An Exxon refinery in Baytown, Tex. The company reassured shareholders that it would “continue to play a critical role in meeting the world’s energy demand.”Credit Benjamin Lowy/Reportage by Getty Images
WASHINGTON — In one sign of the pressures that companies face to understand the business risks of stricter climate-change policies, one of the world’s biggest energy companies on Friday offered its thoughts on how it would fare in a low-carbon world...
Exxon Mobil’s shareholders — concerned that the company’s main businesses, oil and natural gas, may be imperiled — had demanded last year that the company give a more detailed accounting of the consequences of global policies aimed at curbing emissions of earth-warming gases. Those policies include the goal of the Paris climate agreement to prevent global temperatures from rising more than 2 degrees Celsius above preindustrial levels.
Exxon’s conclusion: Even aggressive climate policies pose “little risk” to its investments. It stressed that it expected healthy demand for its products for decades to come, regardless of how strongly countries move to cut emissions.
Exxon also played down the impact of electric vehicles on its business prospects.
But even as those words sought to reassure shareholders, the report underscored how the company is grappling with the transition to stricter policies to curb greenhouse gas emissions, a shift various analysts and climate advocates say will pose a mortal threat to the fossil fuels industry. A paper published in Nature in 2015 estimated that, for the world to have a 50-50 shot at staying below 2 degrees Celsius of warming, the world would have to avoid burning most of the coal reserves currently beneath the ground, half the natural gas, and about one-third of the oil.
Exxon laid out a more optimistic view. Oil and natural gas, the company’s mainstays, will “continue to play a critical role in meeting the world’s energy demand,” the company said in its report.
Exxon’s vast fossil fuel reserves “face little risk” of being left in the ground, the company said. Less than 5 percent of its reserves would be affected under a 2-degree scenario, the company estimated. Under that scenario, Exxon sees the world’s oil consumption dropping only slowly in the next two decades or so, and sees demand for natural gas rising slightly.
In examining whether the rise of electric vehicles could threaten demand for future oil, Exxon said it expected there to be 160 million electric cars on the road worldwide by 2040, up from just a few million today. However, other analysts have suggested that electric cars could catch on more quickly as battery prices drop and as countries like China — one of the world’s biggest emerging markets for cars — push more aggressively for adoption of electric vehicles.
Also on Friday, Exxon reported lackluster quarterly earnings as disappointing refinery and chemical results weighed on its bottom line. Its stock fell 5 percent on Friday amid a broader sell-off in the market.
Some climate campaigners were unimpressed with Exxon’s climate analysis. “The range of risks that Exxon faces if climate action is taken is far deeper than what’s being presented here,” said Adam Scott, a senior adviser at Oil Change International, an energy research and advocacy group.
He and others pointed out that Exxon, for instance, has assumed the development of technologies such as carbon capture that would allow the use of fossil fuels to continue with lower emissions. Also, Exxon didn’t address what might happen if countries agreed to make considerably more aggressive cuts designed to hold global warming to 1.5 degrees Celsius above preindustrial levels, as urged by the Paris agreement.
Nor did the company detail the risks from the growing number of lawsuits being filed against fossil fuel companies in various states around the United States. In January, New York City sued Exxon, BP, Shell, and other oil companies, demanding billions of dollars in damages to help the city cope with the effects of global warming.
“ExxonMobil’s own analysis assumes the world will continue to burn through oil and gas to drive its profits, keeping us on a path toward global temperatures rising well above the 2 degree Celsius threshold,” said Kathy Mulvey, climate accountability manager at the Union of Concerned Scientists.