ExxonMobil drops ball on its “carbon asset risk” report

Exxon tigerWEBFor a couple weeks last month, it looked as if ExxonMobil might be changing its stripes.  In response to shareholder advocacy by Arjuna Capital and As You Sow, the energy giant agreed to complete a Carbon Asset Risk report.  The idea behind such shareholder initiatives is to force companies to take an honest look at how their asset base could be impacted by climate change, or in this case, the adoption of carbon-reduction policies such as a carbon tax or cap-and-trade system; presumably, if such policies succeed at reducing the use of oil and gas, then companies like ExxonMobil would see their untapped reserves and undeveloped leases fall in value.  As a press release from Arjuna and As You Sow put it:

World governments agree that if catastrophic warming over 2°C is to be avoided, no more than one-third of current proven carbon reserves can be burned. These reserves, currently on the balance sheets of the 200 largest coal, oil, and gas companies are valued at $20 trillion. Yet, a recent Unburnable Carbon report calculates that in 2012 alone, the 200 largest publicly traded fossil fuel companies collectively spent an estimated $674 billion on finding and developing new reserves – reserves that cannot be utilized without breaking the world’s carbon budget.

Well, the report that resulted fell far short of expectations.  Rather than look at how a societal commitment to leave oil and gas in the ground would affect its bottom line, ExxonMobil reported that, in its estimation, policy changes that would sharply cut carbon emissions—and so the value of its assets—are “highly unlikely.” According the the company, our need for energy will drive CO2 emissions upward until at least 2030.

Natasha Lamb of Arjuna, while encouraged that ExxonMobil did anything, was clearly disappointed: “The question is not whether or not we’ll face the low carbon standard, but whether they are prepared to address it. We need to know what’s at stake,” she said. “But at least now investors know that Exxon is not addressing the low carbon scenario and (is) placing investor capital at risk.”

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Jim Cummings

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