Exxon Mobil asserts low-carbon regulations won’t happen
Rather, the world’s largest oil company maintained that all sources of energy, including fossil fuels, will be necessary to meet the future global demand and that the best path toward managing greenhouse gas emissions is through technology advancement and adoption of energy efficiency programs.
Moreover, Exxon Mobil expressed confidence that its oil and gas assets were unlikely to become stranded even under much tighter regulation of carbon emissions because the fossil fuels would be needed to grow the world’s economies.
Details of the firm’s views on climate change came in two reports issued Monday. The documents emerged from negotiations with several activist shareholder groups that had pressed Exxon Mobil to disclose to investors the risks it faces from climate change and steps the company was taking to reduce such risks.
“The risk of climate change is clear and the risk warrants action,” William Colton, Exxon Mobil’s vice president of corporate strategic planning, said in a statement announcing the reports.
Environmentalists welcomed the first-of-its-kind acknowledgement by a major petroleum company that climate change poses real and immediate challenges to the firm’s prospects. But they were less sanguine about the company’s vision for what the global energy sector will look like in 2040.
Danielle Fugere, president and chief counsel for the nonprofit group As You Sow, which negotiated with Exxon Mobil to release the climate risk reports, said that although the company deserves credit for making certain disclosures, its executives continue to fail shareholders by refusing to evaluate a scenario in which carbon emissions are deeply cut to avoid a 2-degree Celsius temperature shift that scientists have said would be irreversible and potentially catastrophic.
Risk of having stranded assets?
“It’s clear that Exxon Mobil can’t conceive of a future without fossil fuels, or even a future with fewer fossil fuels,” Fugere said in a telephone interview. “I think that failure of vision puts them at a real risk of having stranded assets, of losing market share [to alternative energy sources] and even of becoming irrelevant.”
Bill McKibben, co-founder of the nonprofit climate advocacy group 350.org, took particular issue with Exxon Mobil’s assertion that it remained confident that the supply-and-demand equation for petroleum would remain in its favor, even in an era of generally tightening carbon regulation.
“Here’s the shorter version of Exxon’s announcement,” McKibben said in an emailed statement. “‘We are happy to overheat the planet and we dare anyone to stop us.'”
While Exxon Mobil provided plenty of details about the company’s thinking on climate change and disclosed steps it was taking internally to meet regulatory and other challenges around carbon emissions, it held fast to the broader assertion that the world’s energy needs over the next three decades cannot be met with low-carbon energy alone.
Renewable resources — like solar, wind and biomass — while expected to be the fastest-growing forms of energy between now and 2040, will continue to represent a fraction of global energy due to a variety of limiting factors, including “scalability, geographic dispersion, intermittency, and cost relative to other sources,” Exxon Mobil said.
That means the world will maintain its voracious appetite for natural gas, according to Exxon Mobil, and continue its heavy reliance on petroleum to meet electricity and transportation sector needs in both developed and developing countries.
“Given the importance of energy, it is little wonder that governments seek to safeguard its accessibility and affordability for their growing populations,” Exxon Mobil said in its risk management report. “It is also understandable that any restrictions on energy production that decrease its accessibility, reliability or affordability are of real concern to consumers who depend upon it.”
Moreover, the company said, “a capping of carbon-based fuels would likely harm those least economically developed populations who are most in need of affordable, reliable and accessible energy.”
Exxon Mobil’s view of CO2 regulation — specifically emissions caps that would be required to achieve an 80 percent reduction in carbon emissions by 2040 — derive from the company’s belief that such caps would drive up energy prices beyond the means of most families and that much of the burden for meeting a “low-carbon scenario” would be borne by the world’s middle and poor classes.
Reducing emissions through energy efficiency
With respect to its own multibillion-dollar portfolio of drilling operations, refineries and pipelines, Exxon Mobil said it “addresses the risk of climate change in several concrete and meaningful ways,” including through energy efficiency measures, deployment of less carbon-intensive technologies at its facilities and even the development of products that help consumers use energy more efficiently.
For example, “advancements in tire liner technology developed by Exxon Mobil allow drivers to save fuel. Our synthetic lubricants also improve vehicle engine efficiency. And lighter weight plastics developed by Exxon Mobil reduce vehicle weights, further contributing to better fuel efficiency,” the company said.
Exxon Mobil also touted its status as the United States’ No. 1 natural gas producer, noting that gas emits significantly less CO2 than coal when burned to generate electricity. And it continues to pursue research into alternative fuels and technologies that can further reduce the carbon intensity of energy applications across a variety of sectors, including electricity production and transportation.
Exxon Mobil also has adopted a proxy price for carbon, in some cases as high as $80 per ton of CO2, to hedge against future government regulation of carbon and help guide company decisionmaking around infrastructure investments and other capital spending.
And although the company expects governments to impose new regulations on greenhouse gases in the future, it believes “an artificial capping of carbon-based fuels to levels in the ‘low carbon scenario’ is highly unlikely.”
“Similar to the forecasts of other independent analysts, our outlook envisions a world in which populations are growing, economies are expanding, living standards are rising, and, as a result, energy needs are increasing,” the company said. “Meeting these needs will require all economic energy sources, especially oil and natural gas.”
But critics like Fugere said that Exxon Mobil may be missing the bigger picture, especially in light of the most recent findings from the Intergovernmental Panel on Climate Change, which hold that the world is already witnessing the harsh realities of climate change and that conditions will worsen unless steps are taken quickly to reduce greenhouse gas concentrations (ClimateWire, March 31).
“Exxon Mobil has acknowledged the significant risks climate change poses to its business, the likelihood of a price on carbon, and growing momentum to address climate change — yet still calls a low-carbon scenario unlikely,” Andrew Logan, director of oil and gas programs at the investor advocacy group Ceres, said in a statement. “Investors disagree, and will continue to push Exxon Mobil to align their planning with this reality.”