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.


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 The resolution was withdrawn after months of negotiations with Exxon Mobil.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.

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

  1. […] 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 …  […]

  2. indy222 Says:

    I don’t understand how Rex Tillerson can sleep at night. I don’t understand how he can face his children and grandchildren, after that speech and the behavior he has shown. There is something deeply and fundamentally flawed about a political/economic system that has, and continues, to elect business, corporate, and political “leaders” such as we have.

    • I am afraid when you are deep in it like he is, its perfectly possible to use that immense wealth to build your fortress to protect your family and friends, and hope that it will keep any force of nature out. This naturally involves using funds to keep the system for income as stable as possible through heavy lobbying and anything to keep status quo.

      There is an odd duality going on though. Its hard to tell if they believe their own words when they do admit humans are causing global warming or if they just say it because its “the correct thing to say” in order to look more humane. So perhaps Rex does sleep well because he isnt convinced yet but have to act like he is.

      But as we all know, words dont mean much, action does… So far there has been only words… the emissions are still rising globally…

  3. redskylite Says:

    I have got to admire people like James Hansen, he doesn’t give up and keeps trying harder and harder. Nearly all the oil companies display climate change statements of concern on their websites, yet the majority (if not all) are still very actively exploring for new fields.

  4. climatebob Says:

    In New Zealand we have an abundance of renewable natural energy and yet still have a huge bill for oil which we use for transport. I am promoting that we start converting part of our transport to electric to get away from oil. which is a diminishing fuel and has a volatile price.

  5. I’m glad to see that McKibben’s article/campaign did some short-term good. I was hopping mad when it came out because the “carbon budget” that he did the math on is going to fry us all in the long term.

    Because of the committed warming we’re already facing due to the ocean heat lag and carbon feedbacks, we need to be burning zero carbon — yesterday. We have already *blown* our carbon budget, and it’s a bogus and dangerous concept to be talking about all the carbon we can still burn.

    For years, my little mantra has been, “Leave it in the ground. It’ll still be there if (when) we figure all this out.”

  6. Once/if aerosols fall out, we’ve already emitted enough to almost hit 2 C ECS warming and 4 C ESS warming. In short, we’ve already burned through the carbon budget.

    The 500 gt approximate more that we could burn ends up with us hitting about 460 ppm CO2 and 550 ppm CO2e when taking all ghg into effect, enough to warm Earth by 3 C ECS (fast feedback) and 6 C ESS (slow feedback).

    These numbers are all bad. The carbon bubble is already bursting. We are already in a catastrophe. But the more we burn, the worse it gets.

  7. […] 2014/03/23: PSinclair: Huge: Exxon Will Advise Investors on Carbon Bubble Exposure […]

  8. […] Also see Climate Crocks: Huge: Exxon Will Advise Investors on Carbon Bubble Exposure […]

  9. […] Graphic: Public companies represent a small piece of the pie; $7 trillion in fossil fuel reserves as opposed to private and national companies that represent three times this market size. Source […]

  10. […] Graphic: Public companies represent a small piece of the pie; $7 trillion in fossil fuel reserves as opposed to private and national companies that represent three times this market size. Source […]

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