January 18, 2022 Exxon’s New Net-Zero Goal May Not Mean All You Think

ExxonMobil has announced it aims to reach net-zero emissions by 2050, putting the oil giant in line with some of its peers, as investors continue to hound energy companies to do more to tackle the climate crisis. While Exxon said in December that it would meet net-zero emissions at its Permian Basin operations by 2030, it’s the first time the oil major has set such a goal across its whole business.

The announcement, released Tuesday, marks a major shift at Exxon, which has long resisted calls from climate activists to change its business practices and drastically reduce its greenhouse gas emissions. The move also underscores a sea change when it comes to how the world’s top energy companies are dealing with public outcry over global warming and how their products have contributed to it.

“It’s both a big deal and not a big deal,” said Nicholas Kusnetz, ICN’s oil and gas reporter. “It is a sign that net-zero has become a must-have for big corporations. Essentially Exxon couldn’t dodge it any longer.”

But the pledge also comes with major caveats that shouldn’t be overlooked, Kusnetz added, including a “cautionary statement” to investors that says any number of factors, including government policies, market conditions and even conflict could prevent the company from reaching the net-zero target. The nearly 1,100-word statement warns investors that the company’s new goal “is not intended to communicate any material investment information” and merely represents “a good faith effort by the Company to address [shareholder] requests despite significant unknown variables and, at times, inconsistent market and government policy signals.” 

Last year, Exxon shareholders voted, against management’s wishes, to add three new members to the company’s board, part of an effort to force Exxon to change course on climate change.

Exxon’s new goal also doesn’t cover the company’s scope 3 emissions—the emissions that come from its customers burning the fossil fuels it sells—meaning the majority of CO2 emissions Exxon helps put into the atmosphere are unaccounted for. Perhaps most importantly, the new aim did not indicate any change in direction for the company’s investments, which are still directed predominantly towards new oil and gas production.

“While today’s announcement reflects a step forward for ExxonMobil, by failing to incorporate scope 3 emissions into its targets, it continues to lag the majority of its peer competitors, particularly Europeans,” said Mike Coffin, head of oil, gas and mining at Carbon Tracker, a think tank that focuses on climate and finance.

Another question to consider is how seriously Exxon is taking its new goal and the likelihood it will be able to achieve it. The company has long resisted such long-term goals to reduce emissions, with Exxon’s chief executive Darren Woods in 2020 comparing such targets to “a beauty competition” aimed at appeasing investors without actually making a difference.

Many environmentalists now criticize “net-zero” pledges from major companies as meaningless, saying they fall far short of what’s needed to meet global climate goals. Many of the pledges rely heavily on unproven technologies such as carbon capture and storage. Exxon did not spell out in detail how it would reach its goal, for example to what extent it would rely on buying emissions offsets.

A particularly jarring juxtaposition is that in that same report where Exxon announced its new goal, the company also says that it doesn’t expect the world to meet its ambitious climate targets, including any net-zero pledges and the Paris Agreement targets. In the report’s outlook, which the company said is based on its assessment of current trends in policy, technology and economic growth, Exxon expects oil and gas demand to actually grow by 2050, a pathway that would put net-zero out of reach.

Today’s Indicator

$626 million

That’s how much money Washington Gov. Jay Inslee is proposing to address climate change in his state, including funding for reducing building emissions and investing in clean energy and transportation.