Spot the contradiction: oil majors with record profits while lower income households struggle to pay their bills. Can Europe act to level the playing field?
BP recorded a profit of $12.8bn in 2021 after oil and gas prices surged in the second half of the year. For Shell, profits amounted to $19.3bn and Total Energies, $16bn.
On the other hand, Europe’s current energy crisis has led to a 54% increase in petrol, gas and electricity prices for households across the bloc compared to 2020 levels. This winter is biting hard for the average European household. And the imbalance between the profit booms of oil majors and the toll on European families is only set to worsen, if European policy makers do not act now.
As part of its Fit for 55 proposals, the European Commission is proposing to include road transport and buildings sectors into the bloc’s carbon market (known as the Emissions Trading System “ETS2”). Household bills for car usage (petrol) and gas and electricity use in homes would be impacted by the proposal.
While the ETS2 proposal is a step in the right direction to help decrease the EU’s greenhouse gas emissions, the current proposal is flawed. In practice, fuel suppliers like Total and Shell would need to buy pollution permits for each liter of fuel they put on the market. But as the market is currently designed, they could then pass this cost on entirely to end-consumers. This could disproportionately impact poorer citizens driving their cars or heating their homes.
Sofie Defour, climate manager at Transport & Environment (T&E), said: “Oil majors make billions in profit each year, while causing environmental disasters of immeasurable scale. On top of that, this unfair advantage is likely to worsen, if Europe does not strengthen its carbon market rules. European policy makers need to put in place the necessary safeguards to protect the average consumer”.
A new legal analysis by T&E finds that the EU could indeed require fuel suppliers to absorb part of the EU’s forthcoming carbon levy instead of passing the burden entirely onto consumers.
The analysis finds several promising pathways, including one that would limit the amount that fuel suppliers can pass on to consumers. Anything above that limit would be covered by the suppliers, in the form of a penalty paid to the Social Climate Fund (SCF), designed to support vulnerable households who might not otherwise be able to move their transport and heating consumption away from fossil fuels.
Sofie Defour concludes: “The era of Big Oil profit making must come to an end. Average Europeans are not causing the largest chunk of emissions, yet they are being asked to pay. It is high time for oil majors to pay their fair share and absorb part of the EU’s carbon price. If the climate transition has any hope of working, the EU should ensure that big polluters — not the small households — pay the bulk of the costs.”
Originally published on Transport & Environment.
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