Polluters  Pay!  

Carbon Majors and the International Loss & Damage Mechanism

3  problems:  

•  Poor  people  suffering  worst  of  climate  change  with  few  resources.    

•  Fossil  fuel  en::es  profi:ng  from  products  that  cause  climate  change.    

•  Interna:onal  nego:a:ons  need  a  fresh  approach  &  new  ideas  to  shake  up  the  nego:a:ons  and  excite  the  public.  

A  solu:on  built  on  interna:onal  law  and  precedents:    Carbon  Majors  fund  the  Interna:onal  Loss  and  Damage  Mechanism.  

Poor  people  suffering  worst  impacts  of  climate  change  with  few  resources  

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Climate  change  loss  and  damage  –  here  already  

•  Typhoon  Haiyan  killed  6,300  people,  4  million  lost  their  houses  and  caused  $2  billion  of  damages  in  the  Philippines.    

•  Prolonged  drought  in  the  Horn  of  Africa  ending  in  2011,  leZ  13.3  million  people  with  food  shortages,  caused  total  losses  of  $12.1  billion  in  Kenya  alone.  

•  Sea  level  rise  on  Pacific  Islands:  stealing  land,  difficult  to  grow  staple  food  crops,  fresh  water  becoming  salty,  forcing  reloca:on.    

Photo  cred

it:  Oxfam

 

Scale  of  loss  and  damage  

•  Costs  of  loss  and  damage  substan:al  but  difficult  to  be  exact.    

•  Non-­‐economic  losses  important:  life,  health,  culture,  nature.  

•  Current  order  of  magnitude  of  economic  losses  due  to  weather  related  disasters  is  ~$100bn  pa1.  

•  Mid  range  es:mate  of  loss  and  damage  in  2060  $1.2  trillion2.  

1  ~$100billion  per  year  extrapolated  from  Munich  Re  in  World  Bank  (2013).  Weather  events  in  all  countries,  not  all  events  climate  change  related.    Does  not  include  non-­‐economic  losses.  2  Measured  in  2000  US  dolllars.  Source:  Dr  Chris  Hope  in  Parry  et  al  2009,  pp100-­‐111  

Mi:ga:on  and  adapta:on  reduce  loss  &  damage  

Current  mi:ga:on  on  track  for    3.7°  -­‐  4.8°C  temperature  increase  by  2100  

Source:  Mi:ga:on:  IPCC  WGIII  AR5  Summary  for  Policy  Makers.                                    Adapta:on:  Schalatek  et  al  2012  and  IIED  briefing  2012.  

1.5-­‐1.7oC  

4.1-­‐4.8oC  

3.1-­‐3.7oC  

2.3-­‐2.9oC  

Temp    increase    by  2100  

100  

450  

5  

Adapta:on  funds  es:mate  low  

Adapta:on  funds  es:mate  high  

Funds  commiked  

Funds  for  adapta:on    far  short  of  need  

Carbon  Majors  profi:ng  from  products  that  cause  climate  change  

14

Car

bon

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positively in all of these areas. The authors look forward to engagement and further work with government and civil society stakeholders on the concept introduced in this paper.1

1 If you are interested in engaging further please let us know via this short form: http://goo.gl/7Dbdfs

Billows of smoke over a refinery

© davis - Fotolia.comPhoto  credit:  davis  –  Fotalia.com  

Carbon  Majors  responsible  for  63%  emissions  

•  Carbon  Majors  published  Nov  2013.      

•  Ground-­‐breaking.    •  From  ‘everyone  is  

responsible  and  hence  no  one  is  responsible’  to  a  world  in  which  the  coal,  oil  and  gas  extracted  and  cement  manufactured  by  only  90  en::es  is  responsible  for  the  majority  (63%)  of  greenhouse  gas  emissions.          

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15

2. Who and what are the Carbon Majors?

The Carbon Majors report (Heede 2013, 2014)2 was released in November 2013. This ground-breaking report is the result of eight years of work by Rick Heede that aggre-gates the historical emissions of the 90 biggest oil, gas, and coal producers and cement manufacturers and demonstrates that the fossil fuels they have extracted and the concrete manufactured is responsible for 63% of global emissions. It attributes 3.52% of greenhouse gas emissions to ChevronTexaco, 3.22% to ExxonMobil, 3.17% to Saudi Aramco, 2.47% to BP, 2.22% to Gazprom, 2.12% to Shell, and 2.01% to the National Iranian Oil Company. The full list of entities is in the table below.

These 90 «Carbon Majors» are responsible for extracting the fossil fuels and manufacturing the concrete that has led to 63% of total global emissions since the Industrial Revolution began (1751–2010). Their products are therefore also respon-sible for the majority of climate change being felt today.

2 See http://carbonmajors.org/.

Carbon Majors and global CO2 and methane emissions, 1850-2010

2010  emissions  MtCO2e  

Cumula:ve  1854-­‐2010  MtCO2e  

Percent  of  global  

1751-­‐2010  

Chevron   423   51,096   3.51%  

ExxonMobil   655   46,672   3.21%  

Saudi  Aramco   1,550   46,033   3.17%  

BP   554   35,837   2.47%  

Gazprom   1,371   32,136   2.22%  

Shell   478   30,751   2.12%  

Na:onal  Iranian  Oil  Company  

867   29,084   2.01%  

Pemex   602   20,025   1.38%  

ConocoPhillips   359   16,866   1.16%  

Carbon  Majors  include:  •  share-­‐holder  owned  en::es  

•  state-­‐owned  en::es  

•  states.    Full  list  in  the  report.  

Top  9  extant  investor  and  state  owned  en::es  shown  here.  

Fossil  fuel  business  model  externalises  climate  cost  

•  2013  profits:          Chevron:  US$21.4bn;          ExxonMobil:  US$32.6bn;          BP:  US$23.5bn;          Shell:  US$16.7bn.  

•  Saudi  Aramco  generates  more  than  US$1bn  revenue  per  day.    

•  Fossil  fuel  corpora:ons  plan  to  con:nue  with  this  approach  …  

Source:  Taxpayers  for  Common  Sense  (decade  profits);  company  announcements  (2013  profit);  Forbes  2013  (Saudi  Aramco)  

12

Even  in  a  “low  carbon  scenario,”  hydrocarbon energy sources are still needed. The IEA

in its World Energy Outlook 2013 examined production of liquids from currently-

producing fields, in the absence of additional investment, versus liquids demand, for both

their  lead  “New Policies Scenario”  and  for  a  “450 Scenario.”  As  shown  in  the  chart  

above, in both scenarios, there remains significant liquids demand through 2035, and

there is a need for ongoing development and investment. Without ongoing investment,

liquids demand will not be met, leaving the world short of oil.

ExxonMobil believes that although there is always the possibility that government action

may impact the company, the scenario where governments restrict hydrocarbon

production in a way to reduce GHG emissions 80 percent during the Outlook period is

highly unlikely. The Outlook demonstrates that the world will require all the carbon-

based energy that ExxonMobil plans to produce during the Outlook period.8 Also, as

discussed above, we do not anticipate society being able to supplant traditional carbon-

based forms of energy with other energy forms, such as renewables, to the extent needed

to meet this carbon budget during the Outlook period.

5. Managing the Risk

ExxonMobil’s  actions. ExxonMobil addresses the risk of climate change in several

concrete and meaningful ways. We do so by improving energy efficiency and reducing

emissions at our operations, and by enabling consumers to use energy more efficiently

through the advanced products we manufacture. In addition, we conduct and support

extensive research and development in new technologies that promote efficiency and

reduce emissions.

8 ExxonMobil’s  proved  reserves  at  year-end 2013 are estimated to be produced on average within sixteen years, well within the Outlook period. See Exxon Mobil Corporation 2013 Financial & Operating Review, p. 22. It is important to note that this sixteen year average reserves-to-production ratio does not mean that the company will run out of hydrocarbons in sixteen years, since it continues to add proved reserves from its resource base and has successfully replaced more than 100% of production for many years. See Item 2 Financial  Section  of  ExxonMobil’s  2013  Form  10-K  for  ExxonMobil’s  proved  reserves, which are determined in accordance with current SEC definitions.

Fossil  fuel  corpora:ons  plan  to  con:nue  

Shell  May  2014:    

“fossil  fuels  con=nuing  to  play  a  major  role  in  the  energy  system  –  accoun=ng  for  40-­‐60%  of  energy  supply  in  2050”  with  “high  energy  prices”   ExxonMobil  March  2014:  

 

“highly  unlikely”  that  governments  will  restrict  fossil  fuels  to  reduce  GHG  emissions  by  80%.  “the  world  will  require  all  the  carbon-­‐based  energy  that  ExxonMobil  plans  to  produce”    

Legal  basis  and  precedents    

Car

bon

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Fund

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age

5. H

ow m

ight

the

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loss

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37

The history of the discussions on a loss and damage mechanism can be traced as far back as 1991, when the Association of Small Island States called for the establishment of an international insurance pool to compensate victims of sea-level rise (Siegele 2012; Verheyen and Roderick 2008). The UNFCCC negotiations began to seriously address the issue of loss and damage with the establishment of a work programme at the Cancun COP in December 2010. This work programme resulted in the Warsaw International Mechanism for Loss and Damage agreed in November 2013. The timeline and process of these negotiations is outlined below.

Deepwater Horizon on Fire

Photo  credit:  US  Coast  Guard  –  100421-­‐G-­‐XXXXL  

Legal  liability  for  loss  and  damage  

•  Polluter-­‐pays  principle  –  those  in  control  of  a  pollu:ng  ac:vity  should  be  held  liable  for  any  harms  caused  by  the  ac:vity.  

•  No  harm  rule  –  responsibility  to  ensure  that  ac:vi:es  do  not  cause  damage  to  the  environment  beyond  na:onal  jurisdic:on  and  obliga:on  to  minimise  risk.  

•  Where  harm  is  caused  an  obliga:on  to  cease  harmful  conduct  and  make  full  repara:on:  res:tu:on,  compensa:on  and  sa:sfac:on.  

Legal  framework  for  loss  and  damage:    UNFCCC  Ar:cle  4.8  The  Par:es  shall  give  full  considera=on  to  what  ac=ons  are  necessary  under  the  Conven:on,  including  ac=ons  related  to  funding,  insurance  and  the  transfer  of  technology,  to  meet  the  specific  needs  and  concerns  of  developing  country  Par=es  arising  from  the  adverse  effects  of  climate  change  …  especially  on:    a)   Small  island  countries;    b)  Countries  with  low-­‐lying  coastal  areas;    c)  Countries  with  arid  and  semi-­‐arid  areas,  forested  areas  and  areas  liable  to  forest  decay;    d)  Countries  with  areas  prone  to  natural  disasters;    e)  Countries  with  areas  liable  to  drought  and  deser:fica:on;    f)  Countries  with  areas  of  high  urban  atmospheric  pollu:on;    g)  Countries  with  areas  with  fragile  ecosystems,  including  mountainous  ecosystems;    i)  Landlocked  and  transit  countries.    Further,  the  Conference  of  the  Par:es  may  take  ac:ons,  as  appropriate,  with  respect  to  this  paragraph.    

Warsaw  Interna:onal  Loss  and  Damage  Mechanism  

Func:ons:  •  enhance  knowledge  and  understanding  of  comprehensive  risk-­‐management  approaches  to  address  loss  and  damage;    

•  strengthen  dialogue,  coordina:on,  coherence,  and  synergies;  and    

•  enhance  ac:on  and  support,  including  technical  support  and  mobilising  finance.    

Legal  framework  for  loss  and  damage:    ILC  DraZ  Principles  on  Transboundary  Harm  Principle  4:  Prompt  and  adequate  compensa5on  (UN  General  Assembly  2006):  •  Each  State  should  take  all  necessary  measures  to  ensure  that  prompt  and  

adequate  compensa1on  is  available  for  vic1ms  of  transboundary  damage  caused  by  hazardous  ac5vi5es  located  within  its  territory  or  otherwise  under  its  jurisdic5on  or  control.  

•  Including  the  imposi1on  of  liability  on  the  operator  or,  where  appropriate,  other  person  or  en5ty.  Such  liability  should  not  require  proof  of  fault  [strict  liability].    

•  Including  the  requirement  on  the  operator  or,  where  appropriate,  other  person  or  en5ty,  to  establish  and  maintain  financial  security  such  as  insurance,  bonds  or  other  financial  guarantees  to  cover  claims  of  compensa1on.    

•  In  appropriate  cases,  these  measures  should  include  the  requirement  for  the  establishment  of  industry-­‐wide  funds  at  the  na1onal  level.    

•  In  the  event  that  the  measures  under  the  preceding  paragraphs  are  insufficient  to  provide  adequate  compensa1on,  the  State  of  origin  should  also  ensure  that  addi1onal  financial  resources  are  made  available.    

Abridged  very  slightly  for  space  reasons  

Key  precedents  

1.  Oil  spill  compensa:on  2.  Nuclear  accident  regime  3.  Biosafety  liability  

Precedent:  Interna:onal  oil  pollu:on  compensa:on  funds  (IOPC  Funds)    •  Financed  by  levies  based  on  oil  transported.    •  Governments  monitor  and  submit  informa:on  to  IOPC.  •  Fund  is  used  for  compensa:on  (strict  liability)  for:  –  property  damage;  costs  of  clean-­‐up  opera:ons;  economic  losses  by  fishermen  or  those  engaged  in  mariculture;  economic  losses  in  the  tourism  sector;  and  costs  for  reinstatement  of  the  environment    

•  Anyone  from  a  member  state  can  claim  compensa:on.  

Precedent:  Nuclear  Liability  Regime  •  Three  :ers  of  compensa:on  for  damages:    –  1:  the  nuclear  operator’s  liability  (insurance  to  €700m)    –  2:  the  State  (public  funds)  in  which  the  installa:on  operates  (€500m)    

–  3:  a  collec:ve  state  contribu:on  (the  Brussels  Supplementary  Conven:on).    The  Brussels  Supplementary  Conven:on  was  set  up  to  provide  public  funds,  should  other  compensa:on  prove  insufficient.      

•  Par:es  make  payments  to  the  Brussels  Supplementary  Conven:on  in  propor:on  to  their  GDP  and  their  nuclear  power  as  a  percentage  of  the  total  nuclear  power  of  Par:es.    

Our  proposal:    

Carbon  Majors  fund  the  Interna:onal  Loss  and  Damage  Mechanism  

Car

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29

resources in cases where the compensation available from operators is insufficient. Draft Principle 4(5) reflects the complementary notions of State responsibility and interna-tional civil liability, as reflected in the polluter-pays principle (Foster 2005, pp. 265, 277).

Thus, there is a strong basis under international law for States and operators such as the Carbon Majors to be held liable for transboundary harm caused by the activities of the Carbon Majors. State responsibility for transboundary harms is a key element of international customary law, and it is further supported by emerging international legal principles holding corporations directly responsible for harms.

Tacloban after Typhoon Haiyan

Photo  credit:  Russell  Watkins/Department  for  Interna:onal  Development    

Funds  from  Carbon  Majors  One-­‐off  payment  based  on  historical  emissions  

Funds  from  Carbon  Majors  Ongoing  levy,  per  tonne  of  coal,  barrel  of  oil,  cubic  metre  of  gas  extracted,  or  per  tonne  of  cement  manufactured    

   $$      via  GCF  or  specific  L&D  Fund  

   Interna=onal  Mechanism  for  Loss  and  Damage  Establish  the  mechanism,  undertake  ac:vi:es,  pay  insurance  premiums,  and  fund  vulnerable  countries  and  communi:es  

         $$$  

   Most  vulnerable  countries  and  communi=es    -­‐  capacity-­‐building  -­‐  knowledge-­‐  and  technology-­‐sharing  

-­‐  building  resilience  and  reducing  risk  

-­‐  disaster  recovery  -­‐  compensa:on  

Interna=

onal  and

/or  

region

al  insurance    

 $$$    $$$  

Funds  from  Annex  II  countries    Where  other  funds  fall  short  

Key  considera:ons  

•  All  fossil  fuel  en::es  (not  just  top  90)  •  Equity  principles  – Mix  of  A1  and  NA1  en::es  – One  op:on:  begin  with  corpora:ons,  phase  in  other  en::es  over  :me  

•  Fossil  fuel  phase  out  –  Increase  levy  over  :me  – Levy  on  top  of  exis:ng  levies,  royal:es,  taxes  

•  Historical  responsibility  

Key  considera:ons  

•  Where  to  set  the  levy?  – We  have  not  calculated  exact  levies  per  tonne  of  coal,  barrel  of  oil,  or  cubic  metre  of  gas  

– Suggested  star:ng  point  of  ~$2  per  tonne  of  CO2  – Would  raise  ~$50bn  per  year  –  Increase  5-­‐10%  each  year.  

•  We  plan  to  con:nue  to  develop  this  concept  and  look  forward  to  input  from  government,  civil  society  and  academia:    hkp://goo.gl/7Dbdfs.      

Ques:ons,  ques:ons,  ques:ons  ….  

Warsaw  Interna:onal  Loss  and  Damage  Mechanism  func:ons  •  Enhance  knowledge  and  understanding  of  comprehensive  risk-­‐management  

approaches  to  address  loss  and  damage  associated  with  the  adverse  effects  of  climate  change,  including  slow-­‐onset  impacts;    

•  Strengthen  dialogue,  coordina:on,  coherence,  and  synergies  among  relevant  stakeholders;    

•  Enhance  ac=on  and  support,  including  finance,  technology,  and  capacity-­‐building,  to  address  loss  and  damage  associated  with  the  adverse  effects  of  climate  change,  so  as  to  enable  countries  to:  –  Assess  the  risk  of  loss  and  damage;  systema:cally  collect  and  share  data  on  

climate  impacts;  –  Design  and  implement  country-­‐driven  risk-­‐management  strategies  and  

approaches,  including  risk-­‐reduc:on,  risk-­‐transfer,  and  risk-­‐sharing  mechanisms;  

–  Implement  comprehensive  climate  risk-­‐management  approaches;  –  Promote  an  environment  that  encourages  investment  and  involvement  of  

stakeholders;  –  Involve  vulnerable  communi:es  and  popula:ons,  civil  society,  the  private  

sector,  and  others  in  the  assessment  of  and  response  to  loss  and  damage  .  

90  en::es  responsible  for  63%  emissions  

Carbon  Majors’  emissions  by  ownership  

•  56  are  crude  oil  and  natural  gas  producers,    

•  37  are  coal  extractors  (including  subsidiaries  of  oil  &  gas  companies),  and    

•  7  are  cement  producers.  

•  Investor-­‐owned  =  315  GtCO2e  (50  en::es)  

•  state-­‐owned  =  288  GtCO2e  (31  en::es),    

•  na:on-­‐states  =  312  GtCO2e  (9  en::es).    

Carbon  Majors:  emissions  by  A1  /  NA1  

•  Of  the  85  extant  en::es,  54  are  headquartered  in  Annex  I  countries,  and  31  in  non-­‐Annex  I  na:ons.    

•  A1/NA1  emissions  =  roughly  50/50  split.  •  Geographic  spread  of  investor-­‐owned  companies  – USA  21,    – Europe  17:  five  in  the  UK,  three  in  Germany,  two  in  France,  Italy  and  

Switzerland,  1  in  Netherlands,  Spain,  Austria    

– Canada  6,    – Russia  2    – Australia,  Japan,  Mexico,  South  Africa  1  

Carbon  Majors:  oil,  gas,  coal  and  cement  

•  50  investor-­‐owned,  31  state-­‐owned,  and  9  na:on-­‐state  producers  of  oil,  natural  gas,  coal,  and  cement.  

•  56  are  crude  oil  and  natural  gas  producers,  37  are  coal  extractors  (including  subsidiaries  of  oil  &  gas  companies),  and  7  are  cement  producers.  

•  emissions  of  315  GtCO2e  have  been  traced  to  investor-­‐owned  en::es,  288  GtCO2e  to  state-­‐owned  companies,  and  312  GtCO2e  to  na:on-­‐states.    

•  one-­‐half  of  CM  emissions  have  occurred  since  1984/86    

GHG  emissions  accelerate  despite  reduc=on  efforts.  Most  emission  growth  is  CO2  from  fossil  fuel  combus=on.