Carbon Billionaires: The investment emissions of the world’s richest people
Oxfam International, UK, published this paper on November 7, 2022. It has been written by Alex Maitland, Max Lawson, Hilde Stroot, Alexandre Poidatz, Ashfaq Khalfan and Nafkote Dabi, researchers working with Oxfam. Citing the World Inequality Report 2022, the paper states that 50 to 70 per cent of the carbon emissions of the world’s richest people result from their investments in highly polluting sectors like fossil fuels and cement. The average annual carbon footprint of one of the 125 richest billionaires in the world is noted to be around 3.1 million tonnes. This, the paper states, is more than a million times higher than the emissions attributable to a person from the poorest 90 per cent of the global population.
The paper finds that the intensity of the emissions of the world’s richest 125 billionaires could be brought down by almost four times. This could be achieved by shifting their investments to funds with more robust environmental and social standards.The 32-page paper is divided into five sections: Climate and inequality, and why investment matters (Section 1); Why our calculations underestimate the scale of billionaires’ investment emissions (Section 2); The role of corporates in climate breakdown (Section 3); Policy recommendations for governments (Section 4); and Recommendations for corporates, directors and shareholders to drive change (Section 5).
As per the paper, the annual carbon emission produced by the investments of 125 of the world’s richest billionaires is equal to the annual carbon emission of France with its population of around 67 million people.
In 2020, Oxfam and the Stockholm Environment Institute released a paper titled Confronting carbon inequality. It noted that the richest one per cent of the global population was responsible for 15 per cent of cumulative carbon emissions.
Citing a 2020 article from the journal The Lancet Planetary Health, the paper states that as of 2015, countries from the global north were responsible for as much as 92 per cent of the excess carbon dioxide emissions globally. The paper, referring to data from the Climate Change 2022: Impact, Adaptation, and Vulnerability report, adds that developing countries will need around 300 billion US dollars per year to adapt to the changing climate.
The paper cites a 2022 report titled Climate Vulnerable Economies Loss Report to state that in the two decades since the year 2000, climate change has destroyed more than one-fifth of the wealth of the world’s 20 most vulnerable countries.
Three categories of emissions are associated with a company’s activities. ‘Scope 1’ emissions are those that emanate directly from the company’s operations, such as, emissions from company vehicles. ‘Scope 2’ covers indirect emissions like the energy equipped to heat offices or operate machinery and ‘Scope 3’ includes all other indirect emissions – emissions occurring along supply chains, employee commute and consumer use.
All three types of emissions listed above should be reported by corporations, the paper states. However, an analysis of 604 companies with major investments from the richest 125 billionaires, revealed that 461 companies (76 per cent) did not report Scope 3 emissions. Data in the public domain on emissions by corporates is therefore underestimated. The major proportion of emissions for most corporates are Scope 3 emissions and it is necessary to address these to realize a low-carbon economy, the paper states.
As per data from CDP – a not-for-profit organisation that records carbon pledges and emissions disclosed by corporations – more than 13,000 corporations (making up 64 per cent of the global market capital) disclosed environmental data to CDP in 2021. Of these, only one-third had credible transition plans for reducing emissions in the future.
Referring to a 2021 study by the Swiss Re Institute, Zurich, the paper states that the G7 countries stand to lose 8.5 per cent of their GDP annually – or, around five trillion US dollars – in 30 years if global warming increases by 2.6°C.
An even distribution of wealth is needed to avoid further climate breakdown, the paper states. It suggests higher taxation on the wealth of the rich. The finances thus raised can then be used to support countries and people experiencing the worst effects of climate change.
Measures are needed to deter investment in economic activities that contribute to the worsening climate change. The paper refers to the World Inequality Report 2022 which calculates that at least 100 billion US dollars can be raised annually through the application of a 10 per cent tax rate on assets owned by billionaires that contribute to pollution.
The paper recommends that governments take measures to compel corporates and billionaire investors to reduce emissions. This may be achieved by enforcing stringent reporting requirements on carbon assets and emissions. Additionally, higher taxation can be introduced on investments in polluting industries.
Focus and Factoids by Bhavani Vaidyanathan.
Alex Maitland, Max Lawson, Hilde Stroot, Alexandre Poidatz, Ashfaq Khalfan and Nafkote Dabi
Oxfam International, Oxford, UK
07 Nov, 2022