The great climate change wealth transfer is here

By David Fickling

There’s rarely been a better time to be a seller of fossil fuels — nor a worse time to be exposed to their effects.

Thanks to resilient crude prices and lackluster investment activity, shareholders in oil and gas companies are enjoying a bonanza. Of the $569 billion in dividends paid by businesses with at least $10 billion in net income over the past 12 months, more than a third — $206 billion — has come from fossil energy. Almost half of that has come from just one firm, Saudi Arabian Oil Co. America is producing more oil and more gas than any nation in history. The S&P 500’s index of energy companies hit a record high in April.

Even as sums are rising on the credit side of fossil fuel’s ledger, they’re climbing on the debit side, too.

Losses from natural disasters hit $280 billion last year, according to reinsurer Swiss Re, a sum that more than offsets the payouts to oil company shareholders. Not all of that amount can be laid at the door of a warming planet — but even counting only costs directly attributable to climate change, global losses over the first two decades of this century averaged about $143 billion a year, a 2023 study found.

Parts of Texas are bracing for more than a foot of rain from Monday as Tropical Storm Beryl gathers strength toward hurricane force over the unnaturally warm waters of the Gulf of Mexico. In Jamaica, the early-season storm left two-thirds of the population with power outages and almost all of the banana crop destroyed. In Saint Vincent and the Grenadines and northern islands of Grenada, more than 90% of houses and infrastructure suffered damage as Beryl rolled through.

That’s just a microcosm of what has happened so far this year. Each of the 12 months through May saw the world’s temperatures at their highest levels since at least 1850, with the mercury rising above 50 degrees Celsius (122 degrees Fahrenheit) in India. Flooding in Brazil has killed more than 170 people while three consecutive waves of inundation in Bangladesh affected 2 million people. More than a dozen were killed in Nepal after heavy rain triggered landslides and more flooding.

All these events are connected by one vast global transfer of wealth. Climate damage is paid for in nickels and dimes, by individuals in rich countries and poor ones.

Homeowners unable to pay for their home coverage, or quitting their suburbs altogether because of increased risk of flood or wildfire, are bearing the cost in the form of insurance premiums and reduced property values. In less affluent corners of the world, the expenditure is even more devastating, as money that should be invested in growth is spent instead on repairing the effects of natural disasters. Of about $687 billion in annual damages that one influential study estimates will be caused in a 2030 world under 2.7 Celsius of warming, $426 billion will be incurred in developing countries.

The profits from this despoliation, however, accrue to companies, whether privately- or state-owned.

It’s dispiriting that the improving economics of clean power, and the rising devastation caused by atmospheric carbon, haven’t prompted a more dramatic shift in the politics of this question.

Instead, the opposite has happened in recent years. Direct subsidies paid by governments to make fossil fuels cheaper almost doubled to $1.3 trillion in 2022 from $500 billion in 2020, though they’re likely to have reduced a bit since then thanks to cheaper oil and gas prices. Combine that with the tariffs increasingly imposed on electric vehicles, batteries, and solar panels, and governments are deploying their fiscal powers to raise the cost of clean energy, while reducing the cost of carbon pollution — a desperately counterproductive state of affairs.

Signs of a turning point in humanity’s fossil fuel addiction are everywhere, from evidence that China’s emissions are peaking this year, to the ongoing failure of crude oil output to climb above levels it hit in 2018.

Still, emissions need to not just plateau, but fall dramatically over the coming decade, and then the decade after that. At this point, politics and profit are making it harder for us to hit that target.