Watching Shell announce its highest quarterly profits – £4.7bn – in eight years last week was rather unpalatable while millions in the UK face fuel poverty this year as energy prices rise by 54%.
Discussions are heating up around the Abigail oil field in the North Sea recently getting the green light – just months after COP26, and the UK offering North Sea fossil fuel extraction one of the world’s most generous tax regimes and the UK’s energy security.
Questions are being asked about where the stupendous profits of the likes of Shell and BP should go. Should Shell be increasing its dividend by 4% and increasing its share buyback programme to $8.5bn? Or does it have a moral obligation to use the windfall to make energy greener, cheaper and more secure?
In the UK, the Liberal Democrats and Labour are arguing a windfall tax ought to be levied on North Sea oil operators to help consumers with the cost of energy this year.
The ‘oughts’ and the ‘shoulds’ are creeping in to the conversation because the situation feels unjust.
In sustainable finance, we’re used to talking about what responsible corporate behaviour is. And, traditionally, the sticking point with fossil fuel companies has been their contribution to climate change and the debate has been framed around whether to divest or engage. Do we penalise the company for its polluting ways and withdraw financial support or work with the company to actually ensure it helps move us towards a green economy?
But this is looking at the situation objectively and denies the reality I hear from finance experts – they know divestment is the less effective option yet don’t personally want their money anywhere near companies that, for decades, have known about their contribution to climate change, have continued polluting regardless and even lobbied governments to ease climate change rules and regulations so they could continue making a killing from climate destruction.
This is a human reaction to deplorable behaviour. Sure, we have the “polluter pays” practicalities of funding the green transition, but I think in order for it to be just there needs to be a penalty for the industry that has been the greatest sole contributor to climate change. Progress and punishment, if you like.
And no, I don’t know how that would look. Perhaps taxation is the most obvious place to start. Climate litigation is picking and will not doubt play a role.
Usually when we talk about a just transition the focus is rightly on guarding against damaging social impacts while we make the changes required to avoid the worst of climate change.
COP26 should have been a wake-up call on that front. If leaders didn’t hear the voices of the Majority World there, taking a stand against being the least responsible for the climate crisis while being its hardest-hit victims, then they must have their heads in the sand. This has to be the turning point where the most powerful and most polluting take responsibility and make amends because that is just, that is the present we want and the future we want.
That’s where I think the polluter penalty comes in too – it’s about the future we want and getting there by deterring a repeat of the kind of behaviour we have seen from oil majors over the last few decades. Namely, jeopardising the future of life on Earth.
And I don’t doubt that, as we continue to see crises stack up one upon the other, the sense of how fairly or unfairly the green transition is being made will become increasingly salient.
Of course, we will need collaboration and to all be on the same team in order to get through the coming challenges. But that shouldn’t come at the cost of punitive justice which, in the case of the fossil fuel industry, is becoming conspicuous by its absence.
