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Climate advocates and experts argue that fossil fuel companies should pay financial compensations for their contributions to climate change, or ‘reparations’, an idea that has also been raised during UN summits. But how could that work, and how much should reparations amount to? In a recent study in the journal One Earth1 Marco Grasso from the Department of Sociology and Social Research at the University of Milan-Bicocca, and Richard Heede of the Climate Accountability Institute have proposed a methodology to quantify the harm caused by fossil fuel emissions and a roadmap to implement reparations. They found that the top 21 fossil fuel companies, also known as Carbon Majors, would owe $209 billion every year from 2025 to 2050. We talked to Marco Grasso about the study.

What motivated you to deal with the issue of climate responsibility by fossil fuel companies, and what approach did you take?

We believe that the burden of climate damages should not be borne only by states and individuals. We argue that fossil fuel companies must be held accountable because they knew that their activities were causing dangerous climate change, and didn’t change their business model even when less carbon-intensive alternatives were available. We provide the first scientifically grounded figures for reparations, based on an estimate of climate damages from 2025 to 2050.

How did you quantify climate reparations?

Based on a survey of 738 climate economists and using a model of economic growth for the period from 2025 to 2075, we estimated the cumulative cost of climate damages due to all anthropogenic sources, considering a temperature increase scenario of 3°C. It amounts to $99 trillion, of which $70 trillion can be attributed to fossil fuels. These costs result from the behaviours of three groups of agents: the producers of the products that generate emissions, the emitters who use fuels, and the political authorities who should act to reduce emissions or fail to do so. For the sake of simplicity, we propose that producers, emitters, and authorities each have one-third of the responsibility, and thus an equal quota of climate damages of $23.2 trillion. Each of the 21 top companies considered is then allocated a share of this $23.2 trillion sum based on its share of global emissions from 1988 to 2022. The result is that the 21 largest companies are responsible for $5,444 billion in expected GDP loss between 2025 and 2050, or $209 billion per year on average.

What criteria did you use to identify the companies that would owe reparations?

We group the top companies into three categories that we called ‘High Requirement’ (HR), ‘Low requirement’ (LR), and ‘Exempted’. HR companies are investor-owned companies and state-owned entities headquartered in wealthier countries such as the United States, Europe, Saudi Arabia, and should bear the full financial burden of reparations proportional to their historical emissions. LR companies are state-owned entities in Russia, Iraq, Brazil, China. We assigned them partial reparations because of the economic situation of their home countries. On the same grounds, companies headquartered in poorer countries such as India, Iran, Venezuela, Algeria would be exempted.

When do you propose that fossil fuel companies pay reparations?

We suggest that HR and LR companies pay reparations over the period 2025 to 2050 through an annual scheme declining toward zero in 2050. This accounts for their decreasing capacity to shoulder reparations, considering that their business will likely become less profitable over the years. As an incentive to early action, we propose that companies can face lower reparations if they achieve aggressive targets to reduce their fossil fuels production. Reparations could help address market failures, such as the reduced competitiveness of renewables compared to heavily subsidized fossil fuels and would make it more difficult to finance and insure new carbon-intensive projects. They would also help finance mitigation and adaptation actions.

What impact are you hoping for the paper

Rather than as a policy proposal, we see this work as a starting point for an open discussion on the shared responsibility for climate harm and we aim to lay the groundwork for further investigations. We hope that our study will inform future efforts to direct payments to those harmed by climate change.