A week ago, I published a research paper, along with my colleagues Paul Gilding and Jimena Alvarez. For 20 leading fossil fuel producing firms, we measured the economic cost to society of the climate change impacts caused by the use of their products, and compared this with their profits in each year from 2008 to 2012. Because the companies presently don’t have to pay for these climate impacts, we view this as an implicit subsidy to the companies.
At the heart of the paper is a very simple comparison, which is shown in the figure below. For each company, the smallest circle is for 2008, with the years connected in order to the largest circle in 2012. Coal companies are shown in black or dark brown, and oil and gas companies in lighter shades of red, brown and orange. The dashed line in the figure represents economic cost to society equal to after‐tax profit.
All the companies lie above the line, which means that the economic cost to society of the CO2 emissions from the products they sell was greater than their after‐tax profit, with the single exception of Exxon Mobil in 2008. For pure coal companies (Coal India, Peabody, Shenhua Group, and China Coal) the economic cost to society exceeded total revenue in all years.
These results seem striking to us, hence the research paper. We are keen to have your comments and take part in a discussion about the meaning of the results, and this has started. The paper has been covered favourably by Dave Roberts at Vox who concluded that ‘with proper accounting, the fossil fuel business doesn’t look like such a moneymaker’. Tim Worstall at Forbes agreed with the numbers, and even the idea of a substantial carbon tax, but didn’t like our rather mild suggestion that ‘company profits could be lost and assets stranded by the resulting shift to low carbon energy’.
Goodness knows what Worstall will make of this paper by Naomi Oreskes and her colleagues which appeared in Climatic Change on the same day as our paper, and concludes that ‘major investor-owned fossil energy companies carry significant responsibility for climate change’.
What do you think?