Exxon Says It Takes Climate Change Risks ‘Seriously’. Is It For Real?

Exxon Says It Takes Climate Change Risks ‘Seriously’. Is It For Real?
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News outlets have heralded ExxonMobil CEO Rex Tillerson’s claim that the company backs “serious action” on climate change as a significant shift in its stance on the issue.

The comments, made at the Oil and Money conference last week, would seem to align Exxon with European competitors such as BP and Shell, which have taken a stronger stance supporting climate action.

But Exxon’s actions speak louder than Tillerson’s words.

Tillerson says the company is taking climate change seriously. Meanwhile Exxon’s lawyers are trying to block access to documents that likely show the company has been deliberately ignoring the issue for decades.

Tillerson says Exxon will innovate to decarbonise, yet the company is investing in accessing ever more and harder to reach hydrocarbons.

Tillerson says Exxon backs climate policy, all the while lobbying against existing regulations in favour of a carbon pricing scheme that will never happen.

So has Exxon really shifted its stance on climate change?

From its right foot to its left, maybe. But despite Tillerson’s best efforts to persuade people otherwise, it’s still very much standing in the way of effective climate action.

Here are a few reasons to stay sceptical of Exxon’s climate concern.

Exxon Knew

The timing of Tillerson’s comments can’t be a coincidence, can it?

In the same week that Tillerson was in London calling for policies that “adjust to developments in our understanding of climate science”, Exxon’s lawyers were filing a motion in Texas to block an investigation seeking records of the oil company’s climate research.

A DeSmog investigation shows those documents go back 40 years, and that Exxon knew about the harmful effects its products had on the climate but chose not to act.

Read: “There is no doubt”: Exxon Knew CO2 Pollution Was A Global Threat By Late 1970s

Exxon is trying to stop the investigations of the Massachusetts and New York Attorneys General on the basis that they have been shown to have an “improper political bias” that prevents them “serving as the disinterested prosecutors required by the Constitution”, Inside Climate News reports.

Exxon initially cooperated with the investigation. But speculation that the investigation plans to assess whether Exxon sufficiently warned investors about how climate change threatened its assets seems to have been enough to make the company switch to being obstructive.

So as Tillerson was uttering the words “climate” and “risk” in the same sentence, Exxon was attempting to prevent prosecutors exploring whether the company had willingly obscured information about just that.

Faith In Technology

Tillerson is convinced the world can innovate its way out of the climate change problem. It’s a common call, and often comes from those unsure of the merits of acting to cut emissions.

Last Wednesday, Tillerson warned ‘Oil and Money’ conference attendees to “never bet against the creativity and tenacity” of the industry. Specifically, he said the “best hope” for the industry “is to enable and encourage long term investments in both improving and new technologies while supporting investment policies”.

That’s what Exxon is doing, he said.

Which is true. Kind of.

Exxon is looking at some low carbon technologies. It just signed an undisclosed deal with Fuel Cell Energy Inc to develop carbonate fuel cells, which capture carbon dioxide from power plants in a supposedly new, effective, affordable way.

It’s probably worth bearing in mind that carbon capture and storage (CCS) technology has been around for decades now, yet is still a long way from being commercially viable — and scandals such as the Kemper CCS plant in the US point to troubling odds that CCS will ever work. Meanwhile, oil industry spending on clean energy is generally still very small compared to the industry’s market value.

Away from fancy, improbable, future technologies, Exxon is investing in lots of other kit — most of it harmful, rather than helpful.

It continues to look at new ways to extract oil and gas from ever harder to reach spots. It has drilling gear exploring the ultra deepwater wells in the Gulf of Mexico, cracking “the world’s largest remaining frontier of undiscovered oil and gas” in the Arctic, and plundering the seas off the Russian coast. And fracking galore — except in Tillerson’s neighbourhood.

Given current reserves (that are a lot easier and less carbon intensive to access) contain enough carbon to easily blow the 2C carbon budget, these aren’t exactly the most climate-friendly investments.

At the conference, Tillerson studiously avoided talking about a potentially game changing technology that Exxon does not back: electric vehicles.

DeSmog UK recently revealed how Exxon lobbied against the roll out of EVs in the UK.

Perhaps that’s not surprising, given the chief executive of one of Exxon’s close competitors, Statoil, told the same conference that after 2020, EVs are likely to be a big cause of a shrinking oil market.

So Exxon is innovating. But it’s doing so to double down on its high-carbon assets, not cut emissions.

Betting on Improbable Policy

Nonetheless, Tillerson maintains that Exxon has been planning for a decarbonised world for a long time. At least 10 years, he says.

That’s how long Exxon’s internal projections have included a carbon price, he told the conference. The company is expecting governments to impose a price of around $80 per tonne of carbon dioxide emissions on average by 2040, he said.

And that remains Exxon’s preferred policy for addressing the climate crisis: a uniform carbon price.

This isn’t news. As far back as 2009, Tillerson was calling for a carbon tax.

He says this would be more effective than the current “hodgepodge of regulations”, as it could “allow market forces to drive solutions”, “maximise greater transparency”, “reduce administrative complexity”, and “promote global participation”.

Sounds good, in theory. The problem is,  the idea of governments or companies signing up to a uniform carbon price seems pretty much a non-starter.

Occasionally carbon pricing will pop onto Congress’ agenda. When it does, it gets killed (most recently in 2010).

While some states have picked up the slack, the US’s largest pricing scheme — the Regional Greenhouse Gas Initiative (RGGI) — keeps reforming to stay effective; the antithesis to the market-led approach Exxon calls for.

RGGI’s main problem, like many other similar schemes, was an over allocation of permits at the outset. In such schemes, companies are allowed to emit a certain amount of carbon dioxide per permit (normally one tonne). If there are too many permits, the market is oversupplied, and companies don’t have to make much effort to reduce emissions.

When that happens, permit prices — effectively the  carbon price — plummets.

This is a problem the world’s largest carbon pricing scheme, the EU emissions trading scheme (ETS), is very familiar with.

The EU ETS has been in dire straits pretty much since it began, with prices bottoming out at below €3 per tonne in 2013. It wasn’t until there was a massive economic recession that emissions covered by the scheme really started to fall.

Exxon notionally prefers a carbon tax to a carbon price set through these ‘cap and trade’ schemes. That’s administratively more straightforward, but no more likely to succeed.

Carbon taxes are meant to be simple. The government sets a price; companies pay it. The price level can be guided by current economic models that nominally work out the cost to society of each additional tonne of carbon dioxide emitted.

This is known as the social cost of carbon. The US government already uses a price of around $37/tonne in its environmental impact assessments. But Stanford academics argue it could be as high as $220/tonne.

The difference between those estimates is down to the uncertainties around the future impacts of climate change. Scientists know some pretty bad things are likely to happen, but are not sure precisely when certain events will occur, and the impact they will have on the economy. That’s why most models give a range rather than a single price.

That means the precise level that a carbon tax should be set at is also somewhat uncertain. So it’s easy to anticipate problems with agreeing the “uniform” price that Exxon calls for.

Given these problems, the chances of governments rolling out an effective carbon price globally, or even across the US, seem slim at best.

That means Exxon can keep backing a horse it never expects to run let alone win, and get kudos for doing so in the process.

Photo: Ron Cogswell via Flickr CC 2.0

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Exxon Says It Takes Climate Change Risks ‘Seriously’. Is It For Real?
Mat is Special Projects and Investigations Editor of DeSmog, and Operations Director of DeSmog UK Ltd. He was DeSmog UK’s Editor from October 2017 to March 2021, having previously been an editor at Nature Climate Change and analyst at Carbon Brief.

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