Private climate finance

Rethinking Private Sector Climate Finance: Why Shouldn’t RWE, RAG, and HeidelbergCement Help Pay for Loss and Damage Caused by Climate Change?

© Carbon Majors,

At a time when the rich nations’ governments — including the federal government of Germany — seem neither able nor willing to dedicate public funds to emissions mitigation and climate adaptation in pursuit of the US$100 billion target, companies are making huge profits at the climate’s expense. What could be more obvious than asking them to share in the burden caused by their actions, thus also opening up a new source of climate finance?

Today, millions of people in the global South have already become innocent victims of climate change, faced with drought, cyclones, and tidal waves. “Loss and damage” refers to the impacts of climate change which are so extreme that they go beyond human beings’ capacity to adapt. They range from extreme weather (such as droughts or floods) to “slow-onset events” including rising sea levels, higher temperatures, ocean acidification, and glacier retreat. Other consequences are salinity, soil and forest degradation, loss of biodiversity, and desertification.

At the same time, those who have made the greatest contribution to the new climatic conditions by emitting enormous quantities of carbon—big international corporations such as Chevron, ExxonMobil, and Saudi Aramco, as well as German companies like RWE, RAG, and HeidelbergCement—have been raking in profits year on year.

The “carbon majors” are the ninety worst climate offenders. The groundbreaking Carbon Majors report, first published in November 2013, is the product of eight years of research by Rick Heede, who aggregated the historic emissions of the ninety largest oil, gas, and coal corporations and the biggest cement manufacturers to show that the fossil fuels they extract and the cement they manufacture are responsible for 63 percent of emissions worldwide. The three biggest emitters are ChevronTexaco, accounting for 3.51 percent of global emissions, ExxonMobil with 3.21 percent, and Saudi Aramco with 3.17 percent. As for the German companies, RWE takes twenty-third place, with 0.47 percent, RAG sixty-second place with 0.08 percent, and HeidelbergCement is responsible for 0.04 percent of total emissions.

The discussion paper Carbon Majors Funding Loss and Damage, presented today by the Heinrich Böll Foundation and the Climate Justice Programme, proposes that in future the top-emitting companies should have to pay for the damage they cause. It sets out the case for a levy on fossil fuel extraction, to be spent on the communities that are suffering from climate change. By 2020, the companies should have paid out around US$50 billion. The levy could start at approximately US$2 per tonne of CO2, rising gradually by 5 to 10 percent a year; it would contribute to the complete phasing out of fossil fuels and the adoption of renewables. The income would flow into the Warsaw International Mechanism for Loss and Damage, agreed during international climate negotiations last year, which will go to benefit the world’s poorest communities and those most seriously threatened by climate change. The precise amount of the levy for each company would be calculated on the basis of its historic and anticipated future emissions.

Together, the products of the three German carbon majors are responsible for approximately 0.6 percent of global emissions. The German government needs to consider how these companies should contribute to the costs of the loss and damage they have caused. This could have a lasting positive impact on the amount of private sector money entering international climate finance. The “polluter pays” principle is applied in business, the “do no harm” principle in international law—and what has long been taken for granted in the case of oil spills or nuclear accidents must now also apply to the consequences of anthropogenic climate change.

The idea has high-profile support, for example from Naderev (Yeb) Saño, the lead climate negotiator for the Philippines at the UNFCCC and a member of the Philippines Climate Change Commission. In the Philippines last year, Typhoon Haiyan (Typhoon Yolanda) claimed 6,300 lives, made 4 million people homeless, and caused US$2 billion worth of damage.

PS: The concept of making fossil fuel extractors financially accountable for the damage they cause goes hand in hand with a strategy based on bringing lawsuits against the culprits. Greenpeace International, WWF, and the Center for International Environmental Law (CIEL) have recently written to the chief executives of the carbon majors and their liability insurers alerting them to this. The letters suggest that executives will be personally liable if their companies fund climate denial or lobbying to obstruct effective climate policy.

Lili Fuhr, Heinrich Böll Foundation