ExxonMobil Climate & Carbon Risk Reports

At the tail end of last month, on the same day that Part 2 of the UN IPCC’s Fifth Assessment Report was released to the public, ExxonMobil also published a pair of climate and carbon risk reports undermining the fact that climate change poses very real and potentially devastating threats.  The timing of their announcement was impeccable, and without a doubt, the intent to ruffle feathers came through crystal clear.  Climate activists throughout the entire Internet realm responded with incredulity (even in places you might not expect!)—and justifiably so.   Such an audacious move by one of the largest oil and gas companies not only raises eyebrows, but also carries with it a reasonable amount of clout.  For them to assert that our need for fossil fuels trumps the risks spawning from climate change, and to do so on such an important date, is a deliberate attempt to overshadow and belittle the warnings the UN IPCC scientists have delivered.  Moreover, such a move helps sustain the absurd continuing political debate over whether or not climate change actually is a real phenomenon.

The two documents Exxon released detailed to their shareholders what exactly they believe the risks associated with climate change are, and what steps they are taking to address the economic threats associated with these risks.  According to their annual Outlook for Energy, which does “not project overall atmospheric GHG concentration, nor [does it] model global average temperature impacts,” the world’s need for fossil fuel-fired energy will continue to supersede the risks associated with the continued burning of these carbon-intensive primary energy sources.  They anticipate that the IEA’s low carbon scenario—“the scenario where governments restrict hydrocarbon production in a way to reduce GHG emissions 80 percent during the Outlook period—is highly unlikely.”  Because of the significantly increased price on carbon dioxide that would accompany this particular scenario, Exxon argues that governments would be unwilling or unable to establish the policies needed to reduce emissions by its required amount.  Therefore, “the Outlook demonstrates that the world will require all the carbon-based energy that ExxonMobil plans to produce during the Outlook period.”

Unfortunately, the conclusions reached by these two reports are the result of bias and manipulated findings.  The authors have used these papers to reassure stakeholders that investment in the oil and gas industry is still a worthy endeavor, yet the statements they make either omit or disregard key pieces of information.  While it is understandable that they would want to convey a message of stability, it is highly unethical to do so through distorted truths, discouraged investment in the greater good, and complete negation of widespread negative externalities.  As theoretically responsible and respectable industry leaders, they must act the part.

One interesting thing about this, to me, is that the use of a proxy cost as the basis of analysis stems from Exxon’s inability to address climate change as a real phenomenon that will in fact drive the direction in which the world moves.  They cannot address it because doing so is essentially admitting that their product has a lifeline, one that spans only so far into the future.  However, excluding such a vital piece of information from their analyses will produce incorrect results regarding costs, policies, and demand.  If anything—aside from planning for a future that will not exist—they are misleading their shareholders into investing in a future that will not exist.

Additionally, the conclusion that was reached regarding fossil fuel reserves—that, rest assured, none of them will become “stranded”—is the result of how the company is viewing the problem of energy requirements in a world with a changing climate.  By addressing the matter as one of pure economics, they ignore the fact that the issue encompasses so much more: environmental degradation, international development, national security, and ethics.   To simply toss aside the most environmentally positive IEA scenario as a bunch of hokum is not only a slap in the face to modern climate science, but is also extremely misleading.  Each IPCC report—compiled through the research efforts of hundreds of respected scientists worldwide—predicts more and more dire consequences from the continued outpouring of greenhouse gases into the atmosphere.  To discredit these findings is both deceptive and foolish.

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