The gas and oil giant, Exxon Mobil, has been accused of being persistently in denial over the existence and damaging effects of climate change. The company has long been the centre of much controversy when it comes to their insistence that climate change either does not exist or does not have the far-reaching effects that many scientists now agree upon.
In a recent article in The Guardian newspaper, Dr Bob Litterman and Natasha Lamb have both accused the oil giant of attempting to save its share prices from falling further by claiming that a carbon-less future will be too expensive to turn into a reality without great cost to global economies. The company was present for the COP21 Climate Change Summit in Paris last year but it has been accused of merely paying “lip-service” to the idea of climate action.
Dr Litterman and Ms Lamb pointed out that whilst the company had indeed been present at the negotiations, they had employed what is described as “an odd course” of action, when considered with the backdrop against which they were speaking. The company set out to try and argue that the globally agreed target of reducing global temperature rises to 1.6C, was overly ambitious and that it would have an incredibly detrimental effect on the cost of carbon-based fuels. The articles two authors state that they believe that this was intended as a scare tactic, which was hoped to dissuade countries from committing to climate action through carbon reduction.
“While appearing to pay lip service to the need for climate action, ExxonMobil suggested that the supposedly high cost of a low-carbon future would make any such action prohibitively expensive. The company claimed that limiting global warming to 1.6C, just above the goal set out in the Paris climate pact, would raise carbon costs to $2,000 per ton by the end of the century. Think $20-plus for a gallon of gasoline and you will have a sense of the scare and paralysis Exxon was hoping to inspire, even as it appeared to concede the need for action on the climate..”
The two authors go on to say that, whilst some people may be incredulous at the notion that such a huge company would act so clearly in its own interests on a stage where the world leaders were lauded for coming together to reach a global deal, this is not particularly out of character for the company- based on its previous action. Litterman and Lamb point to the company’s long past of funding projects with the perceived intention of dispelling climate change theories as merely myth- an invention of the over sensitive left-wing agenda.
The company has recently found itself in trouble with the New York district attorney after it was accused of deliberately misleading the public and its shareholders about the potential threat that a low carbon future would have on the company and the global economy as a whole- at the time of writing no verdict has been reached. However it is not just environmental activists that could lose out if the company continues with its current set of tactics, according to the authors. There is a very distinct possibility that Exxon’s failure to acknowledge the real threat that a low carbon future poses to its business model, will result in the many investors, pension funds and other people that have their money tied up in the firm.
“As recent news accounts have shown, Exxon funded organizations for decades that denied the risks of climate change, despite the company’s own internal research confirming those very risks.
Reducing carbon emissions is a direct threat to Exxon’s current carbon-oriented business planning. But Exxon’s risky path also poses a very real threat to the pension funds, institutional investors, and individuals who could very well end up paying through the nose for the oil giant’s desire to sweep climate concerns under the rug.”
The results of the attorney general’s investigation will be of huge significance the the oil giant. Not only because of the huge damage that a verdict could do to its reputation but also because a negative verdict could send their share prices plummeting even lower.
“It would be a huge shock to the bottom lines of Exxon’s shareholders if they are left holding the bag with high-cost stranded carbon assets.
Exxon is pushing up against a shifting tide. A defensive approach to climate change does not bode well for companies whose very survival is dependent on adapting to a low-carbon future. As investors, we are obliged to tell ExxonMobil that denial is no longer a credible business plan.”
Much of the Exxon investigation will be based around the contents of one of the reports published by the company on the topic of the effects of climate change upon its actions and whether or not it believes that future policy will be damaging to their share of the energy market. It is believed by some that the company deliberately miscalculated many of their figures in an attempt to further push their agenda.
Lamb and Litterman go on to say:
“The Exxon report, a linchpin of the investigation, was written in response to a shareholder proposal filed with the company in 2014 by Arjuna Capital, an investment firm. The proposal asked the company to report on how it was managing its “carbon asset risk”. Or, more specifically, the risk that up to two-thirds of all fossil fuel reserves currently valued on the balance sheets of energy companies might end up “stranded” – too costly to extract when carbon emissions are appropriately priced and therefore non-monetizable. The best climate science tells us that leaving these reserves unburned, indeed, must occur if we are to avoid the risk of catastrophic climate change.”
One thing is for certain, many people now believe that Exxon is face its “day of reckoning” and that the company would be better off if they began accepting the ever greater reality that is climate change.