As the climate havoc wreaked by burning fossil fuels becomes more and more evident, a basic and common-sense principle is moving into the global mainstream: if you break it, you pay for it
What is the polluter pays principle?
Perhaps the simplest idea in environmental policy, the polluter pays principle means the costs of pollution should fall on those who caused it – not on ordinary taxpayers or communities affected by the problem.
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Whether it’s a mining firm that dumps toxic waste on farmland or a water company that pours sewage into the sea, the same rule applies: those that made the mess should pay to clear it up.
The idea gained ground in the 1970s, when governments began cooperating more closely to tackle industrial pollution.
Then in 1992, at the Earth Summit in Rio de Janeiro, over 170 countries agreed to include the polluter pays principle in a landmark global pact on the environment. This transformed it from a relatively niche policy into an internationally recognised standard.
Although the Rio agreement isn’t legally binding, it acted as a global amplifier for the principle and paved the way for governments to write it into national and international laws.
Three decades later, the polluter pays principle is gaining more traction as leaders and campaigners alike look for fair ways to raise money to tackle the climate crisis.
At the UN General Assembly in September 2026, campaigners delivered over 2 million petition signatures with one simple demand: fossil fuel companies should help to pay the bill for climate change.
Polluters Pay Pact
Extreme weather events are causing widespread destruction and financial hardship. Yet the biggest polluters continue to profit while ordinary people bear the brunt of the costs.
It’s time to make polluters pay. Join the movement.
Why should we make polluters pay?
This is what’s technically called a no-brainer. The oil industry is racking up enormous profits from selling the same fossil fuel products that supercharge floods, wildfires and heatwaves.
Meanwhile, communities in Global Majority countries – those least responsible, worst hit and least able to pay for the crisis – are forced to pick up the tab.
By 2035, lower-income countries will need over $700 billion a year from public grants to cover the cost of climate loss and damage, according to one study.
And instead of channelling their profits into supporting people affected by climate disasters or ramping up green energy, major oil companies are using them to boost fossil fuel production, which is making the problem worse.
Scientists have warned for decades that continuing to burn fossil fuels will unleash increasingly extreme weather, threatening the lives of millions and making some parts of our planet unliveable.
Yet fossil fuel companies chose to hide the truth about their climate impacts from the public when they first came to light, and have continued to lobby against efforts to curtail the world’s reliance on oil and gas ever since.
Not only this, but oil firms are actively profiting off wars that have plunged the rest of us into an energy crisis and made the cost of living increasingly unmanageable.
Only this summer, we found that five oil majors raked in $48 billion in the second quarter of 2026, helped by surging prices in the wake of the US-Israel attack on Iran. This was their most lucrative quarter since Russia’s full-scale invasion of Ukraine, which caused energy bills to spiral across Europe.
Why is the polluter pays principle important for climate finance?
While fossil fuel companies profit from a climate-destroying business model, governments and communities across the world are being deprived of the funding they need to tackle global heating.
At the COP29 climate summit in 2024, high-income countries agreed to increase climate financing for lower-income countries to $300 billion per year by 2035.
But after accounting for inflation, the target could shrink to an estimated $170 billion by the mid-2030s.
This is far below the $2.4 trillion that Global Majority countries (excluding China) need to spend annually by 2030 if the world is to meet the Paris Agreement goals, according to a group of expert advisers to COP discussions.
To help bridge the funding gap, campaigners are calling for new rules to tax fossil fuel industry profits, with the revenues deployed to boost climate action.
Crucially, these measures would reduce the profitability of investing in oil, gas and coal, and thereby encourage a faster switch to green energy.
What are some examples of the polluter pays principle in practice?
Embed climate into a new global tax treaty
A new legally binding treaty to improve global tax rules, currently being negotiated at the UN, provides an opportunity to make climate polluters pay on a worldwide scale.
Commonly known as the UN Tax Convention, the rules could set up an additional tax on the fossil fuel industry. Oil, gas and coal companies already report their global earnings, and the treaty could ensure that a percentage of these profits is paid into UN climate funds.
The draft treaty also includes rules that – if made strong enough – would stop multinationals from shifting their profits into tax havens. As well as raising hundreds of billions more in public revenues, this would prevent fossil fuel companies from sidestepping polluter taxes by moving their profits offshore.
Progress on the treaty, which is due to be adopted in September 2027, has been mixed.
Some countries, including Brazil, the UK and Jamaica, have voiced support for strengthening parts of the treaty that relate to climate and the environment, including by adding the polluter pays principle to the text.
Other countries oppose giving more detail to these elements and want to keep the wording vague.
But even if the final text does end up falling short on climate and environmental taxes, it’s not the end of the road. The treaty aims to set up a permanent negotiations process where governments and civil society meet to debate and improve the rules, similar to the climate COP talks.
Reform the UK’s oil and gas windfall tax
In 2022, after soaring energy prices gifted oil companies record profits while households struggled to pay energy bills, the UK government introduced a windfall tax on oil and gas called the Energy Profits Levy (EPL).
The policy raised over £9 billion in its first three years, with the revenues earmarked for energy-poor households.
But the EPL contains significant loopholes, meaning oil companies can escape paying tax that should be used to ease the cost-of-living crisis.
Under the EPL, companies can subtract previous years’ losses from new profits and thereby bring down their tax bills.
For example, Shell and Equinor merged their North Sea operations in 2025 into one oil and gas producer, Adura. Equinor brought historic UK tax losses into the deal, which are now available to Shell to use as a £1.3 billion “tax shelter” against future UK tax bills.
Ministers are planning to replace the EPL with a new tax in 2030 called the Oil and Gas Revenue Levy (OGRL). This is meant to be a permanent measure, which is a welcome feature of the proposal.
But in its current form, the OGRL is essentially a gift to oil and gas companies that will cost the Treasury billions in lost revenue if it goes ahead as planned.
Unless it’s redesigned, the OGRL is likely to collect even less revenue than the current windfall tax rules. This is because the oil price threshold where the OGRL kicks in is set too high at $90 per barrel.
As well as calling on the government to stop new drilling, we are campaigning to ensure that the UK’s oil and gas tax rules help to ensure a quicker transition to green energy, and that a share of the revenue is used to support climate action.
Set up a permanent EU climate tax on fossil fuel profits
Similar to the UK, in 2022 the EU introduced a windfall tax on the profits made by fossil fuel companies that operate in the Union.
The tax was in place for two years, with the proceeds mainly used to support households that were suffering from a sharp rise in fuel costs.
The policy generated at least €26 billion and, if reinstated as a permanent measure, could also generate funds for communities hit by climate disasters.
Our research has highlighted the cost of climate pollution from the EU’s fossil fuel industry, showing that emissions from oil produced by EU-based companies since the Paris Agreement are set to cause an estimated €1.5 trillion in climate damages worldwide.
In February 2026, the US and Israel’s attack on Iran led to the steepest monthly oil price increase on record. This prompted Germany, Italy, Spain, Poland, Austria and Portugal to call on Brussels decision-makers for a new EU windfall tax.
Later in the summer, Europe experienced four record-breaking back-to-back heatwaves. At least 35,000 people died as a result, with economic losses from the extreme heat costing European nations an estimated €113 billion.
In response, the Spanish government pressed the EU to go a step further – to introduce a permanent additional tax on fossil fuel profits specifically to support climate action.
This is a welcome development, as windfall taxes only apply when profits are exceptionally high and are usually short-lived, whereas the climate crisis will be with us for decades to come and weather extremes are set to get worse.
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In October 2026, the European Commission agreed to explore an EU-wide windfall tax on energy companies. We are now calling on decision-makers to follow Spain’s lead and place a permanent EU tax on fossil fuel industry profits, with the revenue earmarked for climate finance.
Create climate superfunds
Another way of getting fossil fuel companies to repair the damage they’ve caused is through climate superfunds.
In the 1980s, the US government created the original superfund programme. This gave federal authorities and states the power to make industrial polluters pay for the clean-up costs of hazardous waste sites.
Drawing inspiration from this policy, some US states introduced bills to establish climate superfunds, with New York and Vermont passing laws in 2024.
While the details vary from state-to-state, superfunds follow the same basic principle: major climate polluters with business ties in those states pay into a fund in proportion to their historic emissions, with the money used to support state-level climate projects.
Predictably, the proposals have been attacked by fossil fuel lobbyists and pro-industry politicians. In August 2026, a federal judge struck down New York’s law, while superfund bills in states like California and Maine have stalled.
But the fight is far from over. Many states are still moving forwards with superfund legislation, and while it’s also fighting a lawsuit, Vermont is required to finalise rules for taking payments from climate polluters by January 2028.
Meanwhile, lawmakers have said they will learn from legal challenges to “future-proof” superfund laws, and climate organisers are running strong local and national campaigns to push the bills forward.
People vs polluters: Rebalancing the scales
Fossil fuel companies are showing few signs of cutting production voluntarily. Some are even walking back their pledges to reduce emissions and invest in renewables.
Yet the science is clear: the longer we depend on oil, gas and coal, the more they endanger us all.
If these companies insist on staying in their climate-wrecking business, then it’s only fair that we tax them to speed up the phaseout of oil, gas and coal. Doing so would also raise vital new revenues to repair the damage done by extreme weather, fund the energy transition and help ensure a safe climate for all.
Authors
Dominic Eagleton, Senior Campaigner – Fossil Fuels