Holding Fossil Fuel and Energy Corporations to Account
Whilst a transition to green energy has never been more needed, oil companies such as Shell have recorded ‘obscene’ record profits of €37 billion during a cost of living crisis where many people struggle to make ends meet. The oil industry profits are concentrated amongst a select few ultra-wealthy individuals, whereas the entire global community will experience the consequences of climate change first-hand.
Whether through an increased windfall tax or bringing energy corporations into public ownership, fossil fuel and energy giants must be held responsible for hampering the transition to green energy. The call for an increase in windfall tax on record excessive profits should be answered enthusiastically by European leaders at the forefront of tackling climate change. Moreover, the revenue generated from an increase in windfall tax, or bringing energy corporations into public ownership, can be put forward to provide meaningful and positive change with an accelerated transition to green energy.
Shell paid just €125 million in windfall taxes in the United Kingdom, where the corporation is headquartered, and €486 million in the European Union in 2022. These figures are minuscule compared to Shell’s remaining €36.4 billion profit which could be used positively and more effectively to fund several initiatives in the transition to green energy and help combat climate change.
Instead, the current lacklustre windfall tax on profits made by companies like Shell only exacerbates wealth inequality and emboldens the fossil fuel industry. To put the profit of Shell into perspective, you or I would need to earn around €50,000 per day since the year 1 A.D. to accumulate the profit Shell has made in a single year. In 2021, the average salary within the European Union was €33,500 per year.
Shell is only one example of many fossil fuel companies that have made exorbitant profits in 2022 whilst paying very little tax, illustrating Europe’s systemic problem and the need for immediate action.
In 2020, the International Energy Agency projected that “renewables [would] overtake coal to become the largest source of electricity generation worldwide in 2025.” Therefore, it makes sense for Europe to focus on enhancing the transition to renewable energy through revenue generated by an increased windfall tax on excessive oil profits. Such a windfall tax would also further encourage energy companies to shift to more renewable energy sources, as it is inevitable that renewable energy will take the mantle over fossil fuels in the coming years.
Therefore, disincentivising the fossil fuel industry must be a priority for European leaders by increasing the windfall tax on their profits. To give ourselves the best fighting chance of tackling the root causes of climate change, we must start sooner rather than later. Green energy infrastructure, such as wind and solar power facilities and increased electric vehicle charging stations, could all be funded through the proposed increase in the windfall tax, which would have a demonstrably more positive impact than if such profits were to be put back into the pockets of corporate shareholders.
A windfall tax is not, however, the only feasible mechanism that has been devised to facilitate a transition to green energy; the Green Party of England and Wales (GPEW) has called for public ownership of the big five energy suppliers within the United Kingdom to stabilise the soaring price of energy. In tandem with public ownership, the GPEW have also called for subsidies for smaller renewable energy specialists to drive innovation and kickstart the transition to green energy. The Trades Union Congress (TUC) estimated in July 2022 that it would cost €3.2 billion to bring the big five energy companies within the UK into public ownership. This is less than the UK government had paid to provide bailouts and compensation to private energy corporations for the government’s price cap at the time. The cost of sustaining the privatised system in the UK will likely rise significantly in the following months. Therefore, not only does public ownership of energy make pragmatic sense in a cost of living crisis, but it also aids in the transition to green energy by cutting out the private interests of shareholders who want to continue the current fossil fuel industry to maximise their shares and profits.
Further analysis by the Trades Union Congress (TUC) in September 2022 illustrates that the UK government will have missed out on up to €137 billion of direct income in the next two years due to a lack of public ownership within energy generation. This revenue could have been used to invest in new green energy technology where the private sector is failing. The analysis provided by the TUC also illustrates how a publicly owned energy champion within the UK could provide up to 77 GW of clean energy generation by 2040. The current privatised system is too slow in its transition to clean energy and is hampering efforts to combat climate change at a national level.
The transition to green energy is now an inevitability; the question that needs to be asked is how quickly European leaders will act to facilitate such a transition. With an increase in windfall taxes and the closure of loopholes, a considerable amount of revenue would be available to pursue initiatives related to green energy, such as investments in establishing more wind, solar, and hydropower plants. Furthermore, the transition to electric vehicles could be incentivised and subsidised with increased charging stations and affordability.
However, windfall taxes do not solve the root cause of the problem, which is that private fossil fuel and energy corporations are putting shareholder interests over the planet’s needs. Public ownership of energy corporations answers this and is needed now more than ever. The Trades Union Congress has provided ample research into how pragmatic, affordable and necessary public ownership of energy is within the UK to alleviate the cost of living and tackle the climate crisis. Yet, despite the evidence, in the UK and across Europe, neoliberal ideological approaches dominate economic and energy policies, which prevents a proper transition to green energy. By providing a lacklustre approach to windfall taxes on obscene record profits and the continuation of the privatised energy system, the lives of future generations are being jeopardised.
James Hamilton
As an International Relations student and member of the Green Party of England and Wales, James’ work and beliefs are grounded in a deep commitment to social, economic and environmental justice. He is extremely passionate about highlighting the way in which the current neoliberal economic system impacts our planet and future generations, and how we can develop strong policies that challenge the dominant system around us.
