ‘Big oil, big profits: Industry tops $120 billion in 2012’, February 5, 2013

Loss and damage are the adverse effects of climate change that go beyond people’s capacity to cope and adapt to climate change impacts. Loss and damage impacts range from extreme events, for example, weather-related natural hazards, to slow-onset events, including sea-level rise; increasing temperatures; ocean acidification; glacial retreat and related impacts; salinisation; land and forest degradation; loss of biodiversity; and desertification.
Communities are already experiencing significant loss and damage to quality of life, livelihoods, food, and livelihood security as well as secondary loss and damage in the form of stress on the social fabric essential for adaptive capacity and resilience.

Loss and damage are related to mitigation and adaptation. The most effective way to address loss and damage is to reduce greenhouse gas emissions. The sooner greenhouse gas emissions are phased out, the less loss and damage there will be. A net phase-out of greenhouse gas emissions by 2050 would ensure a very high likelihood of keeping global warming below 2°C, and give a 50% chance of staying below 1.5°C of warming.

However, even though a 1.5°C rise would prevent some of the worst impacts of climate change, it still poses serious challenges, especially for least-developed countries, small island developing states, and African countries, including with drought, ocean acidification, and sea-level rise.

Hence, even with the best possible future mitigation efforts, vulnerable countries will still have to deal with loss and damage. Even worse, current mitigation ambitions are consistent with 3.7–4.8°C of warming by the end of this century. This level of warming may be beyond the limits of adaptation for a large number of countries.

Effective and timely adaptation approaches – such as integrating disaster risk reduction; climate change adaptation and sustainable development; ecosystem-based approaches for building resilience; sector-specific measures and tools; and community-based adaptation – can be utilised to reduce loss and damage by increasing resilience to climate change impacts. The international community lags well behind what is necessary to provide support for adaptation,3 hence increasing the expected burden of loss and damage upon the most vulnerable.

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Big Coal, Oil and Gas Producers Paying for their Climate Damage

UNFCCC documents – ‘loss and damage
Loss and damage in vulnerable countries initiative of Germanwatch, CDKN, The International Centre for Climate Change and Development, Munich Climate Insurance Initiative, United Nations University
Balogun, Kehinde, ‘Managing loss and damage from slow onset events: Applicability of risk transfer tools including insurance’, September 2013.
IPCC WGII, ‘Climate change 2014: Impacts, adaptation, and vulnerability. Summary for policymakers’ (2014)
IPCC WGIII, ‘Summary for policymakers’, Working Group III (Mitigation), AR5 (2014)
LDC, ‘Submission on loss and damage’ (2012)
Third World Network, Briefing papers 1, 2, 3, 4 on loss and damage.
UNFCCC, ‘Technical paper, FCCC/TP/2013/2. Non-economic losses in the context of the work programme on loss and damage’, October 9, 2013
Warner, Koko, Kees van der Geest, and Sönke Kreft, ‘Pushed to the limit: Evidence of climate change-related loss and damage when people face constraints and limits to adaptation’, Bonn: United Nations University Institute for Environment and Human Security. November. 2013
Warner, Koko, Kees van der Geest, Sönke Kreft, Saleemul Huq, Sven Harmeling, K. Kusters, and A. de Sherbinin, ‘Evidence from the frontlines of climate change: Loss and damage to communities despite coping and adaptation’, Loss and Damage In Vulnerable Countries Initiative. Policy Report No. 9, 2012. Bonn: United Nations University Institute for Environment and Human Security.

Whilst it is clear that the monetary and non-economic costs of loss and damage will be substantial, it is difficult to produce an exact estimate of what the costs of loss and damage from climate change will be.

Firstly, it is not clear how much countries will reduce their emissions, and therefore reduce the loss and damage from climate change. Reducing emissions requires countries to set targets and identify mitigation actions they will take, and it also requires finance from developed countries to enable mitigation action in developing countries. It is also not clear how much funding will be provided for adaptation in vulnerable countries – good adaptation programmes reduce the loss and damage that remains.
Secondly, loss and damage from climate change will result in both economic and non-economic losses. In many developing countries, non-economic losses may well be more significant than economic losses. There are dangers in trying to quantify, or monetise, the non-economic losses associated with loss and damage, in part due to the value judgements inherent in trying to assign
monetary value to life, health, culture, society, and nature. What should be the ‘value’ of watching your child swept away in a typhoon? Is the loss of an entire nation, and its culture, able to be monetised at all? Money cannot bring back the irreplaceable, and financial compensation, whilst necessary, should not be considered of equal ‘value’.

Finally, for the purposes of the International Mechanism for Loss and Damage, it is not clear exactly what will be counted as loss and damage. Will only the most vulnerable developing countries have access to this mechanism? Certainly the least developed countries, small island developing states, and African countries should have preferential access to the International Mechanism for Loss and Damage. These questions, and others, must be determined by the International Mechanism for Loss and Damage and parties to the UNFCCC.

However, not having an exact figure should not diminish our understanding that significant funding will be required. For the purposes of providing an idea of the scale of loss and damage, some examples and estimates of overall costs are provided below.

Worldwide disasters have been on an upward trend since the 1980s. During the 1980–2012 period, estimated total reported losses due to disasters amounted to US$3.8 trillion, of which 74% (US$2.6 trillion) were weather-related. It is very likely that this is an under-estimate of the costs faced, as small-scale losses are often not included, and cumulatively they can have a significantly higher impact than large scale disasters. If included, it is estimated they would increase costs by at least 50%. And none of these figures include the cost of indirect and non-quantifiable losses, such as loss of culture.

  • Three specific recent examples of loss and damage costs include:
    Hurricane Tomas devastated Saint Lucia in 2010 and wiped out the equivalent of
    43% of its GDP.
  • In the Horn of Africa, a prolonged drought that ended in 2011 and which, at its
    peak, left 13.3 million people with food shortages, caused total losses of $12.1
    billion in Kenya alone.
  • 2013 Typhoon Yolanda (Haiyan) displaced 4 million people, destroyed or
    damaged 1 million houses, killed at least 6,300 people, and caused approximately
    US$2 billion in damage in the Philippines. In the five preceding years the Philippines
    had six typhoons with combined damages of US$2.8 billion.

Dr Chris Hope has provided an overall estimate of the costs of climate change, taking into account various amounts of mitigation and adaptation efforts, which gives an indication of loss and damage costs in the future. If strong mitigation and adaptation action is taken, he estimates that the residual cost of climate change will be in the order of US$275 trillion between 2000 and 2200 for all countries.

For the single year 2060, Hope estimates residual costs at about US$1.2 trillion
(measured in US dollars from 2000) with a range of US$0.3 to $2.8 trillion. This would be approximately 1% of the world’s total output in 2060.

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Big Coal, Oil and Gas Producers Paying for their Climate Damage
ActionAid, ‘Loss and damage from climate change: The cost for poor people in developing countries: Discussion paper’ (2010)
Hemenway, Chad, ‘AIR: Insured losses from Typhoon Haiyan up to $700m’, Property casualty 360, November 18, 2013
Schiermeier, Quirin, ‘Did climate change cause Typhoon Haiyan?’ Nature (November 11, 2013)
Siegele, L, ‘Loss and damage from the adverse effects of climate change – A SIDS view on Africa’ 2012, Berlin: Germanwatch.
Tsang, Amie, and Luisa Frey, ‘The economic cost of Typhoon Haiyan. Financial Times Blogs’, November 13, 2013

Two forms of responsibility, or liability, are relevant for considering legal responsibility for loss and damage associated with climate change. State responsibility refers to the establishment of accountability of a State for a breach of international law. International civil liability refers to ‘liability of any legal or natural person under the rules of national law adopted pursuant to international treaty obligations establishing harmonized minimum standards’. Such liability reflects the polluter pays principle, or the notion that those in control of a polluting activity should be held liable for any harms caused by the activity. In relation to private entities, the rationale is to ensure that operators internalise the costs of pollution brought about by their operations. This approach has been codified by the International Law Commission’s (ILC) 2001 Draft Articles on Prevention of Transboundary Harm from Hazardous Activities.

It is a general rule of international law that States have the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or to areas beyond the limits of their national jurisdiction (‘no harm rule’). The no-harm rule was reaffirmed in Principle 21 of the Stockholm Declaration, and Principle 2 of the Rio Declaration. The no-harm rule is repeated in the preamble to the UNFCCC and forms the basis for the UNFCCC and Kyoto Protocol.

The no-harm rule includes an obligation to minimise risk, meaning that States must prevent harm when the harm is foreseeable. Where a breach of international law occurs, and harm is caused, there is an obligation to cease wrongful conduct and to make full reparation for any injury caused. Full reparation includes restitution, compensation, and satisfaction, either singly or in combination.

The UNFCCC provides authority for the provision of funding for loss and damage caused by climate change. Article 4.8 of the UNFCCC states that in the implementation of the UNFCCC commitments that the Parties shall give ‘full consideration to what actions are necessary under the Convention, including actions related to funding, insurance and the transfer of technology, to meet the specific needs and concerns of developing country Parties arising from the adverse effects of climate change.’

In general, States are responsible for their own acts or omissions. States also have an obligation to exercise due diligence in the control of private persons (in this case the Carbon Majors) and if a State fails to do so, it will be responsible for the resulting acts. ILC Special Rapporteur Pemmaraju Sreenivasa Rao observed that, although it is not always possible to prohibit risky activities that are important for economic development, States are under an obligation to authorise them only under controlled conditions and under strict monitoring while discharging their duty to prevent transboundary harm.

Increasingly, there is political recognition that corporations have international responsibilities to protect the environment directly, and not to only rely on States being responsible. There is growing support for the notion that these political statements should be translated into the direct legal regulation and responsibility of transnational corporations. The ILC has developed the Draft Principles on Allocation of Loss in the Case of Transboundary Harm Arising out of Hazardous Activities to support the conversion of these political statements into international law. Principle 4 of the Draft Principles sets out the elements of compensation to be provided in the event of transboundary harm.

Each State should take all necessary measures to ensure that prompt and adequate compensation is available for victims of transboundary damage caused by hazardous activities located within its territory or otherwise under its jurisdiction or control.

These measures should include the imposition of liability on the operator or, where appropriate, other person or entity. Such liability should not require proof of fault. Any conditions, limitations or exceptions to such liability shall be consistent with draft principle 3.

These measures should also include the requirement on the operator or, where appropriate, other person or entity, to establish and maintain financial security such as insurance, bonds or other financial guarantees to cover claims of compensation. In appropriate cases, these measures should include the requirement for the establishment of industry-wide funds at the national level.

In the event that the measures under the preceding paragraphs are insufficient to provide adequate compensation, the State of origin should also ensure that additional financial resources are made available.

Clearly, the main emphasis of Draft Principle 4 is upon operator liability – relevant for the Carbon Majors. However, Draft Principle 4(5) also provides for additional financial resources in cases where the compensation available from operators is insufficient. Draft Principle 4(5) reflects the complementary notions of State responsibility and international civil liability, as reflected in the polluter-pays principle.

Thus, there is a strong basis under international law for States and operators such as the Carbon Majors to be held liable for transboundary harm caused by the activities of the Carbon Majors. State responsibility for transboundary harms is a key element of international customary law, and it is further supported by emerging international legal principles holding corporations directly responsible for harms.

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Big Coal, Oil and Gas Producers Paying for their Climate Damage
Roda Verheyen and Peter Roderick, ‘Beyond Adaptation: The Legal Duty to Pay Compensation for Climate Change Damage’
Reyes, Oscar, ‘Critical issues for channelling climate finance via private sector actor’, UK: Bond Development and Environment Group.

Principle 13 of the Rio Declaration on Environment and Development called upon States ‘in an expeditious and more determined manner to develop further international law regarding liability and compensation for adverse effects of environmental damage.’ Many liability and compensation regimes have been established on this basis that typically impose civil liability on private and public actors responsible for damage resulting from a dangerous activity. Liability is strict – meaning that liability is tied to the conduct of the dangerous activity giving rise to damage, rather than to the actual fault of the operator. Liability is generally limited to a fixed amount, based on the risk posed by an operator’s specific activities. If operator liability proves insufficient, these regimes fall back upon agreed state and global collective loss sharing arrangements to address uncompensated damage.

Liability and compensation regimes deter transboundary environmental harm from domestic industries by creating financial repercussions for economic activities that may have significant cross-border impacts. They also serve a reparative function by identifying or creating funding sources to compensate for transboundary damage caused by domestic industries. This is a way of implementing the polluter pays principle, by shifting the costs of transboundary environmental harm that might otherwise be borne by society at large directly to the person or entity responsible for the activity causing damage. The majority of such agreements deal with issues where private parties have the greatest control over the activities.

There are a multitude of examples of regimes agreed to by States to address liability and compensation arising from pollution damage. It is normal practice for States to manage issues of liability through such schemes. Hence, it is appropriate to consider such a regime that would levy the Carbon Majors to fund the International Mechanism for Loss and Damage.

Two of these schemes exist in the fields of oil spills and nuclear damage. Arguably, there are a number of factors that are common to these schemes and the present problem of loss and damage from climate change. These factors can act as severe limits for access to justice if an international liability scheme is not created and implemented.

These factors are:

  1. a multitude of victims;
  2. enormous pollution with expensive transboundary loss and damage;
  3. absence of a secure and sufficient source of compensation; and
  4. absence of a prior international scheme for managing claims.

However, there are also differences between these precedents and climate change. First, most of the existing regimes address pollution ‘accidents’ rather than cumulative pollution. Individual operator liability is most appropriate in cases where there are accidents, whereas in climate change every operator will have contributed to a certain extent. Second, the mechanisms outlined below are not embedded within an overall plan to phase out the use of a product, as must be the case for fossil fuels. In the following examples, the international liability schemes are used to compensate victims within the context of ongoing operations in these dangerous activities. However, in climate change the use of fossil fuels must be phased out. To some extent, the oil spill scheme provides an important example, as it was designed to discourage the continuing increases in the size of oil tankers. This issue and others are addressed below.

Oil spill compensation

The international scheme that governs liability for oil spill pollution has been one of the most widely accepted international liability schemes. Oil spill pollution became a serious concern to the international community during the 1950s, when there was a major expansion in movement of oil by sea. The international community adopted a number of treaties establishing duties to prevent pollution, and eventually a liability scheme.21 The initial regime, with instruments from 1967, 1969, 1971, and 1977,22 was amended in 1992 by two protocols, which broadened the scope of the original treaties and increased compensation limits (1992 Civil Liability Convention (CLC 92) and the 1992 Fund Convention).

The 1977 Liability Convention sought to ensure that adequate compensation was available to those who had suffered damage due to oil spills, and to adopt uniform international rules and procedures for determining questions of compensation and liability. In addition, the 1977 Liability Convention had an implied goal of encouraging operators to cease further increases in the size of oil tankers, since it provided a limitation of liability based upon the tonnage of the oil cargo. A similar limit is found in the 1992 Liability Convention. This provides a precedent that should be examined in the context of the International Mechanism for Loss and Damage, as there may be methods of encouraging the phasing-out of fossil fuels through carefully constructed limitations of liability.

The 1969 Oil Pollution Liability Convention provided that the shipowner held international liability for damage caused by oil spills. This remains the first tier of compensation under the current scheme, where the owner of the ship that causes the pollution is held liable under strict liability.24 Liability is limited, and shipowners are required to have insurance to cover damage up to the agreed limit of liability.

However, holding shipowners liable individually was inadequate on its own, partly because victims did not receive full compensation in all cases, and the imposition of liability of shipowners was seen as an undue burden on the shipping industry. To address this problem, the Fund Convention was established so that any shortfalls are provided from International Oil Pollution Compensation Funds (IOPC Funds). The IOPC funds are financed by levies on entities that receive more than 150,000 tonnes of oil per year. Governments are obliged to monitor and submit this information annually to the IOPC Secretariat. Corporate entities have contributed at a rate of 99.8%.

Under the current regime, damage must result from oil pollution and have caused a quantifiable economic loss including: property damage; costs of clean-up operations; economic losses by fishermen or those engaged in mariculture; economic losses in the tourism sector; and costs for reinstatement of the environment. Anyone may bring a claim for compensation within the courts of a Contracting State or States, which provides a useful precedent for allowing communities to directly access the International Mechanism for Loss and Damage.

The oil spill liability schemes provide the most practical example of an active international liability scheme that compensates victims of environmental damage.

Nuclear damage regime

The nuclear damage conventions address risks arising from the use of nuclear energy. The damage caused by nuclear accidents is potentially limitless. These conventions attempt to address this issue by limiting owner liability and distributing responsibility for compensation to a number of stakeholders.

Under this scheme, a first tier of compensation is provided by an operator’s compulsory financial security (insurance to €700 million). The second tier is sourced from public funds of the State in whose territory the nuclear installation is located, up to €500 million. A third tier is a collective State contribution (the Brussels Supplementary Convention) of €300 million. All State Parties collectively make contributions to the Brussels Supplementary Convention in proportion to their GDP and their nuclear power as a percentage of the total nuclear power of Parties.

The nuclear accident regime has been criticised for providing insufficient compensation, well below the true cost of a nuclear accident, and hence protecting companies involved in the construction and operation of reactors. Nuclear liability laws have also been criticised for allowing an inherently risky business to continue to operate, whilst socialising the risk. It is important that these shortcomings not be replicated in the scheme to ensure Carbon Majors provide funding to the International Mechanism for Loss and Damage, and that the scale of loss and damage from climate change is incorporated into the design of the scheme and the need to phase out fossil fuels is clearly placed at the centre of the scheme.

Another shortcoming with the nuclear liability regime is that several States with a significant current or planned nuclear capacity, such as Japan, China, and India, are not yet party to any international nuclear liability convention, rather relying on their own arrangements.

Biosafety liability

The Nagoya-Kuala Lumpur Supplementary Protocol on Liability and Redress to the Cartagena Protocol on Biosafety (Supplementary Protocol) was adopted in 2010 to provide international rules and procedures on liability and redress relating to living modified organisms. The Supplementary Protocol differs from previous liability schemes by adopting the ‘administrative approach’. Although it has not entered into force yet, the Supplementary Protocol provides a recent example of a liability scheme negotiated by the international community.

The inclusion of a provision on the financial liability of operators – including a limit on liabilities – was a controversial and complex issue in the negotiations of the Supplementary Protocol. The Supplementary Protocol does not directly oblige the liable operator to pay compensation for biodiversity damage. However, it obliges the liable operator to take reasonable response measures. The operator may be financially liable to reimburse the ‘costs and expenses of, and incidental to, the evaluation of the damage and the implementation of any such appropriate response measures’ (Article 3(4), Article 3(5) and Article 8). This provision amounts to a form of indirect liability for operators. Furthermore, the Supplementary Protocol provides that Parties ‘retain the right to provide, in their domestic law, for financial security’ (Article 10(1)). This provision varies from the usual provision of other international liability schemes, which generally oblige the operators to establish financial security.

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Big Coal, Oil and Gas Producers Paying for their Climate Damage

Anne Daniel, ‘Civil liability regimes: Sound international policy or false comfort?’ Review of European, Comparative & International Environmental Law 12(3): pp. 225, 227.
Duall, Elizabeth, ‘A liability and redress regime for genetically modified organisms under the Cartagena Protocol’, (2004) George Washington International Law Review 36: p. 173.
Faure, Michael G., and Andre Nollkaemper, ‘International liability as an instrument to prevent and compensate for climate change’ (1999) 26A Symposium: Climate Change Risk, 123, 193.
Froggatt, A., Dr David McNeill, Prof Stephen Thomas, and Dr Rianne Teule, ‘Fukushima fallout, nuclear business makes people pay and suffer’ (2013) Greenpeace.

Whilst the ‘no harm rule’ does not differentiate between developed and developing countries, the UNFCCC requires developed countries to take action first and to provide support for developing countries to take climate change action. The Carbon Majors report shows that entities from both developed and developing countries share the burden of responsibility for historical carbon emissions.

Some of the Carbon Major entities are from developing countries, owned by developing-country governments, or in some cases are developing-country governments. Charging the cost of loss and damage to each entity in proportion to their pollution would not take into account differentiation along the developed/developing country divide identified in the Annexes to the Convention.

In discussions with various stakeholders, the CJP has found that some consider treating the Carbon Majors as equal entities and simply taking into account the emissions they are responsible for an advantage, as it is the actual extraction of fossil fuel that is being targeted. Regardless of its origin, each tonne of coal/barrel of oil/cubic metre of gas has added to the climate change loss and damage being inflicted upon the most vulnerable.

Some have argued that fossil fuel extraction in developing countries is more likely to have been used to provide customers with the basic necessities of life, whereas fossil fuel companies in developed countries are more likely to be extracting fossil fuels for luxury consumption (air conditions, driving cars). The challenge is that, certainly for oil – and to a lesser extent gas and coal – fossil fuels are traded on an international market. Additionally, as the latest IPCC report demonstrates, a growing share of CO2 emissions from fossil fuel combustion and industrial processes in low- and middle-income countries has been released in the production of goods that are subsequently exported to high-income countries. Hence, where a fossil fuel is extracted is not necessarily a guide as to where it is burnt, which is not necessarily a guide as to where the product it may have been used to produce is eventually consumed.

A discussion paper by Professor Meinhard Doelle  incorporates the equity principle within our global levy by proposing a process whereby countries at a low level of development could apply to the governing body to “opt out” of contributing the levy to the international loss and damage mechanism and instead use it for domestic mitigation or adaptation.

One way of approaching differentiation would be to implement a two-tier levy system, whereby entities extracting fossil fuels within developing countries pay a lower levy. However, this could have unintended consequences, including an excess of fossil fuel extraction from developing countries and the associated health impacts and economic dependency that is related to such emphasis. And as identified above, just because a fossil fuel is extracted in a developing country, it does not mean that it – or the product it is used to make – is ‘consumed’ in that country. It does not make sense to exclude extractions from developing countries on equity grounds if the products are then consumed in the most affluent countries – rather, the levy should be passed through the supply chain on to the eventual (affluent) consumer.

A practical alternative is to give consideration to phasing-in various entities. For instance, it might be considered desirable to begin the scheme with shareholder-owned entities, bringing in state-owned entities and states over a period of time. This approach was proposed to the CJP on the basis that the shareholder-owned entities are operating on a for-profit basis, and are primarily based in the developed world, whereas the state-owned entities and states could be seen to be operating ‘for the people’ and are primarily based in the developing world.

If the International Mechanism for Loss and Damage, as proposed by the CJP, agrees to provide funding only to most vulnerable countries suffering from the impacts of climate change, this may sufficiently address the issue of differentiation and the levy could therefore be applied on an equal footing based on extraction and emissions.

There may be other considerations and other ways to approach this issue, and we welcome the sharing of ideas as to how to address this issue.

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Big Coal, Oil and Gas Producers Paying for their Climate Damage

Opt-out Process for Developing Countries (Discussion Paper)
Baer, Paul, Tom Athanasiou, Sivan Kartha, and Eric Kemp-Benedict, ‘The Greenhouse Development Rights Framework: The right to development in a climate constrained world’ Revised second edition. November 2008. Heinrich Böll Foundation, Christian Aid, EcoEquity, and the Stockholm Environment Institute.
Government of Brazil, ‘Submission: Development of a reference methodology on historical responsibilities by the IPCC to guide domestic consultations for the ADP 2015 agreement’ (2013)

The Carbon Majors report calculates the annual and cumulative contribution of each of the largest 90 producers from as early as 1854 through to 2010 and calculates that, as a percentage of global industrial CO2 emissions since the Industrial Revolution began (from 1751 to 2010), the 90 Carbon Major entities fossil fuel extractions and cement manufacture have resulted in 63% of emissions.

As the Carbon Majors have contributed in a substantial way to the losses and damages being felt by vulnerable countries right now, it is only fair that they pay a levy – in direct relation to the emissions their products are responsible for – that goes towards the damage they have caused.

Some will argue that the levy for historical emissions should take into account emissions since 1850, in line with the Brazil proposal around historical responsibility for countries; this would mean that the whole period of the Carbon Majors Project would be included.

The science of climate change, whilst extending back until 1827, was recognised as a major concern by the international community at the 1972 Stockholm Conference. The Intergovernmental Panel on Climate Change released their first assessment report in 1990, which detailed their concerned about climate change and the continued burning of fossil fuels. And in 1992 at the United Nations Conference on Environment and Development in Rio de Janeiro the world’s Governments agreed to the UNFCCC, which makes clear the harm from greenhouse gas emissions and the need to limit them. In 1994, the UNFCCC entered into force. Any of these dates (from 1972 to 1994) are appropriate to start calculating levies based on historical responsibility, as from this date all entities were aware of an impending responsibility from emissions.

It is worth noting that approximately half of emissions from the Carbon Major entities have occurred since 1986, demonstrating a reckless disregard for the health of the planet in the face of ever-increasing impacts from climate change and warnings from climate scientists.

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Carbon Majors Funding Loss and Damage Report (Second Edition)

 

The most effective way to address loss and damage is to reduce greenhouse gas emissions, and therefore reduce the impacts of climate change. The sooner greenhouse gas emissions are phased out, the less loss and damage their will be. A net phase-out of greenhouse gas emissions by 2050 would ensure a very high likelihood of staying within 2°C of warming, and give a 50% chance of staying below 1.5°C of warming. Keeping warming below 1.5°C would prevent some of the worst impacts of climate change, but still poses serious challenges, especially for least-developed countries, small island developing states, and African countries.

Fossil fuels make up the majority of greenhouse gas emissions. Therefore, the approach to funding the International Mechanism for Loss and Damage must be embedded within a plan to phase out fossil fuel use altogether. It should also be teamed with the even more urgent need to phase out subsidies for fossil fuels and write down fossil fuel reserves/assets. It should do this in a number of ways:

  • Firstly, the levy should be in addition to existing royalties and taxes, in order to add to the market signal that fossil fuels must be phased down, and then out, and replaced with renewable technologies;
  • Secondly, the levy should increase over time. This will reinforce the need to phase out fossil fuels, and to accelerate their replacement with renewables. It will also have the advantage of keeping the income stream reasonably steady as fossil fuel extraction reduces; and
  • Thirdly, there should be a recognition that the levy will cease to generate funds in the future (once fossil fuels are phased out) and a plan to replace this finance with a different income stream.

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Big Coal, Oil and Gas Producers Paying for their Climate Damage

Höhne, N., Pieter van Breevort, Yvonne Deng, Julia Larkin, and Gesine Hänsel, ‘Feasibility of GHG emissions phase-out by mid-century’, ECOFYS. October 2, 2013
Schaeffer, M,. Bill Hare, Marcia Rocha, and Joeri Rogelj (Climate Analytics), ‘Adequacy and feasibility of the 1.5°C long-term global limit’, CAN Europe and Climate Analytics (2013)

 

 

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