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Engaging on climate policy

Society continues to face the dual challenge of meeting energy demand to support the economic growth needed for improved living standards, while simultaneously addressing the risks posed by rising greenhouse gas emissions and climate change.

While future temperature changes and the associated impacts are difficult to accurately predict, we believe the risks of climate change are real and warrant thoughtful action.

ExxonMobil supports advancement of the scientific understanding of climate change and is committed to providing affordable energy to support human progress while advancing effective solutions to address the risks of climate change. Our climate change risk management strategy includes four components: engaging on climate change policy, developing future technology, mitigating greenhouse gas emissions in our operations and developing solutions that reduce greenhouse gas emissions for our customers.

Climate change is a global issue that requires the collaboration of governments, companies, consumers and other stakeholders to create global solutions. We believe countries need to work together to craft policies aimed at mitigating greenhouse gas emissions that recognize the priorities and needs of both developed and developing countries. We engage stakeholders directly and with trade associations around the world to encourage sound policy solutions for addressing these risks.

Attributes of sound climate policy

ExxonMobil believes the long-term objective of effective policy is to reduce the risks posed by climate change at minimum societal cost, in balance with other societal priorities such as poverty eradication, education, health, security and affordable energy.

We fundamentally believe that free markets, innovation and technology are essential to addressing the risks of climate change. Success in developing and deploying impactful technologies will highly depend on governments creating a policy landscape that enables innovation and competition. Policies need to be clear and guard against duplicative, overlapping and conflicting regulations, which send mixed signals to the market and impose unnecessary costs on consumers. We believe that effective policies are those that:

  • Promote global participation;
  • Let market prices drive the selection of solutions;
  • Ensure a uniform and predictable cost of greenhouse gas emissions across the economy;
  • Minimize complexity and administrative costs;
  • Maximize transparency; and
  • Provide flexibility for future adjustments to react to developments in climate science and the economic impacts of climate policies.

Policies based on these principles minimize overall costs to society and allow markets to help determine the most effective and commercially viable solutions.

Given the wide range of societal priorities and limited global resources, all policies, including climate change policy, must be as economically efficient as possible. ExxonMobil believes that market-based systems that impose a uniform, economy-wide cost on greenhouse gas emissions are more economically efficient policy options than mandates or standards. This is because market-based policies more effectively drive consumer behavior and technology innovation, while mandates and standards eliminate consumer choice and can perpetuate ineffective technologies.

Since 2009, ExxonMobil has held the view that a properly designed, revenue-neutral carbon tax is a more effective market-based option than a cap-and-trade approach. A carbon tax is more transparent, can be implemented in existing tax infrastructure, avoids the complexity of creating and regulating carbon markets where none exist and reduces greenhouse gas emissions price volatility, thus delivering a clearer, more consistent long-term market price signal.

Only through a sound global policy framework will the power of markets and innovation enable society to find cost-effective solutions to address the risks of climate change, while at the same time continuing to address the many other challenges the world faces.

Up Close: Attributes of sound market-based policy

While market-based systems may have different designs and regional applications, we believe effective systems are those that promote global participation and are characterized as follows:

  • Apply to all greenhouse gas emissions across the economy;
  • Provide a uniform price for all greenhouse gas emissions;
  • Apply the costs of greenhouse gas emissions to the parties most able and likely to alter behavior in response to a price signal;
  • Prevent shifting of greenhouse gas emissions to unregulated jurisdictions;
  • Provide for linkages with other market-based systems outside the regulated jurisdiction;
  • Return revenue generated from the system back to the economy in an equitable fashion that encourages economic growth and limits regressive income effects; and
  • Provide for accurate and cost-effective greenhouse gas emissions measurement, verification and reporting.

Engaging stakeholders

Managing the risks of climate change will require increased innovation and collaboration. Therefore, ExxonMobil engages a variety of stakeholders — including policymakers, investors, consumers, non-governmental organizations (NGOs), academics and the public — on climate change issues of direct relevance to the company.

ExxonMobil actively advocates for responsible policies that would be effective in addressing the risks of climate change. When we encounter proposals, we offer informed data and policy analysis and engage in thoughtful debate. We have had hundreds of meetings with policymakers in the United States, The European Union and Canada to share our views on carbon pricing policy. We will continue to meet with policymakers and other stakeholders to discuss effective approaches to reduce greenhouse gas emissions. For information on ExxonMobil’s approach to political advocacy and contributions, see our contributions page.

Our chairman and members of the management committee have primary responsibility for — and are actively engaged in — managing climate change risks. The board of directors receives annual in-depth briefings that cover updates on public policy, scientific and technical research, and company positions and actions related to climate change. To drive improvement, our merit-driven employee development and compensation systems integrate performance in environmental areas, including emissions and energy efficiency.

In order to ensure that our corporate communications accurately reflect our internal policy positions, we employ a corporate-wide global climate change and greenhouse gas issue management team. As issues arise at the local, state, national and regional levels, our global team of experts evaluate and develop a company position on the issue. ExxonMobil employees also hold key leadership positions, including board of director positions, with many trade associations that engage on climate change issues, including the American Petroleum Institute (API), the International Association of Oil and Gas Producers (IOGP) and IPIECA, the global oil and gas industry association for environmental and social issues.

We believe an effective policy response to climate change requires a thorough understanding of the climate system. Our scientists have been involved in climate change research and related policy analysis for more than 30 years. This has resulted in hundreds of publicly available documents on climate-related topics, including more than 50 peer-reviewed publications.

While our long-standing and continuous involvement with climate science research, often conducted in collaboration with governmental bodies and leading universities, has advanced the company’s understanding of the climate system, ExxonMobil is committed to continued engagement with the climate science community in an effort to further develop the science. ExxonMobil contributes to a wide range of academic and other organizations that research and promote dialogue on addressing climate change risks.

Experts from our organization have participated in the UN Intergovernmental Panel on Climate Change (IPCC) since its inception. Most recently, our scientists contributed to the IPCC Fifth Assessment Report in lead author, review editor and reviewer roles. Our scientists also participated in the work of the U.S. National Academy of Sciences, including its work to review the third U.S. National Climate Assessment Report and provide advice to the U.S. Global Change Research Program.

Up Close: Outcomes from COP 21

In December 2015, parties to the United Nations (UN) Framework Convention on Climate Change convened in Paris for the 21st Conference of the Parties (COP 21). COP 21 resulted in a global agreement which, for the first time, commits all parties to undertake action on climate change and report on related progress. Key commitments of the agreement include:

  • “Each party shall prepare, communicate and maintain successive nationally determined contributions that it intends to achieve.”
  • “Each party shall communicate nationally determined contributions every five years.”
  • “Each party shall regularly provide … a national inventory report of anthropogenic emissions by sources and removals by sinks of greenhouse gases” and “information necessary to track progress made in implementing and achieving its nationally determined contribution.”

ExxonMobil believes that these commitments are a positive step in achieving global participation to address climate change risks.

For many years, ExxonMobil’s Outlook for Energy  has taken into account the potential for climate policies to become increasingly stringent over time and impose rising costs on energy-related carbon dioxide emissions. Preliminary analyses of the aggregation of intended nationally determined contributions, which were submitted by governments as part of the COP 21 process, indicate a greenhouse gas emissions trajectory similar to that anticipated in our Outlook.

ExxonMobil continues to support and contribute to efforts to reduce greenhouse gas emissions. We believe the risks of climate change are real and warrant thoughtful action. Meeting the climate change challenge will require action from all parts of society, including governments, civil society and the private sector. We believe it is possible to address climate change risks while also meeting growing global energy demand and supporting economic development.

Photo — Participants at the 21st Conference of the Parties in Paris, December 2015.

Engaging industry

ExxonMobil recognizes the growing interest in climate change risks and understands that stakeholders seek a better understanding of the positions of the oil and gas industry, as well as how individual companies approach the management of climate change risks within their own businesses.

IPIECA was established in 1974 at the request of the United Nations Environmental Program. As an active IPIECA member, ExxonMobil engaged with member companies in advance of the December 2015 COP 21 meeting in Paris in order to help develop a common industry position on global efforts to address and mitigate climate change risks. That work culminated in The Paris Puzzle — a publication on the challenges and responses needed to address the risks of climate change.

Recognizing the desire of stakeholders for more accessible and clear information, in 2015 we also took a key role collaborating with IPIECA and its member companies to create a voluntary reporting framework for oil and gas companies to publish their climate change risk management approach in a simple, straightforward and transparent manner. The resulting framework, which IPIECA will pilot during 2016, covers a wide range of climate-related issues and provides a consistent reporting methodology for the oil and gas industry. This framework should enable interested stakeholders to understand an individual company’s views on the issues central to addressing climate change risks.

Photo — We engage with IPIECA on a number of issues, including climate change risks. Rick Mire, environment, regulatory and socioeconomic manager, has represented ExxonMobil at IPIECA for more than a decade and has served as chair since 2012.

Up Close: ExxonMobil and the IPCC

For more than 25 years, the IPCC has provided periodic assessments of climate change, including information on the causes and impacts as well as potential response strategies. Experts from ExxonMobil have participated in the IPCC since its inception. In October 2014, the IPCC completed its Fifth Assessment Report, which offers an update of materials related to climate science, including the socioeconomic aspects of climate change and its implications for sustainable development. Our scientists contributed to the IPCC Fifth Assessment Report in lead author, review editor and reviewer roles.

The Fifth Assessment reports high confidence in the scientific certainty of many aspects of climate change, including that atmospheric greenhouse gas concentrations are rising in response to emissions, the earth’s temperature has warmed over the last century and that the risks associated with climate change will increase with the magnitude of atmospheric greenhouse gas concentration and temperature increases. The assessment notes that the ability to forecast the magnitude and pattern of future climate change remains less certain and confidence declines when moving from a global to local scale.

While the current scientific understanding of climate change leaves some unanswered questions, it is clear that the risks are real and warrant thoughtful action. ExxonMobil employs a risk management strategy and continually strives to improve our understanding of the impacts of climate change. As part of our Outlook for Energy analysis, we project an energy-related carbon dioxide (CO2) emissions profile through 2040. This can be compared with the energy-related CO2 emissions profiles from various scenarios outlined by the IPCC. When we do this, our Outlook emissions profile approximates the IPCC’s intermediate Representative Concentration Pathways 4.5 emissions profile in shape, but is slightly under it in magnitude.

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