The Senate passed a bill, the Inflation Reduction Act, addressing climate change on Sunday. Less than two weeks before this, the largest U.S.-based oil companies announced record profits and increased share buybacks. Given that the majority of greenhouse gas (GHG) emissions result from burning oil and gas, you might expect this bill to force these companies to use their record profits to address the emissions that result from their highly profitable products. You would be wrong.
The legislation — indeed, a landmark step in the right direction — provides incentives and tax credits supporting clean energy investments and makes available additional funds to support carbon capture and storage — an approach favored by the oil industry.
However, nowhere in this legislation is there a requirement for oil companies to do anything to address carbon dioxide emissions. The bill is missing any mention of producer accountability.
Under the new bill, oil companies can continue to produce oil and gas without taking adequate steps to address carbon dioxide emissions, should they so choose (and they will). In fact, the bill requires the Interior Department to offer millions of acres for lease for oil and gas exploration every year for the next decade. If this sounds like business as usual, it’s because it is.
But oil companies are not getting the same free ride elsewhere. In Canada, the government is implementing a cap on GHG emissions from the oil and gas sector, requiring companies to reduce GHG emissions by 42 percent relative to 2019 levels by 2030. Across the Atlantic, the UK government took a hardline approach in addressing excessive oil industry profits. The House of Commons passed a windfall profits tax on oil and gas producers in the British North Sea, which is expected to generate about $6 billion USD in tax revenues in the first year alone.
Meanwhile, the U.S. government, if it has done anything, has moved backward, committing to open up more of the Gulf of Mexico and offshore Alaska to oil. The tax credit that rewards oil companies that choose to take steps to address carbon dioxide emissions puts the cost of addressing emissions on the back of the taxpayer, rather than the shareholder.
Oil companies have not always had the free ride that the U.S. is giving them today. Fifty years ago, pollution from cars burning gasoline was identified as a significant health issue in major cities. The government jumped into action, requiring oil companies to produce unleaded gasoline. Doing so forced the producers to shoulder both capital and operating costs, which they did without any special tax credits. Producing lead-free gasoline simply became a cost of doing business, because it was necessary to the health and safety of the population.
And about 25 years ago, it was recognized that additional pollution reduction steps were needed, this time forcing producers to remove sulfur from gasoline and diesel. Once again, the industry invested billions of dollars to meet the requirement. As a result of these investments, air quality today is much better than it was 50 years ago — even though the number of miles driven has increased more than threefold.
What changed? Why were oil companies required to address their pollution issues in the past, but not today? Unfortunately, the cynical answer is also the most reasonable explanation: The oil industry has carefully grown its influence over enough politicians, regulators and think tanks to remove responsibility for emissions from the political conversation. Instead, the only question being discussed is how large a tax credit the industry needs to encourage it to consider joining the fight against climate change.
It’s past time for our government, at all levels, to commit to protecting people, not oil companies. Companies need to be held accountable for the adverse effects of their products — and the taxpayer shouldn’t be stuck with the bill. There is an old saying that you get the government you deserve. We deserve better. Let’s make sure that we get it.
Hugh Helferty, Ph.D., led major research and engineering organizations for ExxonMobil, the largest U.S.-based oil company. He is now president and co-founder of Producer Accountability for Carbon Emissions (PACE), a nonprofit fighting climate change by driving fossil fuel producers to take responsibility for all emissions that result from their products and activities.