Exxon changed course slightly last week by acknowledging for the first time that its core oil and gas assets face some risk of becoming stranded due to policies that seek to limit climate change. The oil giant, however, continued to paint a rosy future for its core business, and downplayed the threat presented by international climate goals, while research has shown that reaching those goals requires leaving roughly three quarters of known fossil fuel reserves in the ground.
The report, 2018 Energy & Carbon Summary: Positioning for a Lower-Carbon Energy Future, along with the 2018 Outlook for Energy: A View to 2040, includes Exxon’s analysis of several scenarios in which the world works to meet the goal of the Paris Climate Agreement to hold global warming to 2 degree Celsius through 2040.
“Considering the 2°C scenarios average, we believe our reserves face little risk,” said Exxon in a report released on Friday that was prompted by a shareholder resolution that passed last May.
“So far this report raises more questions than it answers,” said Kathryn Mulvey, climate accountability campaign manager for the Union of Concerned Scientists.
“The main concern that we have is that it appears that ExxonMobil is paying lip service to the Paris Climate Agreement and the goal of keeping temperature increases well below 2 degrees, but assuming business as usual.”
According to Exxon, all energy sources will remain in demand, with a growing global population and a rise in living standards predicted to result in an increased worldwide energy demand of about 25 percent from 2016 to 2040. The company said demand will increase for natural gas and renewables, while oil and coal is expected to decline. Coal demand, the company said, will drop nearly 50 percent.
“We welcome what is the most information that Exxon has disclosed on climate risk to date,” said Patrick Doherty, co-director for corporate governance for New York State Comptroller Thomas P. DiNapoli.
“That said, the company offers too many generalizations and too few specifics on how it plans to participate in a low carbon economy. The reports rely on optimistic assumptions of undiminished growth in demand for fossil fuels in certain economic sectors, and lack a discussion of the company’s goals for reducing greenhouse gas emissions.”
Mulvey said the concern is that Exxon is assuming that the world will continue to burn through oil and gas—with the associated emissions—that will put us well above 2 degrees.
“There isn’t anything in these disclosures that we see that shows that ExxonMobil foresees carbon emissions bending rapidly toward zero as they must do well before 2040,” she said.
In its one concession to a potential drop in demand, Exxon said that under some scenarios, “it is possible that some higher cost assets, which could be impacted by many factors including future climate policy, may not be developed,” and some undeveloped liquids resources, “may not be attractive investments considering the 2°C Scenarios Average, assuming no advances in technology, processes, or designs.”
The disclosure is an about-face from its 2014 Managing the Risks report, in which Exxon denied that its assets would ever become stranded.
For the recently released reports, Exxon analyzed several different 2 degree scenarios, but said society is not currently following any of those scenarios and is not on course to meet the 2 degree Celsius goals.
“Should society choose to more aggressively pursue a 2°C pathway, we will be positioned to contribute through our engagement on policy, development of needed technologies, improved operations, and customer solutions,” said Exxon, which emphasized its advances in technology such as carbon capture and an ability to lower the energy intensity of its processes.
Tracey Rembert of Christian Brothers Investment Services, a co-sponsor of the climate-impact resolution, told Reuters she was disappointed that Exxon did not specifically address how future climate-related regulations would play into its bottom line.
“That is the meat that we’re missing in the sandwich here,” said Rembert.
Also missing was any mention of several liability suits it faces for contributing to the impacts of climate change and the billions of dollars it could be forced to pay for climate-related damages.
According to Mulvey, that’s a gap that needs to be filled.
“If this report ostensibly contains some discussion about how ExxonMobil is managing risks related to climate change, then that’s a glaring omission,” said Mulvey.
She said the company also omitted disclosure of systemic risks to the global economy from catastrophic climate change, as well of disclosure of the risks of climate change to its own facilities.
“It does not get to the level of looking at operational segments or specific company facilities that might be affected by physical climate risks,” said Mulvey.
Exxon is being particularly deliberate about responding to shareholder demands for more disclosure of climate risks. Shareholders finally succeeded in passing a resolution in 2017 with 62 percent of the vote. That followed a rejection of a similar resolution in 2016, which drew a rebuke from the Securities Exchange Commission, which said, “it does not appear that ExxonMobil’s public disclosures compare favorably with the guidelines of the proposal.”
Exxon management initially opposed the successful resolution, but announced in December that it would provide the disclosure, which includes addressing how its investors would be affected by efforts to reach the goals outlined in the Paris Agreement.
Mulvey also questions Exxon’s new pledges of support for climate policies.
“The company, like a couple of other major fossil fuel companies, has stated its support for a tax on carbon, but we have not yet seen consistent advocacy or support behind that,” said Mulvey, adding that what Exxon says and what it is actually advocating for through trade associations and industry groups raises questions about the company’s willingness to back up its words with actions.
Investigations by InsideClimate News and the L.A. Times found that internal communications show Exxon scientists warned management about risks to the company decades ago, but the company failed to disclose those risks to the public.