ExxonMobil: Fueling Climate Change

The link between ExxonMobil and climate change is undeniable, but whose responsibility is it to put a stop to global warming? The drug dealer or the drug user?

 Image result for exxonmobil greenhouse gas emissions

Today’s rapidly growing global economy has a thirst for energy that has never before been seen in human history. The world is addicted to fossil fuels but this addiction comes with a cost, climate change.  Oil is the world’s drug of choice and since the days of John D. Rockefellar, ExxonMobil has been the world’s drug dealer of choice.  Today ExxonMobil produces roughly 3.9 million barrels of oil equivalent a day and 125 million metric tons of greenhouse gas a year. (Exhibit 1)   It is the largest publicly traded oil and gas company in the world with a market capitalization of $346B[1].  The link between ExxonMobil and climate change is undeniable, but whose responsibility is it to put a stop to global warming?  The drug dealer or the drug user?  What responsibility does ExxonMobil have to the world to combat global warming and what responsibility doe ExxonMobil have to its shareholders to simply maximize value?

(Exhibit 1)

Image result for exxonmobil greenhouse gas emissions

For years, ExxonMobil has profited off of the world’s growing dependency on fossil fuels with no regard for the impact their energy was having on the environment.  They focused on two simple things: 1) The sale of fossil fuel was profitable for shareholders and 2) the dramatic economic growth across the world they were fueling was pulling millions of people out of poverty. For years, it seemed these two simple facts were enough for Exxon, even when ExxonMobil scientists started to suspect that the burning of fossil fuels was having a warming effect on the climate.  One might hope Exxon would share this scientific knowledge with the world, but instead millions of dollars were poured into lobbying efforts and more scientific studies to prevent the acceptance of global warming.[2] Why you might ask?  Because global warming is a huge fundamental risk to Exxon’s core business.  If the world gets serious about stopping global warming and carbon emissions are limited, the demand for ExxonMobil’s product will go down.  And with massive investments in oil reserves around the world, a dramatic decrease in demand for oil will crush Exxon’s bottom line.

So what is Exxon’s strategy?  Exxon has accepted (in recent years) that global warming is real and is a real threat to the world, but how much responsibility are they willing to take to make a difference?  According to Exxon’s website:[3]

Our commitment to positive action on climate change can be broken down into four components:

  1. engagement on climate change policy and planning;
  2. mitigating GHG emissions in our operations;
  3. development of products that help customers and consumers reduce GHG emissions;
  4. and investing in next-generation clean technologies

This policy seems great at first.  If Exxon were truly committed to creating climate change policy that worked, mitigating their emissions, mitigating the world’s dependence on emissions and creating clean tech, than surely this $346B behemoth of company could make a real dent in global warming.  But, the devil is really in the details and the allocation of resources between these four components is what will be crucial going forward.  I would argue that the money that is currently being spent on policy and planning is poorly utilized lobbying dollars that are really creating policies which enable the world’s dependence on fossil fuel, rather than forcing significant change. Exxon’s allocation of resources at this time suggests they are focused on capturing short term gains, while very slowly figuring out how to mitigate the risk of climate change to their own business and the world in the long run.

What is needed is a more significant investment in research and development. Components 3 and 4 of Exxon’s strategy, developing clean technologies and developing products that reduce consumer emissions, are what will have the largest impact on global emissions.  Developing nations are addicted to growth, and no developing nation is going to prioritize carbon emissions over improving the lives of its population, so Exxon must take a larger role in developing alternative technologies.  Exxon has fueled growth across the world for years, but for them to maintain this position they have to start fueling more innovation.  Because global warming is a big enough issue that if they don’t figure out how to solve it, another corporation will and their investments in fossil fuels will be ruined.  ExxonMobil must make short-term sacrifices to promote innovation that will lead to a sustainable long-term future for both the company and the world’s ecosystem.  So the question is will ExxonMobil put its money where its mouth is?  ExxonMobil understands the challenges and has outlined a strong plan… but will they make the financial sacrifices needed to transform their business?

(765 Words)


[1] CNN Money – http://money.cnn.com/quote/profile/profile.html?symb=XOM

[2] The Guardian “Tell the Truth ExxonMobil: A low carbon future is affordable and necessary”  – https://www.theguardian.com/business/2016/jan/31/exxon-mobil-climate-change-oil-gas-carbon-footprint-paris-climate-talks

[3] ExxonMobil “Climate Policy” – http://corporate.exxonmobil.com/en/current-issues/climate-policy/climate-perspectives/engagement-to-address-climate-change


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Student comments on ExxonMobil: Fueling Climate Change

  1. Exxon,

    Thank you for your provocative and interesting post. I always find it interesting when people refer to fossil fuels as a “drug” as this drug has catapulted millions of people out of poverty and advanced civilization in countless ways. Although I do agree that Exxon should look to minimize their greenhouse gas footprint, I would like to challenge the argument that they are the company who should be tasked with developing clean energy solutions. They are a business whose competitive advantage is exploration, resource assessment, efficient production, pipeline management, and refining operations. Investing in new energy alternatives and bringing these innovative products to market is not their area of expertise, and I would bet that with their size and corporate culture, they would fail. I would much rather a more nimble, innovative business with a strong focus on R&D take the reins to take market share from fossil fuels. In the interim, I do not think it is a bad thing to have an American company who owns strategic oil and gas reserves, especially as Exxon is smaller in terms of both revenue and bpd than Saudi Aramco, Gazprom, and NIOC. On the lobbying point, to the extent that their money is accepted by policymakers, I would place the blame with our elected officials as opposed to the company. We elect our representatives because they purport to care about issues facing society, and many large businesses lobby the government for many different causes.

    Thanks for writing a post that poses the good question about what oil and gas companies’ roles should be in clean energy development.


  2. Exxon – Thank you, also, for your provocative post.

    I agree with Jess – the transition from fossil fuels to renewable energy sources is particularly difficult for incumbents. I’d encourage you to take a look at my post about NRG Energy, Inc., which is the U.S.’s largest Independent Power Producer. NRG tried to transition its mix of business towards renewables but ran into several difficulties. Chief among them, investors found it increasingly difficult to purchase the Company’s stock. Renewables, such as utility-scale solar (with long-term power purchase agreements and generally lower cash yields), may have very different investment profiles than Exxon’s current businesses. Moreover, what happens to someone working on an oil platform, or in a refinery when their parent company says that their business is the ‘old’ or ‘non-core’ business. What happens when Exxon’s suppliers and customers think that they are no longer serious about their commitments? All of these are very real concerns for the ‘fossil fuel’ incumbents.

    Second – I’d like to address the notion that “developing nations are addicted to growth, and no developing nation is going to prioritize carbon emissions over improving the lives of its population, so Exxon must take a larger role in developing alternative technologies.” I’d like to point you to this blog post in Bloomberg from 2014 (http://www.bloomberg.com/news/articles/2014-08-29/poor-countries-shouldn-t-sacrifice-growth-to-fight-climate-change). The author writes, “Consider that the average income in a country such as Tanzania is 3 percent of average incomes in the U.S. (adjusted for purchasing power). Doubling Tanzania’s income would still leave it desperately poor. Electricity conception per person in the East African country is 92 kilowatt-hours per year. Americans burn through that much electricity every two and a half days.” It seems reasonable to me that individuals in Tanzania would (1) want their economy to grow and (2) want to consume more power to the extent that they have the wealth to do so. Is that an unreasonable “addiction” to you? I hear your view that Exxon, as a large company, can influence the energy used elsewhere in the world (not just in the U.S.), but I think policy and expectations need to be set using a realistic perspective of what those countries are trying to do (and why).

  3. Dear Exxon,
    Thanks for your blog post. I wrote a blog entry on the similar topic covering Shell — https://d3.harvard.edu/platform-rctom/submission/shell-the-impact-of-climate-change-on-an-oil-major/.

    I totally agree with your stand on focusing on long-term strategy rather than on short-term financial gains. The oil and gas industry needs to diversify its operations, to encompass other sources of energy in their product mix. Such a move would not only shield them from an oil shock, like the one we are currently facing, but also help them boost their top line. It was interesting to see the efforts being placed by Shell into developing efficient Carbon Capture technologies. Carbon capture technologies can help industries capture CO2 emanating from their plans — thereby keeping their dependence on fossil fuels intact, but reduce their impact on climate. Such a move will keep the current interests of Shell and the entire O&G industry intact.


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