Internal briefing - "Big Fossil Fuels is cashing in on war – can windfall profit taxes serve up justice?"
While the cost of living is rising globally and companies like Shell and BP are still making massive amounts of profits, the broad implementation of a permanent excess profit tax is urgently needed. This internal briefing displays fossil fuel companies excess profits in 2022 and how countries react in their attempts to tax those profits. It also includes some general reflections on historic examples and a review of various (CSO) positions on the topic of Excess/Windfall Profit Taxes (EPT/WPT).
The Russian invasion of Ukraine in February 2022 has unsettled the 21st century geopolitical (Western-) world order and with it the historically grown energy supply relations between Russia and Europe. Since then, providing for ‘energy security’, understood as unlimited delivery of mainly fossil fuel sources of oil, coal, gas, and all its derivatives to keep the current fossil fuel-based industrial- extractivist economies running, has become a public policy imperative. Amplifying the price rebound associated with the economic recovery from Covid-19, the turmoil on markets and private and public efforts to guarantee ‘energy security’, a surge in oil prices caused by embargoes on Russian fossil fuels imposed since the invasion of Ukraine, and Russia’s decision to cut off gas supplies to continental Europe, among others, has allowed the fossil fuel industry to realise historically unseen and extraordinary profits.
Windfall profits are profits that are not the result of direct and planned strategies and decisions of a company but instead come from unanticipated external changes in the market conditions, changes that could not have been foreseen at the time when the initial investment decision had been taken. While the benefits mainly went to firms that extract fossil fuels, profits have also increased for oil refineries and not-gas-or-oil-fired electricity generators. These ‘windfall’ or ‘excess’ profits – not to forget – are the rent generated by the extraction of limited natural resources. The handling of these natural resources on a global scale determines the planet’s environmental integrity and thus concerns society as a whole. A share of this resource extraction rent – via a windfall or excess profit tax – should be returned to society.