For fossil-fuel emitting governments, climate action should start at home

Chevron, ExxonMobil, Shell and other fossil fuel companies continue to be some of the world’s major greenhouse gas emitters.

But, a few individuals also play a disproportionate role in global emissions. Oxfam found that 125 of the world’s richest billionaires emit roughly three million tonnes of CO2 per year. This figure is roughly the same as France’s annual CO2 emissions.

Governments have responded to the problem of private emissions through a variety of policies. However, what is often overlooked is that governments own some major emitters themselves.

Numerous state-owned energy companies and utilities rank among the world’s biggest polluters.

Despite recent privatization efforts, Saudi Arabia still owns 98 per cent of Saudi Aramco Oil Group. Russia holds a majority stake in the multinational energy corporation, Gazprom. Most OPEC members have nationalized their fossil fuel industries.

Many other governments maintain major stakes in fossil fuel companies, including Argentina (YPF), Brazil (Petrobras), Malaysia (Petronas), Mexico (Pemex) and Norway (Equinor).

According to climate researcher Richard Heede’s groundbreaking study, nation-states and government-owned enterprises were responsible for a staggering 68.5 per cent of major carbon emissions from 1910 to 2010. In 2017, the Carbon Disclosure Project reported that government-owned enterprises accounted for 59 per cent of the so-called carbon majors’ emissions. The carbon majors are the highest emitting companies dating back to the 1850s.

State-caused pollution can also result from unexpected sources. Military operations, for example, are responsible for one to five per cent of global emissions. For reference, the aviation and shipping industries roughly account for two per cent of global emissions each.

State-caused pollution presents both a problem and an opportunity.

State-caused pollution is inconsistent with the principles of international climate change law. As the International Court of Justice has confirmed, governments are required to prevent transboundary environmental harm resulting from the activities under their “jurisdiction and control,” which includes state entities.

The Paris Agreement calls on governments to enact climate change mitigation efforts that reflect their “highest possible ambition.” The UN Committee on Economic, Social and Cultural Rights notes:

“States should … refrain from unlawfully polluting air, water and soil, e.g. through industrial waste from State-owned facilities.”

These norms suggest that states should do more to lower their emissions.

At the same time, state-caused pollution is easier to control through the political process. In contrast to privately-owned companies, state-owned polluters are directly accountable to government officials.

This implies that their activities are primarily shaped by political priorities, as opposed to the overriding goal of profit maximization. This distinction opens interesting avenues for climate change action, provided governments make it a priority to reduce their emissions.

State emission sources can be controlled in two ways.

First, voters can urge governments to speed up the transition to cleaner energy through state-owned enterprises. Starting in 2003, the Ontario government closed five state-owned coal-fired power plants. The closures slashed coal’s share of the province’s electricity generation mix to zero per cent from roughly 25 per cent.

In October 2022, the French government announced plans to renationalize the country’s national utility, Électricité de France. This initiative contributes to France’s energy transition strategy.

In both these examples, governments leveraged state ownership to pursue significant changes in their economy’s energy supplies.

Second, national and international courts can hold state-owned polluters accountable for environmental harms. There is an emerging trend of climate change claims against state-owned polluters, or so-called “state-as-polluter” litigation.

In the Ogoniland case, the African Commission on Human Rights found the Nigerian government responsible for human rights violations resulting from the polluting activities of its government-owned oil company.

Similarly, an Ecuadorian court recently found the country liable for constitutional violations resulting from gas flaring

In Belgium and the United Kingdom, climate activists have launched lawsuits against government financial institutions for their investments in the fossil fuel industry. This trend of “state-as-polluter” will likely continue in the future.

Historically, state-owned energy companies played an important role in pursuing political objectives. During the Cold War, many countries nationalized their fossil fuel industries to increase domestic wealth.

State-owned energy companies in many countries continue to provide a reliable source of energy for domestic consumers.

The mission of state-owned energy companies will need to change in the climate change era.

Indeed, 36 national fossil fuel industries have the combined capacity to exhaust 143 percent of the remaining 2 C global carbon budget. To address this challenge, governments can leverage their control over state-owned companies to divest from the fossil fuel industry and lower their emissions.