Study: Making fossil fuel firms pay to clean up carbon could curb climate change

Requiring fossil fuel companies to pay to clean up their carbon emissions could help curb dangerous global warming at a relatively affordable cost, a study says.

The approach, which holds producers responsible for the waste generated by the products they sell, already exists in other areas such as plastic packaging or electrical goods.

It can even be compared to the water sector, where companies have to invest in and consumers pay for the treatment and disposal of waste water.

Applying the approach to energy would mean that the emissions from all fossil fuels extracted or imported into a region, country or bloc such as the EU would be offset by storing the same amount of carbon back underground.

The study’s authors say it could be phased in with a requirement for a rising percentage of fossil fuel emissions to be recaptured, so that it would reach the requirement of storing 100% of carbon from fossil fuels by 2050.

Fossil fuel companies would have to invest in technology that captures carbon dioxide when fuels are burned and then stores it underground, known as carbon capture and storage (CCS) or directly capturing it from the air for storage, which is called direct air capture (DAC).

The authors warn that analysis shows without dramatic reductions in global demand for energy this decade – which is not happening – storing carbon emissions underground will be needed to meet targets to keep temperature rises to 1.5C to avoid the worst impacts of climate change.

And the world cannot rely just on using “nature-based solutions” such as planting trees, as landscapes will be needed for other things such as food production, they add.

The study, published in the journal Environmental Research Letters, comes as Russia’s invasion of Ukraine has pushed up energy prices to exorbitant highs, and left governments scrambling to secure supplies of fossil fuels – including turning to more domestic production in spite of climate goals.

Study author Stuart Jenkins, from the University of Oxford, said the world had to dramatically scale up geological carbon storage.

The approach which the study describes as a “carbon takeback obligation” would help overcome the energy trilemma – the choice between energy security, affordability and environmental sustainability.

“Unfortunately when governments are forced to choose they often forgo that latter obligation,” he said.

“A carbon takeback obligation provides a simple and predictable regulation ensuring the fossil fuel industry cleans up after its activities and products without government subsidies,” he said.

He said the policy was a “backstop” to other policies to reduce demand for fossil fuels, such as scaling up renewables, and should not be used as an excuse for continued production.

But, he added: “It does add to the cost of fossil fuel production, and so it’s not an incentive to continue production by any means.”

Quizzed on how the obligation – which would eat into fossil fuel profits or be passed onto consumers – could be promoted when energy prices are high, the authors said costs would start low, as only a small proportion of emissions would need to be captured initially, and would be spread across all users.

Dr Hugh Helferty, who used to work for ExxonMobil in North America, said: “It makes sense that the producer and consumer should pay rather than the taxpayer should pay, and that puts the drive to reduce costs in the right place.”

He also said the industry was capable of delivering carbon storage, but it needed regulation to do so.

Professor Myles Allen, from the University of Oxford, said that ending fossil fuel use was going to be hard, warning that a “lot of the reaction to current very high fossil fuel prices has been to increase supply not to reduce demand”.

“So we’re going to have to stop fossil fuels from causing global warming before the world stops using fossil fuels.”

He said prices for gas had shot up from less than 3p per kilowatt hour (kWh) three years ago to more than 10p now, while the cost of extracting and delivering gas had not changed.

The cost of capturing the carbon dioxide from that gas and storing it under the North Sea with today’s technology was around 4p per kWh, he said.

“We need to start a conversation about how we redirect this colossal amount of money that is currently simply being injected into what we call fossil fuel rents to addressing the climate problem,” he said.

The paper says implementing the obligation could reduce and ultimately prevent further global warming from fossil fuels at an affordable cost relative to conventional solutions.

The costs of cutting emissions to net zero, including the use of a carbon takeback obligation and spending on clean energy, could be around 10 trillion US dollars (£8.2 trillion) a year by 2050, the study estimates – similar or less than using conventional policies that set a global price for carbon pollution.

But the world spent 13 trillion US dollars (£10.7 trillion) on energy last year, mostly on fossil fuels and with a substantial fraction going into “rents” or profits, taxes and royalties. With the global economy expected to double by 2050, the net zero cost would be less than half of last year’s energy costs as a proportion of global GDP, the study authors say.