Jeffrey D. Sachs writes: ExxonMobil’s current business strategy is a danger to its shareholders and the world. We were reminded of this once again in a report of the National Petroleum Council’s Arctic Committee, chaired by ExxonMobil CEO Rex Tillerson. The report calls on the US government to proceed with Arctic drilling for oil and gas – without mentioning the consequences for climate change.
While other oil companies are starting to speak straightforwardly about climate change, ExxonMobil’s business model continues to deny reality.
The year 2014 was the hottest on instrument record, a grim reminder of the planetary stakes of this year’s global climate negotiations, which will culminate in Paris in December. The world’s governments have agreed to keep human-induced warming to below 2º Celsius (3.6º Fahrenheit).
Many of the world’s biggest oil firms are beginning to acknowledge this truth. Companies like Total, ENI, Statoil, and Shell are advocating for a carbon price (such as a tax or permit system) to hasten the transition to low-carbon energy and are beginning to prepare internally for it. Shell has stepped up its investments in carbon capture and sequestration (CCS) technology, to test whether fossil-fuel use can be made safe by capturing the CO2 that would otherwise go into the atmosphere.
Exxon’s management, blinded by its own vast political power, behaves with a willful disregard for changing global realities. It lives in a cocoon of Washington lobbyists and political advisers who have convinced the company’s leaders that because the US Senate is currently in Republican hands, the business risks of climate change have somehow been nullified, and that the world will not change without or despite them.
At the same time, ExxonMobil is not some marginal actor in the planetary drama. It is one of the central protagonists. So what does ExxonMobil say about the new climate realities? How does it reconcile its corporate policies with planetary needs? Unfortunately, the company basically ducks the issue.
The development of the Arctic’s oil and gas resources would contribute to warming far above the 2º limit. The Arctic itself is warming far faster than the planetary average, potentially causing massive, global-scale climate disruptions – which may include the extreme weather patterns recently observed in the US mid-latitudes.
For these reasons, the best recent science, including an important study published in Nature this year, provides a clear and unequivocal message: Keep the Arctic oil in the ground and beneath the deep seas; there is no safe place in the climate system for it.”
ExxonMobil’s brazenness should be deeply troubling for its shareholders. The company’s management is planning to spend vast sums – perhaps tens of billions of dollars – to develop Arctic oil and gas reserves that cannot safely be used. Just as the global shift toward renewable energy has already contributed to a massive drop in oil prices, climate policies that will be adopted in future years will render new Arctic drilling a huge waste of resources.
Pension funds, universities, insurance pools, and sovereign wealth funds worldwide are grappling with the increasing risks, both moral and financial, of owning shares in oil, gas, and coal companies. As Lisa Sachs and I recently explained, responsible investors must urgently query these companies about their business plans to comply with the 2º limit on warming.
