Industry vs. scientists – who profits from climate disruption?

“Follow the money – it’s all about the research grants.”

This and similar accusations are commonly made against anyone who advocates on behalf science-based climate policies at all levels, all they way from national academies of science down through professional scientific societies, universities, research groups, and even down to individual scientists. S&R decided to follow the money to see who profits the most from climate disruption, the fossil fuel-related industries or the global climate science community. Note: Many of the numbers below are so large that there’s not a common style convention for writing them. For this post, trillions of dollars will be indicated like this: $1464 billion.

Fossil fuel-related industries are more than just the organizations that extract the crude oil, coal, and natural gas from the ground. There’s also the groups that transport the fuels via ship, train, and pipeline. Then there are the refiners who turn the crude oil or natural gas into unleaded, diesel, plastic, and fertilizer feedstock. And there’s the utilities that keep the lights on by burning natural gas and coal. All of these industries make a great deal of money because carbon dioxide (CO2) emissions are not priced or regulated, and they all risk losing a great deal of money should that change.

According to the U.S. Energy Information Administration’s international data on crude oil exports for 2008 (the latest year for which all the data for this post was available), total annual exports were 15.442 billion barrels of crude oil. Using the calculated average spot price for crude oil in 2008 of $94.81 per barrel, the total value of exported crude oil was approximately $1464 billion. Similar calculations for dry natural gas production and Contract 1 prices per million BTUs of gas produce an estimated value for produced natural gas of $1007 billion in 2008.

In order to estimate the revenues of the industries that were involved in fossil fuel production, transportation, refining, and electricity generation, I used the Fortune Global 500 list of the largest publicly-traded companies in 2008 (published in 2009). According to Fortune’s estimates, the largest energy companies had revenues of $619 billion in 2008, the largest mining and crude-oil production companies had revenues of $498 billion, the largest petroleum refining companies had revenues of $4,462 billion, the largest pipeline companies had revenues of $65 billion, and the largest utilities had revenues of $863 billion. The combined total of all these industries in 2008 was $6508 billion.

When added up, these industries plus the total value of gas and crude oil exports accounted for a minimum of $8979 billion of the global economy in 2008. This is a conservative estimate because it only accounts for the revenues of the top 500 publicly-traded corporations – there are dozens if not hundreds of private or government-controlled companies that are not included in the list above. One private oil conglomerate alone, Koch Industries, was estimated by Forbes Magazine to have revenues of at least $100 billion.

The International Monetary Fund and World Bank estimated that global economy in 2008 was approximately $60000 billion. Of that, at least $9000 billion, or 15% of the entire global economy, was directly involve in the production, transportation, consumption, and refining of fossil fuels.

In comparison, the entire US budget for research into climate disruption in 2008 was only $1.83 billion. The UK’s budget for climate research was about $30 million, Canada’s budget was only $75 million, and Australia’s budget was about $73 million. While S&R was unable to determine the budgets of other nations with major scientific research budgets such as China, Russia, Japan, and Germany due in large part to the language barrier, S&R estimates that the entire global climate research budget exclusive of the U.S. is not likely to exceed the US’ budget based on how much greater the US’ research budget was than the UK’s, Canada’s, and Australia’s.

The total research budget for climate research globally in 2008 is estimated to be about $3.8 billion. Compare that to the combined revenues of fossil fuel industries of a minimum of $9,000 billion. The research money available to climate researchers is approximately 0.04% of the revenues of fossil fuel industries.

I asked a couple of working scientists their opinion about what motivates scientists in academia and government civil service. Dr. Andrew Dessler, professor of atmospheric sciences at Texas A&M, said that his own motivation was doing “incredibly interesting and challenging” research rather than money. He said

After college, I went to work on Wall Street in the energy group of an investment bank, and after a year or so realized that I was incredibly bored and decided I would rather have an interesting job than a high salary.

Furthermore, Dessler described how his salary is determined, and how the amount of research grant money he brings in doesn’t drive his salary in any way:

Texas A&M pays 10 months of my salary to teach. The other two months of my salary are paid out of grants for doing research, but the University sets the amount I receive during those two months equal to the monthly rate that the University pays me the other 10 months. Thus, the vast majority of my salary is completely disconnected with research.

Dessler also pointed out that what motivates most scientists is not money but rather the desire to “impress your colleagues.” Brigham Young University geochemistry professor Barry Bickmore made a similar observation at his personal blog, saying “scientists get brownie points for showing that others’ work is flawed in some way.” Put another way, Dessler and Bickmore are claiming that scientists are not largely motivated by financial gain, and as such they don’t agree with the “it’s about the research grant money” motivation accusations made by so many climate disruption deniers.

Economists have studied how much it will cost the global economy to address climate disruption, and they’ve concluded that it will cost between 1% and 3% of the global economy. In 2008 that would have been between $600 and $1800 billion, of which climate research would have represented less than 0.6%. Given that climate research has a microscopic piece of this hypothetical climate pie, it’s unrealistic to believe that climate researchers would be willing to prostitute their own research for so little when there is so much more money available in the fossil fuel industries.

S&R also estimated the amount of “extra” revenue that fossil fuel industries made in 2008 as a result of very limited CO2 restrictions. Assuming that climate disruption costs 3% ($1,800 billion) of the global economy and that the cost is borne entirely by the fossil fuel industries. In 2008, that would have cut the fossil fuel industries’ revenues from $9000 billion to $7200 billion, a 20% drop. According to Fortune, the fossil fuel industries had profits of $371 billion over revenues of $6508 billion in 2008, for a profit margin of approximately 5.7%. If the companies’ revenues were 20% smaller but the profit margin remained the same, those companies would have had profits that were $74 billion less in 2008 than they actually were. So long as the industries’ opposition to climate disruption legislation via advertising, lobbying, media outreach, litigation, and FUD-focused think tanks cost less than $70 billion, the opposition resulted in the industries’ making more profit than the total amount spent by all governments on climate science research.

$9000 billion in total fossil fuel revenues. $371 billion in profits for just the Fortune Global 500. $74 billion in extra profits made because climate disruption wasn’t being addressed. Compared to less than $4 billion for climate research.

If “it’s all about the money” like the climate disruption deniers claim, then the numbers above show that fossil fuel industries have the greatest financial stake of the varied interests involved in climate. Furthermore, their financial self-interest lies in ensuring that climate disruption isn’t addressed.

And, to date, climate disruption hasn’t been.

Thanks to Gavin, Wufnik, and the others who helped find the data used in this piece. Calculations used to generate the numbers in this post are available here.

21 comments on “Industry vs. scientists – who profits from climate disruption?

  1. The American climate research number is grossly overstated, due to some accounting tricks by the Clinton administration who wanted to look as though they were increasing the climate research budget without actually doing so. Only a small fraction of the US amount goes to climate research as such. The lion’s share is the NASA earth observation budget which supports satellite observations of all kinds. Various other distantly related programs were also folded in. The US budget that actually goes to people who think of themselves as climate scientists or climate science support has been around $200 million. To be fair, it shows signs of actually really going up under Obama. But worldwide it’s probably still under a billion, supporting perhaps two or three thousand scientists and support staff, their equipment, expedition costs, etc.

    See http://initforthegold.blogspot.com/2007/04/science-budget-talking-point.html

    I think the real question is the communication budget. The public money actually set up for the defense of science against attack is, I venture, precisely zero in the US, and small elsewhere. There seem to be a couple of private initiatives, but they have their own agendas that always seem to get in the way. If the oil companies (never mind other related interests) put one part in ten thousand of their NET income into misleading the public, that will be $37 million vs., pretty much, volunteer blogging.

    • Michael – I work in aerospace, and the amount of money that it takes to put a satellite into orbit dwarfs the money put into actual science, so you’re absolutely right. When the Orbiting Carbon Observatory failed to make orbit, that one satellite represented more money than multiple years of budget for some government labs that employ dozens of scientists and do active fieldwork. Not good.

      Denny – I’ve studied this stuff in detail for years now, and I was still surprised just how much of the global economy was devoted to fossil fuels and just how little money is really spent on science. I figured the numbers would be big, but not 15% (and maybe as much as 25%) of the global economy big.

      Wufnik – I don’t know what you’re talking about. I just did what I was told and followed the money trail to where it led.

    • In what way is Gore’s tremendous success – especially given that being born into privilege and then being VP provides one with something of a running head start – relevant or responsive to Brian’s analysis?

  2. Yes, universities do set caps on salary. And the NIH caps the amount that can be paid on grants. I assume the NSF and other funding agencies are the same.

    To be fair, though, that number is…shall we say…flexible. And more grant money brought in does have its perks, salary and tenure among them. Of course, compared to the numbers you’re talking about, it’s a mere pittance. That may be enough for some.

    I suspect most scientists aren’t in it for the money, but that doesn’t mean they are above taking what they can get. And as with any profession, they aren’t above a bit of ego-stroking, either. It takes a sort of insanity to spend hours and hours and hours staring at data and we all like to feel that what we’re doing actually MATTERS.

    • I personally don’t know any scientists in academia or civil service that are in it for the money. The few scientists I’ve known who were motivated largely by money all work in private industry where their salaries are potentially much higher. Given the scale of the numbers above, that makes sense – there’s just so much more money available in the private sector.

      • Right. In the last 20 years or so, especially, there’s been a massive shift away from public funding and pure research and into corporate funding for applied research. Now, some of that can be had in the university system, to be sure, and if the prof life is your chosen route you won’t have to beg spare change on street corners.

        But if you’re a bright scientist driven by cash, a university is the LAST place you wind up.

  3. I agree. I’m in academia even though I could probably make twice as much if I stayed with my Aero degree and went into industry. To me the small ability to control what I research >>> money. But ego DOES play a role in research. And more research money, however small it might be in the grand scheme of things, does play a role in that. If only because it allows a PI to pursue his/her research “vision.” (yeah, i’m a bit dated on corporate-speak, i admit it. heh)

  4. Actually, now that I think about it, if I’d stuck with my Aero degree, I’d probably be outta a job in a few months when they shut down the shuttle program. haha.

  5. All this talk about how much scientists are motivated by money sort of misses the point. Scientists generally are the sort of people who are bright enough to choose any number of careers, but they chose science. Why? Because we like figuring things out, discovering new things, and so on. It’s fun. The fact is that nothing would suck the joy out of our jobs faster than participating in fraudulent research. Sure, there are a few scientists who are driven more by money than others, and everyone needs to pay the bills. Certainly there have been a few scientific frauds. But the idea that the vast majority of climate scientists are just toeing a party line to haul in research bucks is inconceivable, given that such a course would turn their jobs from challenging fun to joyless drudgery.

  6. Global subsidies to the fossil fuels industry appear to be now on the order of $500 billions yearly, according to:

    http://www.globalsubsidies.org/en/subsidy-watch/studies/gsi-publishes-the-politics-fossil-fuel-subsidies

    A small number in comparison to the $9000 billions mentioned above, but one has to say that yeah, the energy industry is doing OK.

    I suppose that global spending on research and development totals somewhat more than $1000 billions per year? No website comes immediately to hand. But the total for basic research is not the larger portion of that. Within ‘basic’ climate research is a very small proportion, as indicated above.

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  8. @ # 5, Jeff Watson

    Your comment is an ad hominem attack on Mr. Gore, not a response to the posting. Gore is entitled to put his money where his mouth is — just as oil and coal company executives are. Moreover, the NYT article states that Gore doesn’t lobby legislators to favor his investments to nearly the extent O&C companies do. In addition, much of his ‘profit’ is donated to a ‘non-profit’.

    Can you address the substance of the posting?

  9. Money is the root of all evil…what is the root of Money? Ayn Rand.
    How can these two figures even be compared in the first place other than anecdotally? These days industry is science in action. How much of the research is funded by partnering with energy industry interests? How much profit do energy companies get from new technologies in fuel efficiency of other enhancments and technologies derived from research. How much does the environment suffer from underfunded research and under-regulated production? Was there a peak oil moment when the whaling days were drying up?

    The numbers are a nice to know but he only conclusion is that everyone profits from energy exploitation, even Fat Albert Gore Jr. If you are in a job that does not require energy input into its processes, let me know, I would like to invest. Climate research should be used to identify patterns, problems and changes but must be able to prove within reason the source of these changes without bias or agenda or its not science, period!

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  13. What a load of nonsense. AGW advocates outfund AGW skeptics by roughly 1000:1.

    Comparing the entire fossil fuel industry to the billions spent on AGW advocacy is nonsensical, not least since they actually spend more money on pro-AGW causes than anti-AGW (they don’t actually care if you impose carbon taxes on their customers, that only hurts poor people). The IPCC’s travel budget is about 10x bigger than Heartland’s entire anti-AGW outlay.

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