In the past two weeks, ExxonMobil, Chevron, BP and Shell have reported their combined annual profits for 2022 added up to a record-crushing $160bn.
That’s a sign of the astonishing pay-off oil companies have had from soaring energy prices driven by Russia’s invasion of Ukraine. And as governments grapple with the cost of living aftershocks, plus rising climate change concerns, there are predictable demands for tougher windfall taxes. But is that really the only option? Or should we be seizing the chance to make more far-reaching policy shifts?
One idea that British academics have been pushing for years is gathering pace. It would make fossil fuel companies pay to clean up their carbon emissions in a way that would create a safer climate at a relatively affordable cost. This so-called “carbon takeback obligation” would not require carbon taxes or direct taxpayer subsidies and a version of it made it into last month’s weighty UK government net zero review by Conservative MP Chris Skidmore. Some in Westminster would like to include the measure in an energy bill making its way through parliament.
It’s by no means clear this will happen but, if it did, this is how it could work. Companies that extract or import fossil fuels would have to arrange for a percentage of the carbon dioxide generated by the products they sell to be permanently stored deep underground. That percentage could start off at around 1 per cent and rise to 10 per cent by 2030, which advocates say would add just a few pence to the cost of supplying a litre of petrol. The percentage would eventually rise to 100 per cent by 2050, transforming the prospect of reaching net zero.
Carbon could be captured initially from cement plants or factories, and oil companies would not have to store the CO₂ themselves. The idea is that a market based on tradable carbon storage certificates would develop, which would help to reduce costs.
The plan is by no means perfect. Carbon capture and storage technology has struggled to get off the ground for decades, in part because it would extend the life of fossil fuels that should ideally be replaced by cleaner alternatives. But this technology is on track to mushroom anyway, thanks to provisions in last year’s US Inflation Reduction Act that boost the availability of tax credits for carbon capture projects.
Also, climate scientists have gradually reached the conclusion that some forms of carbon removal will eventually be needed to meet the goals of the 2015 Paris Agreement that is supposed to prevent disastrous levels of global warming. That’s because cutting emissions from sectors such as aviation is going to be hard, and because the world is set to overshoot its carbon budget so much that some CO₂ will need to be removed from the atmosphere to ensure a stable, cooler climate.
This has bolstered interest in direct air capture companies that suck carbon dioxide out of clean air rather than clouds of factory pollution. But none of these developments guarantee that global emissions will fall as quickly as they must. “And also, why should cash-strapped taxpayers pay for this when the industry is making out like bandits?” says Oxford university’s Professor Myles Allen, who has spearheaded the carbon takeback idea.
That is an important point. So too is Allen’s insistence that an idea like carbon takeback can never be a replacement for all climate change policies. “It’s a backstop policy,” he says. “It guarantees that no matter what happens to other costs — if renewables don’t work out as cheap as you hope or if fossil fuels suddenly get cheaper than expected — you still make sure that you get to net zero at the date you’ve set.”
When Allen was first writing about the carbon takeback idea in 2009, critics understandably told him that fossil fuels should be phased out entirely. This has not happened and, meanwhile, emerging market countries have become more insistent that they should have the right to exploit their own fossil fuel reserves. A carbon takeback obligation would still allow that, as long as the resulting carbon emissions were safely disposed of.
Ultimately, the world is running out of options. Last October, experts published a report assessing progress on 40 of the big shifts needed to limit global warming to 1.5C, from phasing out coal-fired power plants to curbing deforestation.
Of those 40 indicators, the number currently on track to do what is needed is precisely zero. We need to do much more, much faster and that means looking at policies we might otherwise wish we could ignore.