This week, the world’s five largest fossil fuel companies reported their largest annual profits ever — about $200 billion. The industry as a whole reported more than $400 billion in profits, driven largely by higher energy prices resulting from Russia’s criminal assault on Ukraine.
In a speech this week, António Guterres, the secretary-general of the UN, said he was incredulous at the “monster profits” of fossil fuel companies earned at a time when the world needs to be rapidly slashing its greenhouse gas emissions. “If you cannot set a credible course for net-zero with 2025 and 2030 targets covering all your operations, you should not be in business,” Guterres said. “Your core product is our core problem. We need a renewables revolution, not a self-destructive fossil fuel resurgence.”
Claire Moser, deputy executive director of the US activist group Climate Power, told The Guardian the record fossil fuel company profits are “a number we’ve never seen before, and one that was built off the backs of working families who were victimized by oil and gas executives’ greed.”
The companies, of course, don’t care a flying fig leaf what Gutteres or Moser have to say. They are too busy using their ill gotten gains to pay their executives enormous bonuses while paying out record stock dividends and pursuing stock buybacks.
Despite everyone knowing that burning fossil fuel is slowly destroying the Earth’s ability to support human life, countries are still forging ahead with numerous “carbon bomb” projects that will push global temperatures to new extremes. Last year, more than $1 trillion was invested in fossil fuel infrastructure and extraction worldwide.
BP Cuts Back On Climate Actions
The sale of oil and gas remains so enticing that BP this week announced it is scaling back its climate ambitions and retaining its fossil fuel assets for longer than previously expected. “We need continuing near-term investment into today’s energy system — which depends on oil and gas — to meet today’s demands and to make sure the transition is an orderly one,” says Bernard Looney, BP’s chief executive. “At the end of the day, we’re responding to what society wants.” So, you see, it’s really our fault, people. You and me. If we weren’t so greedy, none of this would be happening.
Climate activists point out that the largest fossil fuel companies are still investing relatively little into clean energy, which is endangering the goals of the Paris climate agreement. “If the bulk of your investments remain tied to fossil fuels and you even plan to increase those investments, you cannot maintain to be Paris-aligned because you will not achieve large-scale emissions reductions by 2030,” Mark van Baal, founder of Follow This, an activist shareholder group, tells The Guardian. “The picture is clear now. No oil major has plans to drive down emissions this decade. Now it’s up to the shareholders. Together with major investors, we continue to compel BP to put its full weight behind the energy transition.”
Activists vs. Fossil Fuel Companies — Now It’s Personal
ClientEarth, a nonprofit that pursues legal remedies against polluters, has sued the 11 directors of Shell in the high court of England. It is the first case in the world seeking to hold corporate directors personally liable for failing to properly prepare their company for the net zero transition. According to The Guardian, the suit is being brought under the UK Companies Act and is supported by a group of large pension funds and other institutional investors.
It argues a global transition to low carbon energy is inevitable as world governments act to end the climate crisis and that Shell’s failure to move fast enough threatens the company’s success and would waste its investors’ money on unneeded fossil fuel projects.
“Shell may be making record profits now, but the writing is on the wall for fossil fuels long term,” said ClientEarth lawyer Paul Benson. “The shift to a low carbon economy is not just inevitable, it’s already happening. Yet the board is persisting with a transition strategy that is fundamentally flawed, despite the board’s legal duty to manage those risks.
“Long term, it is in the best interests of the company, its employees and its shareholders — as well as the planet — for Shell to reduce its emissions harder and faster than the board is currently planning, Doubling down on new oil and gas projects isn’t a credible plan — it’s a recipe for stranded assets,” Benson said.
Nest, the UK’s largest workplace pension plan, with 10 million members, has backed the lawsuit. “Investors want to see action in line with the risk climate change presents and will challenge those who aren’t doing enough to transition their business,” said Mark Fawcett, Nest’s chief investment officer. “We hope the whole energy industry sits up and takes notice.”
London CIV manages the assets of the London local government pension program. Its head of responsible investment, Jacqueline Amy Jackson, said, “Over the next few decades, 1 billion lives and trillions of pounds will be at risk due to a single issue — climate change. We do not believe the board has adopted a reasonable or effective strategy to manage the climate risks affecting Shell. In our view, the board of a high emitting company has a fiduciary duty to manage climate risk.”
ClientEarth is asking the high court to order Shell’s board to adopt a strategy to manage climate risk in line with its duties under the Companies Act, and in compliance with the Dutch court’s order for big cuts in emissions. The high court will now decide whether the suit will proceed.
Shell, of course, vigorously defends its actions. A spokesperson for the company said, “We do not accept ClientEarth’s allegations. Our directors have complied with their legal duties and have, at all times, acted in the best interests of the company. We believe our climate targets are aligned with the more ambitious [1.5C] goal of the Paris agreement. Our shareholders strongly support the progress we are making on our energy transition strategy, with 80% voting in favour of this strategy at our last annual general meeting.”
You might be forgiven if you equate the actions of the oil companies during the past year to war profiteering. Yes, the war in Ukraine was a shock to the energy sector, but was it really that much of a shock or did the fossil fuel companies use it as a convenient excuse to raise prices more than the Ukraine situation called for? Each of you can answer that question for yourself.
Suffice to say, to the outside observer, all the chest thumping by the industry about its commitment to reducing greenhouse gas emissions seems like just so much eyewash designed to keep critics at bay long enough for them to wallow in all that lovely money they are making. Someday, their actions will be judged and it is likely that the consensus of the human community will be harsh indeed.