“While it remains interesting to nationalize TotalEnergies to better control decarbonization, it seems even more relevant to tax its superprofits”

2024-04-20 12:00:13

On March 28, Marie Toussaint proposed an unprecedented measure: the takeover by the public authorities of the main European oil companies. The head of the environmentalist list for the European elections wants a European fund to buy the majority of shares in TotalEnergies, Eni and others, to align their strategies with the rapid decarbonization of the economy.

The main stated objective is to reorient the activity of oil companies: rather than investing in new drilling or paying dividends to their shareholders, these companies would use their resources in the service of renewable energies. This takeover would make it possible to train and reorient their employees towards careers of the future, for example by using their skills in offshore construction and drilling for offshore wind turbines and geothermal energy.

Although such a reorientation would effectively support the dynamics of the transition, we can nevertheless fear that its contribution will remain limited. Indeed, the opening of new wells being dictated above all by world demand for oil, it would only be delayed by the nationalization – or rather the “Europeanization” – of European companies, to the extent that other oil companies could replace “Europeanized” companies. These foreign companies would thus take market share and poach employees from European companies.

The second stated objective is to leave certain reserves held by oil tankers underground, what is called “stranding assets” in economic jargon. Reducing the global oil supply in this way would increase the price of oil and lead to a reduction in demand. Through this mechanism, Europeanization would reduce CO2 emissions.

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Note, however, that these emissions reductions would mainly take place outside the European Union (EU). Indeed, thanks to European carbon markets, 80% of EU CO2 emissions will already be capped by 2027 (when the second carbon market comes into force, which will regulate transport and buildings). European emissions thus regulated will coincide with this ceiling and will therefore remain insensitive to variations in the price of oil.

A cost for European taxpayers

Certainly, failing assets compensates for the shortcoming of a European decarbonization policy currently focused solely on reducing demand. Because, to the extent that the oil market is competitive, the decline in global oil demand due to the decarbonization of the EU and other regions may induce a decline in the price of oil, leading to an increase in the demand in other regions. Also, if we do not act on supply or on the rest of the world, part of the reduction in European emissions is offset by an increase in emissions in the rest of the world.

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