COP 27: The heat is on for fossil fuel firms amid renewed calls for polluters' tax
The UN is seeking global consensus on taxing fossil fuel companies' windfall profits to fill Africa's energy transition and adaptation kitty.
Steve Umidha, bird story agency
Fossil fuel firms are facing renewed pressure to open their wallets – fattened by the global energy crisis – and pour revenues into building renewable energy industries in states hit hardest by the fallout from climate change.
According to estimates by the International Monetary Fund, the surge in fossil fuel prices has generated substantial windfall profits in the energy sector and lined the pockets of fossil fuel producers and their shareholders.
United Nations Secretary-General António Guterres has used the COP 27 meeting in Sharm-el-Sheikh, Egypt, to urge governments to start taxing heavily polluting fossil fuel firms.
"I am asking that governments tax the windfall profits of fossil fuel companies; let us redirect that money to people struggling from rising food and energy prices and to countries suffering losses and damages caused by the climate crises." He reminded heavy polluters that "time was running out" and that a roadmap to speedy execution was crucial.
His calls were backed by 350 Africa, a grassroots program that seeks to stop the extraction of fossil fuels in Africa, and now wants such taxes levied on these companies to build sustainable energy systems in countries ravaged by polluters' emissions.
Africa is among the globe's worst-affected regions regarding climate change – a particularly galling fact given that the continent accounts for less than 6% of global energy consumption and just 2% of cumulative global emissions.
World leaders at COP27 in Sharm El Sheikh, Friday, November 9, 2022. The event has been heralded as "Africa's COP" . (Photo : Seth Onyango, bird story agency)
"We need to keep fossil fuels underground in Africa and hold those responsible for loss and damage to account," 350 regional organiser Christian Houndjonousse said, emphasising that states like Nigeria had already lost crucial adaptation time.
Implementing a polluters' tax would be key to unlocking existing barriers to African nations' clean energy transition plans; it would give countries on the continent access to much-needed financial support to produce, use and export clean energy as part of a green energy drive.
Africa is well placed for these processes; scientific research has proved that the continent has tremendous latent solar and wind power, and its soils contain many minerals needed for clean energy technologies.
Such a tax would also allow many African countries to bypass traditional fuels and infrastructure and go straight to building sustainable energy systems. This would be a boon, particularly in places whose grid infrastructure, designed to accommodate conventional energy sources, is inadequate, leading to frequent power losses and low supply quality.
The renewed drive for a polluters' tax could now force policymakers and tax experts in many countries to rapidly develop policies that would tax part of such companies' profits without discouraging investment.
The IMF has previously stated: "Many fossil fuel-producing countries already have an adequate rent-capturing fiscal instrument in place. Others may consider introducing a permanent tax on windfall profits from fossil fuel extraction but should be more cautious about temporary and possibly poorly designed windfall profit taxes."
bird story agency