The United Nations is considering a global tax framework that would tie oil and gas industry profits to climate compensation, though deep divisions among member states leave the outcome uncertain. Attempts to hold major energy producers financially accountable for climate change are not new. However, as the costs of the energy transition mount and legal efforts deliver mixed results, taxation is increasingly being viewed as an alternative policy instrument.
The United Nations is currently weighing the creation of a new international tax cooperation framework that could, among other objectives, channel funds from the oil and gas industry toward climate-related compensation. While the proposal reflects a familiar ambition to hold the industry financially accountable for climate change, its prospects remain uncertain.
The initiative falls under the Framework Convention on International Tax Cooperation, which is being negotiated at UN headquarters in New York. The broader goal is to strengthen global tax collection mechanisms and increase taxation on the world’s wealthiest entities and individuals. Sustainability features prominently in the discussions, with many countries—particularly those experiencing frequent climate-related disasters—supporting efforts to make major oil producers contribute financially. At the same time, resistance remains strong among other member states that oppose assigning climate liability to the energy sector or implementing a global wealth tax.
Recent proposals have suggested linking oil and gas profits directly to climate compensation payments. However, critics argue that these ideas lack sufficient clarity and enforcement power, limiting their viability. Supporters note that such measures could have generated as much as $1 trillion in additional revenue since the 2015 Paris Agreement, highlighting the scale of the opportunity lost if no agreement is reached.
Any move to formally tax Big Oil for its alleged role in man-made climate change would almost certainly provoke a strong response from the industry, likely through legal challenges. This would build on an already extensive record of climate-related litigation, where activist groups have achieved mixed results.
In the United States, California launched a lawsuit against major oil companies in 2024, accusing them of downplaying the climate risks associated with fossil fuels. The case targets companies including Exxon Mobil, Chevron, BP, and ConocoPhillips. State Attorney General Rob Bonta later strengthened the case by adding a provision aimed at forcing companies to surrender profits derived from alleged wrongful conduct. However, the lawsuit’s progress remains unclear, and California officials have recently softened their rhetoric toward oil companies in an effort to keep refineries operating and prevent fuel price spikes.
Maine has pursued a similar legal path, filing a “climate deception” lawsuit against several oil majors and the American Petroleum Institute. A federal judge allowed the case to proceed last year, with plaintiffs alleging that the defendants concealed information about the environmental and economic consequences of fossil fuel use.
This wave of so-called climate lawfare has become a favored strategy among activists seeking to penalize the fossil fuel industry. Yet given the uncertain outcomes of court cases, taxation is increasingly viewed as a more reliable alternative. The energy transition has proven far more expensive than initially anticipated, and governments are searching for sustainable funding sources.
Big Oil remains an obvious target due to its substantial profits from essential energy commodities that are widely blamed for climate change. Whether the UN negotiations ultimately result in a binding global tax remains to be seen. Even if they do, governments hoping for swift revenue may need patience—because the oil and gas industry is unlikely to accept such measures without a prolonged fight.
Sources: Irina Slav
THE ETERNAL SOVEREIGN 