A staggering $420 billion in ‘surplus’ profit was earned by 36 leading companies in the fossil fuel industry and their funders in the 24 months leading up to July 2023, according to a recent report by ActionAid. This revelation, made at the World Economic Forum in Davos, Switzerland, suggests that imposing a 90% tax on these windfall profits could generate an enormous $382 billion in revenue. Such a tax could substantially boost public spending in crucial areas like education and climate action.
Windfall profits, typically resulting from external changes in context, are considered ‘surplus’ beyond the regular earnings of companies.
This comprehensive research analyzed the earnings of the top 14 fossil fuel companies and 22 major financial corporations by stock market value. It found that during the specified period, these firms amassed $1,218 billion in profit, with windfall profits totaling $425 billion.
According to a report by The Guardian, fossil fuel company profits during this period surged by an astonishing 278%, compared to averages between 2017/18 and 2020/21. The report highlights that the extraordinary profits in both the fossil fuel and financial sectors are largely due to the repercussions of Russia’s invasion of Ukraine and the high-interest rates adopted by several countries in response to rising inflation.
The windfall profits amount to almost 20 times the $21 billion provided by donors for climate adaptation in 2021.
Arthur Larok, ActionAid Secretary-General, commented on the extraordinary scale of profits accruing to fossil fuel companies and their financiers amid global crises. He noted the stark contrast between these profits and the hardships faced by ordinary people worldwide. Larok advocated for windfall profits taxes as a sensible solution to generate substantial revenue for climate action and social services, targeting only extraordinary corporate profits.
In 2023, ActionAid found that banks had invested over $3.2 trillion into fossil fuels in the Global South since the Paris Agreement’s adoption in 2015, implicating them in climate damage.
At COP27, United Nations Secretary-General Antonio Guterres urged governments to tax the windfall profits of fossil fuel companies and redirect the funds to those affected by climate change. However, a year later, only a few European Union member states, like the United Kingdom and some Latin American countries, had implemented temporary and often limited windfall taxes on fossil fuel companies.
