The pushback was fierce and pretty much instantaneous this week after colossal fossil ExxonMobil announced a vague climate plan that would reduce its greenhouse gas emissions per unit of oil and gas extraction, with almost nothing to say about the real cuts in carbon pollution required by climate science.
“Exxon on Monday said it would reduce the intensity of operated upstream greenhouse gas emissions by 15 to 20% by 2025, compared to 2016 levels,” Reuters reports. “The reduction would be supported by a 40 to 50% decrease in methane intensity and a 35 to 45% decrease in flaring intensity across Exxon’s global operations, with routine natural gas flaring eliminated in a decade, the company said.”
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But the dodge is in the details.
• By choosing 2016 as its baseline year, rather than the 1990 benchmark used by the European Union or even the 2005 reference point favoured by the Trudeau government, Exxon allows itself to calculate any reductions from a much higher level of emissions.
• And by basing its promise on emissions intensity, Exxon ensures that if its oil and gas production increases enough, its total emissions will, as well, since emissions intensity is a calculation of carbon pollution per unit of economic activity. (So for example, if emissions decrease 15% by 2025 but Exxon’s total oil and gas extraction grows 20%, the company will be a bigger emitter in five years than it is today, half-way through the decade in which scientists are calling for a 45 to 50% reduction in global emissions.)
“Exxon is emphatically not promising to cut its overall carbon footprint by 15 to 20%,” Grist stresses. “It’s just saying that it will reduce the amount of greenhouse gases released during the production of each barrel of oil. If Exxon continues to grow its business, finding and extracting more and more oil, as it intends to do, its overall emissions impact could continue to grow.”
And as it happens, that’s precisely what the colossal fossil intends.
“Exxon plans to up its production by one million barrels per day over the next five years,” Andrew Grant, Carbon Tracker’s head of oil, gas, and mining research, told Grist. “Reducing a minority of its life cycle emissions by a small sliver is the thinnest of fig leaves for a big increase in overall emissions and a bet on continued business as usual.”
The company still made best efforts to cast its modest announcement in practical, forward-looking terms.
“We certainly recognize the direction of travel that [the 2015 Paris Agreement] sets out and the ambitions for society to get to net-zero as early as possible before the end of the century,” said Pete Trelenberg, Exxon’s director of greenhouse gas and climate change. [Memo to Exxon: The deadline for hitting net-zero is 2050, not 2099.—Ed.]
“What we have tried to do is to develop specific, actionable plans that we can hold our organization accountable to drive continuous improvement in emissions,” Trelenberg added.
But Grist points to the 2030 deadline to eliminate natural gas flaring as the “only absolute measure Exxon has committed to.” And that makes the plan “a departure from the industry norm,” in a year when several European and U.S. fossils have made at least equivocal commitments to push toward net-zero emissions.
“At a time when even U.S. peers like Occidental and ConocoPhillips have set net-zero targets for their operational emissions and committed to addressing their product emissions, this effort from Exxon falls short,” said Andrew Logan, senior director of oil and gas at Boston-based Ceres.
“Exxon CEO Darren Woods has criticized other companies’ net-zero plans as being a ‘beauty competition’, and he’s not totally wrong,” Grist writes. “No oil companies have made it clear how much work the word ‘net’ in net-zero is going to do. They haven’t specified what percentage of their emissions they intend to eliminate versus how much they expect to offset through natural or technological carbon sinks.” Overall, the quality and credibility of their commitments is variable at best.
But notwithstanding serious gaps in their net-zero plans, European fossils are generally farther ahead than their North American counterparts, analyst Benjamin Israël concluded in an analysis last month. And news coverage over the last couple of weeks has shed light on the pressures pushing Exxon into any kind of climate commitment at all, after decades of funding climate denial groups, planning on increases in fossil demand and production through 2040—and paying a steep price on the stock market as a result. Most recently, Exxon doubled down on that business model, even after dismissing 14,000 staff and contractors and writing off $20 billion in stranded assets.
Early this month, newly-formed investment firm Engine No. 1 sprang to life in California with the news that it would press Exxon to shift its spending priorities, improve its faltering financial performance, and focus more on clean energy. The effort won the support of the California State Teachers’ Retirement System (CalSTRS), Reuters reported, and later the Church Commissioners for England, who manage the Church of England’s investment fund.
“The industry and the world it operates in are changing,” and “Exxon Mobil must change as well,” Engine No. 1 told the Exxon board. “Given the company’s long-running underperformance and the challenges it faces, it is time for shareholders to weigh in.”
“Far too many companies fail to incorporate externalities into their business strategies,” but “having built companies from the ground up across multiple industries in transition, we have a first-hand understanding of how a company’s performance and its broader impact are intrinsically linked,” added Engine No. 1 founder Chris James, one of two hedge fund industry veterans behind the firm.
“Framing the debate as ‘shareholder capitalism versus stakeholder capitalism’ does both parties a disservice,” James added. “Over the long term, shareholder and stakeholder interests align, and companies that invest in their stakeholders are better, stronger companies as a result. Through active ownership, we will seek to leverage our long duration capital and operational expertise to build long-term value by focusing on where we can have positive impact.”
Beyond demanding changes in the composition of the Exxon board, Engine No. 1 wants the colossal fossil “to cut its costs on projects that are unlikely to be money makers, create a better plan for success in the renewable energy sector, and to overhaul management compensation to better align with shareholder value creation,” Reuters writes. But “Engine No. 1 faces a tough road. Exxon has beaten back past activist efforts to change its climate stance.”
While that battle plays out, a whole other collection of news stories suggests it’s business as usual at Exxon. Bloomberg Green singles the company out for holding back investment in carbon capture research that could theoretically help get the climate crisis under control if the technology could be brought down in cost and scaled up. Meanwhile, the company is reporting a first hydrocarbon discovery after exploring for oil off the coast in Suriname, and may be in line for royalty payments after drilling a dry exploration well in Guyana. The Institute for Energy Economics and Financial Analysis has some probing questions about the way that deal was structured.
