Skip to main content

The Globe and Mail

Exxon shrugs off climate change business fears

The company does not dismiss the dangers of climate change, saying the “risk warrants action” that includes focusing on energy efficiency and production of lower-carbon natural gas. It said a carbon tax would be preferable to a cap on carbon emissions

Jessica Rinaldi/Reuters

Exxon Mobil Corp. sees little threat to its asset base from the growing fears about climate change, although critics accused the company of taking a remarkably rosy view given the dire warnings in the latest United Nations' climate report.

The Irving, Tex., energy giant has waded into the debate over the so-called "carbon bubble" in which environmentalists and some institutional investors suggest that companies with large reserves of coal or oil could face significant financial losses as the world moves to reduce carbon dioxide emissions that result from burning those fossil fuels.

In a report, Exxon said it is confident that none of its reserves will become "stranded" because they are "essential to meeting growing energy demand worldwide." Exxon is a major oil sands producer both directly and through its subsidiary Imperial Oil Ltd.

Story continues below advertisement

A group of institutional shareholders – including some of the biggest pension plans in the United States – have urged major energy companies to provide better assessment and disclosure of the risk to their business plans if the global government embraces a "low carbon" future. The companies include major oil sands producers such as Suncor Energy Inc., Canadian Natural Resources Ltd. (CNRL) and Royal Dutch Shell PLC.

"As always with Exxon, it's two steps forward and one step back," Andrew Logan, director of the oil and gas program at Ceres, a non-profit organization that has spearheaded the carbon disclosure effort, said Tuesday. "It's the best picture we've seen as how Exxon views the climate issue as a business risk issue … but it sidestepped the whole issue of demand reduction and commodity price risk."

The company does not dismiss the dangers of climate change, saying the "risk warrants action" that includes focusing on energy efficiency and production of lower-carbon natural gas. It said a carbon tax would be preferable to a cap on carbon emissions.

But Exxon said climate strategy has to be balanced against the need to provide the world's increasing growing population with affordable energy to fuel the economic aspirations of a rapidly growing middle class.

And it said it is "highly unlikely" that the world will embrace a low-carbon energy strategy that would send energy prices soaring through tax or regulatory measures and reduce demand for crude. "It is difficult to envision governments choosing this path in light of the negative implications for economic growth and prosperity that such a course poses."

That view contrasts sharply with the warnings this week from the UN's Intergovernmental Panel on Climate Change, which painted a grim picture of social and economic disruption caused by rising sea levels, extreme storms and changing weather patterns, including drought.

"The IPCC report talked about the threat that climate change poses to the global economy, and beyond that the threat to global stability," Mr. Logan said. "Where Exxon seems to think the growing economy can't afford to deal with climate change, we would would say the global economy can't grow unless we deal with climate change."

Story continues below advertisement

Neither Suncor nor CNRL would comment on the Exxon report on Tuesday, but Suncor has pointed to several areas in which the company deals with sustainability, including an annual risk statement.

In a February, 2014, regulatory filing, Suncor said it assesses all projects with a view to the potential costs related to greenhouse gas emissions. But that assumes governments will proceed cautiously in imposing additional carbon-related costs on industry.

However, in a securities filing dated March 24, CNRL said climate regulations being considered by the federal government could indeed have an "adverse effect on the company's financial condition."

Report an error Licensing Options
About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨