If fossil fuel firms don’t increase production to help down the historically high energy prices being felt by many Americans, President Joe Biden on Thursday to pursue new legislation that would tax the windfall profits made by those companies this year.
While inflation was the main topic of Biden’s announcement, polls indicate that the biggest threat to Democrats in the upcoming midterm elections is the taxation of the fossil fuel industry. This would help pay for efforts to combat climate change, reduce inequalities in environmental justice, and quicken the transition to clean energy.
According to the Bureau of Labor Statistics, annual inflation in the United States hit 8.2 percent last month, which is still very close to a 40-year high. And most economists concur that the Russian invasion of Ukraine, which has altered the geopolitics of energy globally, continues to play a significant part in the record inflation that is afflicting most of the world.
Because of the exorbitantly costly fuel in recent months, Americans have had to pay more for a variety of goods and services. According to AAA, while the national average cost a gallon of gas has dropped to $3.76, it reached a record-high of $5.01 per gallon back in June.
However, the biggest oil companies in the world are making unexpected profits this year while consumers have suffered at the pump. The combined profits of ExxonMobil, Chevron, Shell, BP, ConocoPhillips, and Total Energy total more than $100 billion so far this year. They made roughly three times as much over the same period in 2021 and more than they did the entire previous year. Exxon recorded $19.7 billion in earnings for the most recent quarter alone.
At the news conference on Monday, Biden stated that it was time for these businesses to stop making money from war, fulfill their obligations in this nation, and give the American people a break. Oil firms’ current record profits are not the result of doing something novel or inventive; rather, they are the result of war, specifically the cruel conflict destroying Ukraine and harming tens of millions of people worldwide.
To have a hope of adopting a new tax bill, Democrats would need to keep control of Congress in November. Republicans and fossil industry interest groups swiftly condemned Biden’s remarks, charging the administration with partisan electioneering and endangering the nation’s energy security.
Progressives and environmentalists, meanwhile, applauded Biden for the decision, charging Big Oil with ripping off ordinary Americans at the pump while enriching its investors. This includes a large number of influential climate organizations, who have long claimed that because oil and gas firms’ goods are the main source of human-caused global warming, they should be responsible for covering the costs associated with addressing it.
President Biden’s support for a windfall profits tax to hold oil and gas firms accountable has us ecstatic, according to a statement from Lauren Magnus, advocacy director for the Sunrise Movement. Democrats ought to have fought for this throughout the year.
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A windfall tax is imposed when a government singles out a certain industry, say because it produces a lot of pollution, and taxes it when its earnings are higher than the sector’s average annual revenue.
The government would then put that money to use for projects that advance society as a whole, such as putting in place plans to clean up the water or air pollution brought on by the industry. It can also be known as a polluters pay tax when applied directly to industries that produce pollution, like in this instance.
Polluters’ pay tax is one of the most efficient and effective methods to address the climate catastrophe, according to many activists and other climate-aware policymakers. The Biden administration incorporated such a tax into the bipartisan infrastructure package that was passed by Congress last year.
This tax will assist pay for the cleanup work of toxic Superfund sites that are severely behind schedule due to years of underfunding. Chris Van Hollen, a senator from Maryland, earlier this year proposed legislation that would tax Exxon, Chevron, and a few other significant oil and gas companies to cover the costs of damages and other expenses related to floods, wildfires, and other natural disasters that scientists have connected to rising greenhouse gas emissions.
Progressive senators like Vermont Sen. Bernie Sanders, Rhode Island Sen. Sheldon Whitehouse, and Massachusetts Sen. Elizabeth Warren support this measure, which supporters claim will raise $500 billion over ten years. It’s unclear how that law may relate to Biden’s suggestion from Monday.
At the COP27 international climate negotiations, which will be placed in Sharm el-Sheikh, Egypt, next week, discussions regarding polluters paying taxes are also likely to come up. The world’s richest countries are substantially to blame for the climate problem, but poor, developing countries are primarily experiencing its harshest effects. That subject is anticipated to be the main focus of the discussions, according to my colleague Marianne Lavelle.
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A study published earlier this year by Dartmouth College, for example, concluded that U.S. greenhouse gas emissions alone cost the world more than $1.9 trillion in climate-related damages between 1990 and 2014. Emissions from four other top emitters China, Russia, India, and Brazil caused an additional $4.1 trillion, it said, and altogether the five countries caused losses equal to roughly 11 percent of annual global GDP.
A just transition means leaving no person or country behind, United Nations Secretary-General Antonio Guterres said during a separate climate conference held in New York City back in September. It is high time to put fossil fuel producers, investors, and enablers on notice.