Their profit, our cost: Should fossil fuel companies pay for climate disasters?

As recovery efforts continue after Australia’s most recent flood catastrophe, leaders of the world’s oil and gas industry are gathered for CERAweek, the sector’s annual knees-up in Houston, Texas. The mood is buoyant, going by speeches and public commentary so far. As Cyclone Alfred, seen here from space, bore down on Australia, oil executives gathered in Houston, Texas.

“We can all feel the winds of history in our industry’s sails again,” said Amin Nasser, chief executive of Saudi Aramco, the world’s largest oil company. There was a time, not that long ago, when the world seemed determined to tackle climate change, and the oil companies played along. They rebranded themselves as integrated energy companies and responded to shareholder demands for climate action by setting ambitious net zero targets.



Then Russia invaded Ukraine and governments around the world scrambled for more energy as prices soared and voters grew restive. Besides, transition turned out to be harder than expected, and the profits from doing what the companies were built to do – extract and sell fossil fuel – were huge. Now, with Donald Trump in office, the industry is apparently content to rinse off the last of the greenwash.

“It is time to stop reinforcing failure,” Nasser said, referring to green hydrogen, which many had hoped would soon be competing with fossil fuels, but which has met with little commercial success so far. “In fact, there is more chance of Elvis speaking next than the current plan working.” To be fair, Aramco has at least been consistent on this.

At last year’s CERAweek, Nasser called for his peers to “abandon the fantasy of phasing out fossil fuels” and a few years earlier it was reported that Saudi Energy Minister Prince Abdulaziz bin Salman told a private meeting, “we are still going to be the last man standing , and every molecule of hydrocarbon will come out”. His upbeat outlook appears to have spread. “It is time to make energy great again,” said the chief executive of the UAE’s state-owned oil company ADNOC, Sultan Ahmed Al Jaber, also at CERAweek, flattering Trump with an announcement about new investment in US gas exploration.

The positive outlook for fossil fuels is not confined to the Gulf. In February, BP announced a strategic shift to increase oil and gas production, planning to boost annual spending on these fossil fuels by 20 per cent to $US10 billion ($16 billion). It reduced its planned funding for renewable energy by more than £5 billion ($10 billion), effectively scaling back its previous net zero ambitions.

Shell softened its net zero goals last year . Collectively, the oil and gas industry takes between $US3 trillion and $US4 trillion a year in revenue, which brings us back to the floods. It is not yet clear how much Cyclone Alfred will cost the nation, though before the storm hit, Treasurer Jim Chalmers warned that the figure would be in the billions.

Much of that cost will be borne by insurers, which are paying out more each year for climate-related disasters around the world. Beach erosion at Surfers Paradise in Alfred’s wake. Credit: Justin McManus One recent estimate put the global cost of climate-related disasters at $US330 billion a year between 2015 and 2021, while think tank the Australia Institute noted that in Australia between 2022 and 2023, the average insurance premium rose by 14 per cent, the steepest increase in a decade .

So far, Cyclone Alfred has prompted 22,400 claims in NSW and Queensland, though the broader hit to the economy will be far larger. AMP chief economist Shane Oliver told the ABC that each day of economic disruption to the region would cost about $1 billion. As the costs to insurers and the insured mount, so too does political pressure.

Prime Minister Anthony Albanese and Opposition Leader Peter Dutton have taken aim, blaming the industry for taking too long to pay out policyholders after past disasters. Similar complaints were made in the US after Hurricane Milton battered Florida last year and fires ripped through Los Angeles in January. Increasingly though, climate advocates are arguing that the wrong industry is under fire.

They argue that the oil companies which profit from the products that accelerate the disasters should be paying. Collectively, the oil and gas industry takes between $US3 trillion and $4 trillion a year in revenue. Credit: Nic Walker After a savage heatwave struck Oregon in 2021, the county of Multnomah took aim at the fossil fuel giants, suing the global industry for $US50 billion to cover costs of the heatwave and for future-proofing the county.

The county accuses the industry of “a scheme to rapaciously sell fossil fuel products and deceptively promote them as harmless to the environment, while they knew that carbon pollution emitted by their products into the atmosphere would likely cause deadly extreme heat events like that which devastated Multnomah County in late June and early July 2021”. The case is before the courts, one of about 86 active suits attacking the industry. In one prominent case, The Hague district court ordered Shell to cut its carbon emissions as it had a duty of care to Dutch citizens.

The company succeeded in having the decision overturned in November last year, arguing it was unfair to single out one company for a global issue, and that it was unrealistic to try to hold Shell accountable for its customers’ choices. As costs of climate disasters continue to rise, and the death toll mounts, it is hard to imagine that calls for the fossil fuel industry to share the pain will end. Environment is a free, fortnightly newsletter that gets to the heart of climate change and environmental issues, sent out every second Wednesday.

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