• 3 minutes War for Taiwan?
  • 7 minutes How China Is Racing To Expand Its Global Energy Influence
  • 10 minutes Is it time to talk about Hydrogen?
  • 10 mins U.S. Presidential Elections Status - Electoral Votes
  • 6 hours Locked Thread on the election
  • 15 hours “Consumers Will Pay For Carbon Pricing Costs” by Irina Slav
  • 17 hours Censorship in USA
  • 15 hours Michael Moore Cranking Up Planet of the Humans Again
  • 2 hours Mail IN Ballot Fraud
  • 6 hours British PM Eyes Banning Gasoline and Diesel Car Sales
  • 2 days Renewables deprogramming
  • 2 days CREO Syndicate – Ultrawealthy & Oil-igarchs Multi-Trillion Investments on Climate & Green
  • 1 day Conoco Pledges ‘Net-Zero’ Emissions in Break With U.S. Rivals
  • 20 hours San Francisco Imposes Natural Gas Ban
  • 1 day WTI / ​​​​​​​Price Forecasting 
Russia's Relentless Quest For Arctic Oil

Russia's Relentless Quest For Arctic Oil

Russia’s arctic exploration ambitions are…

Consumers Will Pay For Carbon Pricing Costs

Consumers Will Pay For Carbon Pricing Costs

As the world grapples with…

Rory Johnston

Rory Johnston

Rory Johnston is a Master of Global Affairs student at the University of Toronto’s Munk School of Global Affairs where he focuses primarily on the…

More Info

Premium Content

Exxon Responds to Carbon Asset Risk Concerns

Last week I wrote about the emerging investor language of “Carbon Asset Risk” and ExxonMobil’s agreement to publish its plans to deal with the risk of potentially “stranded” assets in a carbon-constrained future. Exxon’s answer arrived Monday with the publication of “Energy and Carbon—Managing the Risks,” a report that outlines the corporation’s views on the risks climate change pose to its assets and the future of its business model.  

In short, Exxon is not too concerned.

The report makes clear that Exxon does not believe the world will meet the emissions reduction targets required to limit global warming to below 2°C above pre-industrial levels. It goes on to say that all long-term investments are based on its global outlook for energy, which has explicitly factored in potential future emissions regulation. The report concludes that, “based on this analysis, we are confident that none of our hydrocarbon reserves are now or will become ‘stranded.’”

Related Article: Exxon Eyes Production at 10 New Projects

This is because Exxon believes that the “low carbon scenario”—the one that sees an 80 percent reduction in global emissions by 2050 and a stabilization of CO2 in the atmosphere at 450 ppm—is unlikely.  It goes as far as saying that not only is it unlikely, but that it is undesirable as the “damaging impact to accessible, reliable and affordable energy resulting from the policy changes such a scenario would produce are beyond those that societies, especially the world’s poorest and most vulnerable, would be willing to bear.” Furthermore, this scenario would require CO2 prices to rise above $200 per ton by 2050, which the report juxtaposes against the current EU price of $8-$10 per ton.

Costs of CO2 for Various Emission Pathways

One of the key concerns behind the carbon asset risk movement was the hundreds of billions of dollars being spent on exploration to buttress reserves that may never be used. However, even under the “450 Scenario” the world would still consume significant volumes of liquid hydrocarbon fuels. As the chart below shows, if firms stop investing in exploration and production maintenance, supply will fall sharply below demand.

Related Article: Geopolitical Turmoil Takes its Toll on ExxonMobil

Liquids Supply/Demand

By this logic, it is clear why Exxon doesn’t seem to worry about the future value of its assets. It has a secure future demand base, even if the environmental community pulls off a miracle and manages an 80 percent emissions reduction by 2050.

A corporation the size of Exxon, with annual revenues exceeding the gross domestic product of 167 countries, has considered every possible threat to its business model, climate change included. This is likely why the turn-around time on Exxon’s response to the carbon asset risk proposal was so short—they already knew their answer.

By Rory Johnston of Oilprice.com


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • carson on April 03 2014 said:
    I think the firm is purposely downplaying the negative side of the impact!

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News