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Bookmark and ShareAndrew Simms is nef‘s Policy Director and head of nef’s Climate Change programme.

An oil rig at sunset

Without essential funds we won't meet climate change targets. The lucrative oil industry has money to spare, so why not tax it? | Photo by arbyreed via Flickr

Many people forget that the basic principles for the Copenhagen negotiations were set long ago at the Earth Summit in 1992. Rich countries were supposed to go first, fastest and furthest, and pay to help others follow in the footsteps. They failed in every single aspect. Consequently, all they can do now is beg, grovel and implore the major low income countries – the likes of Brazil, India and China – to participate willingly, and in good faith.

Of course, it’s not that simple. The “Why should we, when you didn’t and still aren’t?” position may feel smugly strong to negotiators from the global south. But, it needs to be used with extreme caution. Played with too much zeal, while living on the frontline of climate change, they might find that the house of economic development which they hope to move into has burned down long before they get there.

Without a genuine, global commitment to prevent an accumulation of greenhouse gases that is likely to push us over a 2C temperature rise, we could be giving a whole new meaning to the idea of a “scorched earth” policy.

It’s all too easy to imagine a carbon stand-off that has tragic, violent consequences. Western consumers are repeatedly told by their politicians that little matters if China doesn’t play ball. Meanwhile, China views the nihilistic inaction of western societies with a shrug, and keeps building coal-fired power stations. Small behaviour changes happen in the United States, a bit more renewable energy comes on tap, but the bigger policy stays in place: the real fireworks of using the world’s largest military to control declining oil supplies.

The latter gets sustained by its own weirdly self-supporting logic. Since becoming oil-dependent in the early 20th century, the dominant superpower’s military might is used to ensure the fuel supplies that, in turn, keep its own military functioning and mobile. Up to the first world war, it was the British and their navy. Afterwards, it was the US with its air, land and naval forces.

It’s possibly the greatest energy inefficiency we have, not to mention the way that this military “oil protection racket” also removes the incentive for energy alternatives to develop.

In a single year (2007) the US military spent over $12bn on fuel, using the equivalent of 363,000 barrels of oil per day. It is thought to be the biggest institutional buyer of oil in the world. To put those numbers into perspective, it means that just one nation’s military fuel use was almost double that another entire nation, Ireland.

With so much locked into the continuing use and extraction of oil and coal, what will it take for everyone to raise their sights?

The European Union’s murky statement that developing countries would need €100bn per year by 2020 to tackle climate change, but without being very clear how much would come from where, was less than inspiring. Those who remember the 1992 Earth Summit might get a sense of déjà vu, as back then the summit concluded that $125bn new money from rich to poor countries would be needed annually to implement its agreements, virtually none of which was forthcoming. And let’s not pretend that, even during the global recession, the money is not out there.

The oil company BP may have just been hit with a record $87m fine for safety failings at its US, Texas City refinery, but it still managed a massive $5bn profit in just the third quarter of 2009.

If radical steps are not taken when the climatic conditions on which civilisation depends are under threat, when will they be? Why not, quite seriously, impose a near-100% tax on the profits of the oil majors for the next five years? All the proceeds could then be invested into both beginning the great low-carbon transition at home, and delivering the financial resources without which a meaningful Copenhagen deal will not be agreed. At a stroke, it would generate the vast majority of the funds that most say is essential. We’d also be able to save billions in that other area quite rightly referred to as “unproductive expenditure”, the military.

85 months and counting…

Bookmark and ShareAndrew Simms is nef‘s Policy Director and head of nef’s Climate Change programme.

A letter to the Observer, 14th December 2008.

oil1We are gravely concerned at the behaviour of energy companies who are refusing to pass on price cuts to consumers, in spite of the sharp falls in the world price of crude oil.

Average annual spending on energy per household has breached £1,200. Since 2000, gas prices have risen 100 per cent and electricity 61 per cent. Correspondingly, energy providers’ profits have risen from £557m in 2003 to over £5bn today. Similarly, oil companies have announced huge windfall profits.

The record price rises coupled with the refusal of companies to pass on cost cuts could increase those in fuel poverty beyond six million. While the government’s energy package of long-term measures worth £900m over three years is welcome, this won’t go far enough to end fuel poverty.

In 2008 the inflated price of energy continues to make massive unearned profits for providers. We urge government to introduce a new windfall tax if these companies continue to refuse to pass on their cost cuts to consumers. Revenues from any windfall tax should be targeted at homes in fuel poverty to give them immediate help and should also be used to start a programme of home insulation to protect people from future price rises.

Gavin Hayes Compass; Neal Lawson Compass; Chuka Umunna Labour PPC Streatham; Jon Cruddas MP; Kate Hoey MP; Fabian Hamilton MP; Clive Betts MP; Mark Donne Fair Pay Network; Andrew Simms nef; Prof Ruth Lister CBE; Roger Berry MP; Sir Steve Bullock Mayor of Lewisham; Prof Sally Ruane; Richard Murphy Tax Justice Network UK

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