People around the world are trapped in a ‘toxic triangle’ made up of short-term financial investors, timid governments and fossil fuel companies, which threatens to push up global temperatures, putting 400 million people at risk of hunger and drought by 2060, Oxfam warns today.
Oxfam’s new report Food, Fossil Fuels and Filthy Finance shows that this ‘toxic triangle’ supported spending of $674 billion on fossil fuels in 2012 - at this current rate, $6 trillion will be spent by fossil fuel companies to develop the industry over the next decade. Investment in fossil fuels is propped up by a concoction of tax breaks, government incentives and an estimated $1.9 trillion of subsidies a year going directly to the industry or to pay for the social, health and environmental damage they cause. These subsidies are protecting investment levels despite the growing business risk.
Fossil fuel lobbying of the US and EU governments, which amounts to more than half a million dollars a day to protect the status quo, keeps the ‘toxic triangle in place. In 2013, the combined profits of the top five publicly traded oil companies – Exxon, Chevron, Shell, BP and ConocoPhillips - was $93bn.
Fossil fuels are the main contributor to climate change, responsible for 80 per cent of carbon dioxide emissions, putting health, property, food, businesses and economic growth at risk. Failure to reduce consumption of fossil fuels will put the world on track to warm by between 4 ºC and 6ºC by the end of the century. Warming at this rate would leave up to 400 million of the world’s poorest at risk of severe hunger and drought by 2060.
Oxfam’s Executive Director Winnie Byanyima said: “The fossil fuel industry is benefitting from a toxic triangle it has constructed that is trapping us in a warming world. Our continued dependence on fossil fuels is not inevitable but the deliberate choice of the industry, timid governments and short-sighted investors. This is all about big profits for the few with little care for the rest of us – particularly the world’s poorest people who are already being made hungry by climate change.
“Investors and governments – starting with the richest countries that are most responsible for our climate crisis – need to urgently shift their funding to renewable and clean alternatives. This would not only offer good, sustainable investment opportunities but will set us on course to tackle the threat of climate change with the urgency that both the science and people all around the world demand.”
Fossil fuel companies and their trade associations spend at least €44m a year on lobbying the EU and will find out if their latest splurge has been successful when European Heads of State agree the EU 2030 climate and energy package next week. The proposal on the table for an emissions cuts target of 40 per cent is in line with the recommendation from BusinessEurope, one of the most powerful business lobbies in the EU. This falls short of the cut of at least 55 per cent experts say is needed if Europe is to make a fair contribution to tackling climate change. Oxfam says European leaders must resist pressure from the fossil fuel industry and agree a package that commits to this, along with energy savings of at least 40 per cent and boosting sustainable renewable energy use to a minimum of 45 per cent of the energy mix.
Only one fifth of carbon reserves currently held by companies listed on stock exchanges can ever be burned to avoid warming of more than 2ºC, the temperature limit agreed to by all governments at the United Nations. Oxfam says that investing in fossil fuels is flawed because this will hit profits whether regulation is introduced or not. Failure to introduce government regulation will hurt economies as governments are forced to cover the costs of climate change, and harm businesses - which are already feeling the brunt. Unilever, for example, says it loses €300million ($415m) each year due to extreme weather. Regulation that limits warming to 2 ºC could see the stranding of $300 billion of fossil fuel assets, bursting the ‘carbon bubble’ and leaving savers and long-term investors out of pocket.
Advances in technology means that renewables and clean energy have become more competitive, despite receiving five times less in subsidies. It is estimated it would cost $44 trillion to shift to worldwide clean energy by 2050, with any additional up-front costs more than covered by over $115 trillion that would be saved in running costs because of no longer having to pay for fuel. Solar and wind energy sectors could create 6.3 million and 2.1 million jobs respectively around the world and improved energy efficiency could reduce prices and consumption. The shift would also improve energy self-sufficiency.
Oxfam says governments need to:
- Commit to phasing-out fossil fuel emissions, and phasing-in sustainable renewable energy for all, by early in the second half of the century, with developed countries leading the way and providing the necessary support to developing countries to follow.
- Shift their investment from dirty energy to renewables, energy efficiency and ensuring that the poorest people are not left behind in terms of accessing energy.
- Push for fossil fuel companies to become more transparent on their lobbying activity.
- Commit to climate proof the global financial system by reviewing risk, improving transparency and providing capital for low carbon investment.
At the same time, in the private sector, Oxfam is calling for:
- Fossil fuel and energy-intensive companies to plan to shift and diversify their business models to embrace a low carbon future and become part of the solution.
- Investors to shift their investment from fossil fuels to low-carbon development, factor in climate risk and challenge companies that are pursuing high-carbon strategies.
- Other businesses whose operations are at risk because of climate change, including food and drink companies, to press governments for ambitious global action, and to challenge companies including fossil fuel companies and lobbyists, that are benefitting from the status quo.
Notes to editors
Download the report - Food, Fossil Fuels and Filthy Finance