Huge: Exxon Will Advise Investors on Carbon Bubble Exposure

March 23, 2014

I’ve posted on how a number of large companies are beginning to face reality and prepare for a carbon constrained future, with internal carbon pricing. These include Walt Disney, Walmart, and even oil companies like Shell and Exxon.

Despite the efforts of the climate denial machine, science and facts on the ground eventually win out, especially when investor’s money is at stake.  Since Bill Mckibben’s widely cited “Do the Math” piece in  in Rolling Stone, there has been an increasing awareness that a good deal of fossil fuels still in the ground, in particular the “exotic”, hard to get at tar sands, and oil and gas shales, will have to be left in the ground. This is the “Carbon Bubble” – corporate assets that, if used, will destroy the planetary life support system.

See Jim Hansen addressing that in recent testimony elsewhere on this page. Above, quick powerpoint lecture to bring you up to steam. Here, see Exxon CEO Rex Tillerson’s 2012 acknowledgement of the reality of human caused climate change, and the need to “adapt”.

Now a movement of shareholders has pushed Exxon Mobil to begin cataloging its exposure to carbon bubble risks.

Bloomberg:

Exxon Mobil Corp. has agreed to publish a report describing its plans for a future in which market forces and stricter climate regulation may leave some of its carbon reserves unburnable.

Exxon Mobil is the first oil and gas producer in the U.S. to commit to reporting on its risks of stranded assets due to climate change.

The commitment came in response to a shareholder resolution filed in the fall of 2013 by wealth management firm Arjuna Capital and shareholder advocacy group As You Sow. The resolution was withdrawn after months of negotiations with Exxon Mobil.

Investors have increasingly raised concerns that stranded assets, also known as a “carbon bubble,” could occur if fossil fuel reserves are suddenly revalued under future government policies for climate change or greenhouse gas emissions.

In its report, Exxon Mobil will let shareholders know what types of reserves it holds—from deep sea drilling, tar sands or elsewhere—so that “investors have a better idea of where the risks lie and how well the company can withstand those risks,” Danielle Fugere, As You Sow’s president, told Bloomberg BNA.

“That kind of differentiation is important to shareholders as they decide which company to invest in,” Fugere said.

The report will also discuss how climate risks could affect Exxon Mobil’s capital expenditure plans. The report will be posted on Exxon Mobil’s website by the end of March.

Exxon Mobil’s Response

Natasha Lamb, director of equity research and shareholder engagement at Arjuna Capital, said she was “very impressed” by Exxon Mobil’s responsiveness to the shareholder resolution.

“In the past, they’ve been seen as a climate denier,” Lamb told Bloomberg BNA. Exxon Mobil seems to be making more of an effort to engage with shareholders on climate change and related issues, “in part because you can only hide under a rock for so long,” she said.

Lamb said Exxon Mobil made a “big move” recently when it disclosed to CDP, formerly known as the Carbon Disclosure Project, that it has included a carbon proxy cost in its long-term business plans since 2007. Exxon Mobil is one of about 30 companies in the U.S. that put an internal price on carbon pollution.

“Exxon Mobil invests billions of dollars in energy projects which take decades to plan and execute,” Exxon Mobil spokesman Alan Jeffers told Bloomberg BNA in December. “Although climate policies remain uncertain today, for the purposes of our business planning we assume that governments will continue to gradually adopt a wide variety of more stringent policies to help stem greenhouse gas emissions.”

Exxon Mobil declined to comment on the shareholder resolution.

The Street:

“If you look at the fossil fuel business, that’s trillions and trillions of dollars,” Fugere said, noting the market is often described as a “carbon bubble.”

“If world governments put a cap on carbon, you would see that bubble burst and that would throw the world economy into disarray,” she said. Instead, the plan of As You Sow and other investors is to ensure “the bubble is going to be let out slowly in a way that nobody loses all their money.”

As awareness of global warming has grown in recent years, a consensus has emerged that man-made carbon dioxide emissions are a leading cause. Through public pressure and the work of organizations like the Intergovernmental Panel on Climate Change, a U.N. advisory panel made up of scientists, governments have become increasingly aware of the risks associated with pumping ever more carbon dioxide into the atmosphere.

As stated in the press release issued by the shareholders:

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. … Yet, a recent Unburnable Carbon report calculates that in 2012 alone, the 200 largestpublicly 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.

The American Conservative:

At least three companies, Disney, Microsoft, and Shell, already implement their own internal carbon taxes. According to the Guardian, these companies have been enforcing the price within their own organizations in order to drive down their carbon footprint and increase efficiency. Shell has the highest price of the three, and so only uses the price for planning purposes; no money actually moves around. Nevertheless, Shell officials told the Guardian that they have declined pursuing carbon-intensive projects that a $40 per ton price makes unattractive. Disney, on the other hand, prices and taxes themselves. The funds raised from the tax deposited in their “climate solutions fund.” Currently, they price approximately $10-20 per ton, and have raised $35 million. Microsoft has the most aggressive goal, of seeking zero net emissions this year, and has the correspondingly lowest price, approximately $6-7 per ton.

While there are a variety of motivations for aggressive carbon pricing, the oil companies, such as Shell, are seeking to be prepared for increasing concern in industrial countries about the effect of carbon emissions on global climate change. As there are a variety of proposals circulating the globe, they are seeking a predictable program that will let them stay in business.

Worth your time if you have not seen yet.

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14 Responses to “Huge: Exxon Will Advise Investors on Carbon Bubble Exposure”


  1. […] “‘If world governments put a cap on carbon, you would see that bubble burst and that would throw the world economy into disarray,’ she [Danielle Fugere, As You Sow’s president] said. Instead, the plan of As You Sow and other investors is to ensure ‘the bubble is going to be let out slowly in a way that nobody loses all their money.'” — Huge: Exxon Will Advise Investors on Carbon Bubble Exposure, March 23, 2014 […]


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