ExxonMobil Admits Climate Change Is Real. It also Imposes an Internal Cost on Carbon. Still Not Enough to Get Any Love From the Greens (Interesting Reading, Though)

Last week, in response to shareholder requests that it disclose information regarding how climate change might affect it in the future, ExxonMobil released two reports, one titled Energy and Climate, and one titled Energy and Carbon – Managing the Risks.  They actually make fascinating reading and seem to represent a new tack by ExxonMobil in its battle with those seeking aggressive action on climate change.

The reports do not deny the reality of climate change.  Indeed, the reports acknowledge climate change, acknowledge the need for both mitigation and adaptation, acknowledge a need to reduce fossil fuel use (at some point), acknowledge the need to set a price on carbon, and acknowledge that ExxonMobil in fact already is making future planning decisions utilizing an internal “proxy” price on carbon that is as high as $80/ton of CO2 in the future.

The reaction of the shareholder activists who pushed for the disclosures?  They are not happy.  Why not?

Because ExxonMobil has said explicitly that it doesn’t believe that there will be sufficient worldwide pressure – meaning government regulations imposing very high carbon prices – to reduce fossil fuel use sufficiently quickly enough to limit global temperature rise to 2 degrees Celsius.  It also does not believe that worldwide carbon regulation will leave it with any “stranded assets.”

I understand the moral case against fossil fuel use.  Personally, however, I’d rather rely on a carbon price that provides the appropriate incentives to get the reductions in CO2 emissions that we need to mitigate climate change.  On that score, sadly, it’s not obvious to me at this point that ExxonMobil’s analysis of likely outcomes is actually wrong.

My biggest complaint with the reports is the refusal to recognize that markets react dynamically to new regulatory requirements.  The history of big regulatory programs is that they pretty much always cost less than the predictions made before the regulations are implemented.  The lesson then is that the current projections of energy cost increases resulting from a high cost of carbon are likely to be overestimated.

Time will tell.  At least I hope so.

2 thoughts on “ExxonMobil Admits Climate Change Is Real. It also Imposes an Internal Cost on Carbon. Still Not Enough to Get Any Love From the Greens (Interesting Reading, Though)

  1. Checkout James Hansen’s ‘Golden Opportunity’ and compare it with Charles Krauthammer’s “Tax gas – a lot”. This is the best way to put a Price on Carbon (pollution). It would transform the world’s fossil fuel addiction and create millions of jobs leading to the well-being of people and the Planet.



  2. November’s Senate vote of 59-41 showed a deficit of thought. Thinking in Congress has now been completely suspended.
    The Tar Sands issue hinges on the scientific consensus and risks associated with CO2 emissions being limited to 1 trillion tons in an effort to mitigate the earth’s temperature rise below 2 degrees Celsius. Providing a ‘pipeline’ for the dirtiest of fossil fuels opens a valve which essentially assures failure…..not a very thoughtful thing to do.
    Sorry, if you haven’t figured out the scientific evidence by now, you are likely an invested member of the Upton Sinclair club; “it’s hard to get someone to understand something if their salary depends on them NOT understanding it.”
    Unhealthy jobs, leading to an unhealthy planet can be transformed. In fact, they have to be. The transition to clean energy is win win.
    Exxon Mobil’s announcements (link above) underline the reality, albeit without guilt, and admit the ‘costs’ everyone is setting aside.
    The President, if forced to approve the Pipeline, should make his approval contingent upon EM’s projected cost of $80/ton CO2, applied to the estimated 150 million tons / year.
    The proceeds being applied to the costs of clean-up and all forms of mitigation, including Research and Development.

    Dear William:
    Thank you for writing. I want you to know I take your thoughts about the Keystone XL pipeline very seriously, and I appreciate your taking the time to share them with me.
    We know a low-carbon, clean energy economy can be an engine of growth for decades to come. I want America to build that engine, which is why my Administration has invested aggressively in renewables and energy efficiency. But it’s also true that we cannot complete that transition overnight, which is why we have taken steps to produce more oil here at home rather than buying it abroad.
    No matter what, allowing the Keystone XL pipeline to be built requires a determination that it will serve our national interest, and the State Department is running a process to make this determination. I want to be absolutely clear: this project will only serve our national interest if it does not significantly exacerbate the problem of carbon pollution.
    Thank you, again, for your message—it will be on my mind in the days ahead.
    Barack Obama

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