Story at a glance
- Exxon is one of the most powerful U.S.-based multinational oil giants, but it has been facing criticism and pressure from activists and investors to get a handle on its carbon emissions.
- On Monday the company announced a 40 to 50 percent cut to the intensity of its emissions of greenhouse gas methane.
- Critics still doubt that Exxon’s new climate plan will go the distance, urging the company to expand into renewables.
Energy giant Exxon Mobil announced a 180-degree turnaround from its former growth plan this Monday — a reaction to criticism from activist investors who were displeased with Exxon’s emissions trajectory.
The corporation had entered the new decade with a multiyear growth plan that would have significantly increased greenhouse gas emissions, but that was before the coronavirus pandemic got in the way. Now, Exxon is heading into 2020 with much different goals, setting ambitious targets for reducing emissions and even releasing data on pollution related to their customers’ usage of fuels — a first for the company.
Exxon’s ambitious new plan places a special emphasis on curbing upstream emissions intensity, or those caused by pumping oil and gas, by as much as 20 percent in just five years. They will also focus on cutting flaring and methane leaks.
It’s no coincidence that Exxon’s new plan is being described by the company as consistent with the goals of the Paris Agreement, as President-elect Joe Biden has pledged to rejoin on the first day of his administration, invest $2 trillion in clean energy and get the country on a path to net-zero carbon emissions by the year 2050.
Why emission intensity?
Representatives from Exxon have said that their new environmental commitments focus on emissions per unit of output rather than absolute emissions. Their goals are “specific, actionable plans that we can hold our organization accountable” for, said Pete Trelenberg, Exxon’s director of greenhouse gas and climate change, during a call with reporters. Trelenberg said that these targets will be updated over time.
Trelenberg added that Exxon chose to target emissions intensity rather than absolute emissions because “we want to try and achieve first-quartile performance” relative to peers. “To achieve the intensity targets we do need absolute emissions reductions as well, and those will be particularly focused in the methane and the flaring areas.”
Playing catchup
Once deemed the most valuable company in the world, Exxon’s market cap has fallen a staggering 60 percent in the last decade, and it was removed from the Dow this summer. Now, the company has finally buckled under pressure from investors to take action on the environment. Last week, an activist investor campaign also called for new directors.
Pressure to set new environmental standards also comes from competitors like Unilever, who recently became the first major company to voluntarily give shareholders advisory voting power on efforts to reduce carbon emissions. The company will be seeking approval from investors every three years on its plans to mitigate its carbon impact and the risks of climate change on its business.
What’s the big picture
Oil companies have long been critiqued for dragging their feet when it comes to a transition to clean energy. While it seems some are beginning to make a more concerted effort, it is yet to be seen whether these companies will step up to the plate to make real lasting changes to their carbon footprint over the next several decades.
Experts say the smartest companies are those beginning to diversify their portfolio into renewables, a move that many consider to be the inevitable future of energy across the world.
Engine No. 1, for example, is a sustainability-focused investment firm that issue a statement to Exxon on Monday explaining the importance of exploring a significant investment in clean energy to help the company reach their targets of emission reduction while remaining profitable.
“While reducing emissions intensity is important, nothing in ExxonMobil’s stated plans better positions it for long-term success in a world seeking to reduce total greenhouse gas emissions,” the company said in their statement.
Competing with green energy
The question then arises as to how Exxon might continue to bump up its climate goals to impress investors if it chooses to stay out of renewables, as its present targets still remain weaker than many of those made by European oil companies that have set reduction goals linked to both internal operations as well as customers’ use of products like gasoline.
A decade ago, these fast-growing giants like NextEra, Iberdrola and Enel were little-known, but are now thriving thanks to early all-in bets on renewable energy sources like wind and solar farms.
Enel and Iberdrola don’t show any signs of slowing down either, as both have outlined plans to substantially expand their portfolios of renewable-energy projects over the next decade with about $170 billion in collective investments. NextEra also expects to have invested $60 billion in renewable energy projects between 2019 and 2022.
The Dallas-based BP Capital Fund Advisors, which have historically focused on investing in oil and gas, even bought shares in NextEra back in March as part of an effort to diversify with investments in renewable energy.
“NextEra stands alone in terms of what it offers in exposure to the renewable theme,” portfolio manager Ben Cook told The Wall Street Journal. “If you’re investing in energy now…that has to be part of the equation.”
WHAT YOU NEED TO KNOW ABOUT CORONAVIRUS RIGHT NOW
HOW THE CORONAVIRUS HAS IMPACTED THE OIL INDUSTRY – AND THE FUTURE OF THE CLIMATE CRISIS
REPORTS OF DOLPHINS AND SWANS IN VENICE CANALS GO VIRAL DURING CORONAVIRUS PANDEMIC
CORONAVIRUS SHOULD BE A WAKE UP CALL ABOUT OUR TREATMENT OF THE ANIMAL WORLD
THE EFFECT OF CORONAVIRUS IS SO EXTREME YOU CAN SEE IT FROM SPACE
changing america copyright.
