Offshore jurisdictions—commonly known as tax havens—play a central role in sustaining the fossil fuel industry through legal, financial, and regulatory frameworks. Over 68% of fossil fuel financing by the world’s 60 largest banks flows through secrecy jurisdictions. These jurisdictions serve as critical nodes in the global economy, shielding corporations from accountability from environmental and labor regulation, transparency and disclosure requirements, and banking and investment protections. This secrecy provides a veil of sovereignty for fossil fuel profits and hinders corporate accountability for environmental harms.
While the role of offshore jurisdictions in tax avoidance and financial secrecy has been extensively studied, their contribution to environmental degradation and the fossil fuel industry remains underexplored. In a recent publication, we address this gap by framing secrecy jurisdictions as regulatory havens. These havens facilitate the avoidance of financial, legal, and political liabilities central to environmental protection.
It is bitterly ironic that the Caribbean—the place where the key fossil fuel offshore jurisdictions facilitate the extraction of carbon profits—is the region that is most exposed to the devastation wreaked by climate change manifesting as hurricanes, rising sea levels, and wholesale destruction of communities. In this regard, regulatory havens also sustain neocolonial power dynamics and systemic exploitation.
Structures of Secrecy
Three key structures are particularly relevant for the fossil fuel industry: shell companies and subsidiaries, shadow banking/insurance, and ‘ghost fleets’ in shipping. These entities function as legal fictions that allow corporations to maintain operations while minimizing exposure to environmental regulation, regulatory oversight, disclosure requirements, and political risk.
Fossil fuel corporations employ intricate networks of shell companies and subsidiaries within regulatory havens to obscure ownership and evade scrutiny. The Cayman Islands, for instance, hosts over 100,000 registered companies despite its population of just 65,000, illustrating its role as a secrecy jurisdiction. The British Virgin Islands and Bermuda similarly house thousands of corporate entities used for profit shifting and liability avoidance.
Establishing a shell company in regulatory havens allows corporations to restructure their tax liabilities, book profits, and shift financial resources away from higher-tax jurisdictions. Saudi Aramco, the world’s largest oil company, exemplifies this practice. Aramco strategically employs subsidiaries in regulatory havens, such as SABIC Capital B.V. in the Netherlands, to obscure its financial operations. By operating subsidiaries in the Cayman Islands, Aramco ensures its financial flows remain beyond regulatory reach.
International banking centers in regulatory havens, such as the Bahamas, the Cayman Islands, and Panama, finance fossil fuel projects through shadow banking mechanisms. Private equity firms, asset managers, and captive insurers play a dominant role in funding fossil fuel expansion, with two-thirds of banks’ fossil fuel financing routed through secrecy jurisdictions. Asset managers engage in these practices to avoid strict environmental investment regulation in their main country of operation. Furthermore, the rise of the shadow fleet—aging vessels with hidden ownership and dubious insurance—has increased environmental risks. For instance, ghost ships operating under flags of convenience allow sanctioned oil producers, such as Russia and Venezuela, to continue exporting fossil fuels despite international restrictions, undermining global climate efforts.
By giving life to these structures, regulatory havens construct a veil of sovereignty—an illusion that these neocolonial territories autonomously manage their tax, regulatory, and banking systems. This veneer obscures the Caribbean’s role in protecting and reproducing the interests of global elites and corporations, rather than addressing the region’s structural vulnerabilities. It reflects a broader legal logic that sustains neocolonial power and systemic exploitation, while masking the role of European and U.S. governments in enabling extractive practices and environmental harm in the Global South. The unfolding story of the Caribbean’s regulatory havens teaches us how colonial histories have designed the region’s economy as a conduit for capital accumulation in the core, and for ecological destruction most violently experienced in the periphery.
Evading Financial Liabilities
Regulatory havens enable fossil fuel corporations to exploit weak transparency laws to obscure ownership structures and financial flows, making it difficult to trace capital movements or enforce regulatory oversight. They allow investment to be channeled into exploration, extraction, and production through internal capital markets out of reach of tax and all other regulatory authorities. This means two things: tax liabilities are reduced, since the total revenue visible for tax purposes is reduced, and this revenue is hidden from courts imposing environmental damages or regulators imposing fines, thus reducing the proportion of revenue exposed to environmental liabilities.
Regulatory havens also facilitate the fossil fuel industry’s ability to evade environmental and labor regulations via flag-of-convenience registries. Panama, the Bahamas, the Marshall Islands, and Nevis register a significant share of the world’s oil tankers and drilling rigs, shielding companies from accountability for spills and pollution. One such case includes the Prestige oil spill in 2002, where the true owners of the oil were rendered invisible by a complex chain of shell companies registered in regulatory havens and were ultimately never indicted.
Private equity firms invested $1.1 trillion in fossil fuel projects between 2010 and 2021. Firms like Blackstone and Harbour Energy structure assets in offshore jurisdictions to shield fossil fuel investments. Blackstone, for instance, manages North Sea oil assets through the Cayman Islands, minimizing tax liabilities and regulatory exposure. Similarly, asset managers, including Vanguard, Fidelity, and State Street, are among the largest financiers of the fossil fuel industry, holding significant shares in major oil companies. The Bahamas and Offshore Leaks investigations revealed that these firms maintain holding companies and subsidiaries in the Bahamas, the British Virgin Islands, Bermuda, and Nevis.
Captive insurance further insulates fossil fuel firms from liability. By paying insurance premiums to their own subsidiary, fossil fuel companies can retain profits within the company group by paying over-inflated premiums. This diverts revenue away from the company’s home state, where it would otherwise be subject to tax liability. Moreover, in the event of environmental disasters, captives can limit external scrutiny of how compensation and cleanup responsibilities are handled, complicating legal efforts by affected communities or regulators to seek justice or transparency. Even basic information about the extent to which an insurer can cover the damages is hidden from court proceedings and regulators, allowing these companies to avoid or delay damages payments. By establishing subsidiaries in regulatory havens, companies like BP and ExxonMobil create internal insurance mechanisms to reduce exposure to environmental risks while maintaining financial secrecy.
Evading Environmental and Social Liabilities
In addition to providing direct financial advantages, regulatory havens enable fossil fuel corporations to evade environmental regulations, circumvent sanctions, and insulate their operations from social and political conflicts. This vast offshore capital flow deepens global inequality and obstructs efforts to track fossil fuel revenues, further undermining national regulatory frameworks. This opacity is not incidental but a deliberate legal and political strategy employed by major players in the global oil market. The structure of impunity created by regulatory havens offers a critical advantage to fossil fuel companies and local elites, particularly in resource-rich regions. It is no coincidence that three of the world’s largest oil-producing countries—Saudi Arabia, the UAE, and Venezuela—also rank among the top nations, with over 50% of their offshore wealth held in secrecy jurisdictions.
Ghost ships operating under flags of convenience frequently disable their automatic identification systems to avoid detection, heightening the risk of environmental disasters. Panama, the Bahamas, the Marshall Islands, and Nevis register a significant share of the world’s oil tankers and drilling rigs, shielding companies from accountability for spills and pollution. Some of history’s largest oil tanker spills have involved vessels registered in flag states. The secrecy afforded by regulatory havens obscures liability, shifting the costs of environmental disasters onto affected communities and ecosystems.
Additionally, regulatory havens shield fossil fuel corporations from scrutiny by climate movements and NGOs, and reduce exposure to litigation and accountability by structuring ownership and financing through secrecy. As climate change accelerates and environmental movements grow, fossil fuel reserves and infrastructure have become politically toxic and increasingly contested. The veil of sovereignty offered by Caribbean regulatory havens is now essential to the survival of fossil capital, echoing colonial-era strategies used to insulate extractive assets from scrutiny. Ironically, the same Caribbean populations most impacted by climate change are among the most vocal critics of fossil capitalism, yet they are structurally excluded from challenging the legal frameworks that protect it. These regulatory regimes function in insulated political spaces, ultimately controlled by global superpowers that retain sovereignty over the region’s legal and financial systems.
Regulatory havens are not peripheral anomalies but central enablers of extractive capitalism and environmental degradation. The Caribbean’s role as a hub for regulatory havens underscores the deep entanglement between colonial legacies, financial capitalism, and environmental degradation. These jurisdictions have been placed in a detrimental position where their economic development is subordinated to the fossil fuel industry and the secrecy needs of Global North countries. In this way, regulatory havens carry the political blame and the environmental consequences of the fossil fuel industry’s efforts to disrupt climate action by externalizing environmental and social costs, perpetuating global income asymmetries, and maintaining economic and political dominance.
Understanding how fossil fuel corporations exploit regulatory havens is critical for advancing climate accountability and dismantling the legal structures that sustain environmental harm. Limiting financial secrecy, enforcing accountability, and addressing environmental and economic injustices require international regulatory action. Without taking drastic measures, the consequences will be severe, as the global transition from fossil fuels will remain out of reach.
