ExxonMobil believes the long-term objective of effective policy should be to reduce the risks of climate change at minimum societal cost, in balance with other priorities such as poverty eradication, education, health, security and affordable energy.
Climate change is a global issue that requires the collaboration of governments, companies, consumers and other stakeholders to create worldwide solutions. We engage with stakeholders directly and through trade associations around the world to encourage sound policy solutions for addressing climate change risks.
We believe that free markets, innovation and technology are essential in addressing the risks of climate change. Success in developing and deploying technologies will be highly dependent on governments creating a policy environment that enables innovation and competition. Policies should be clear and guard against duplicative, overlapping and conflicting regulations, which may distort markets 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 change policies.
Given the wide range of societal priorities and limited global resources, all policies should be as economically efficient as possible. ExxonMobil believes that market-based systems that place a uniform, predictable cost on greenhouse gas emissions are more effective policy options than mandates or standards. Market-based policies more effectively drive consumer behavior and technology innovation, while mandates and standards limit consumer choice and can perpetuate ineffective technologies.
We recently joined the Climate Leadership Council as a founding member. The council advocates for a revenue-neutral carbon tax and aligns closely with our longstanding principles.
Performance and initiatives
We engage a variety of stakeholders on climate change issues — including policymakers, investors, consumers, nongovernmental organizations (NGOs), academics and the public to actively advocate for responsible policies that would be effective in addressing the risks of climate change. We offer data and policy analysis on proposals and engage in constructive debate. For example, we have had hundreds of meetings with policymakers around the world to share our views on carbon pricing policy. Learn more about ExxonMobil’s approach to political advocacy and contributions.
Our chairman and members of our management committee have primary responsibility for managing climate change risks for ExxonMobil and our operations. 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.
As issues related to climate change arise at the local, state, national and regional levels, our global team of experts evaluates and develops a company position consistent with our principles. 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, resulting in hundreds of publicly available documents on climate-related topics, including more than 50 peer-reviewed publications.
ExxonMobil experts have participated in the United Nations 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 to provide advice to the U.S. Global Change Research Program.
ExxonMobil 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.
As an active IPIECA member, ExxonMobil engaged with member companies in advance of the 2015 Conference of Parties (COP) 21 meeting in Paris to develop a common industry position on global efforts to address climate change risks. That work culminated in The Paris Puzzle — a publication on the challenges and responses the industry believes are needed to mitigate the risks of climate change. In advance of the 2016 COP 22 meeting in Marrakech, ExxonMobil further engaged with IPIECA members to explore solutions for transitioning to an energy system with lower greenhouse gas emissions. This work resulted in Exploring low-emissions pathways: Advancing the Paris Puzzle, which was published in November 2016.
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 is currently being piloted by several IPIECA members, including ExxonMobil — covers a wide range of climate-related issues and provides a consistent reporting methodology for the oil and gas industry. This framework enables interested stakeholders to understand an individual company’s views on the issues central to addressing climate change risks.
Up Close: Outlook for Energy and business planning
Each year, we update our long-term energy demand projection in our Outlook for Energy, taking into account the most up-to-date demographic, economic, technological and climate policy information available. This analysis serves as a foundation for our long-term business strategies and investments, and is consistent with other credible forecasts such as the International Energy Agency’s (IEA) New Policies Scenario.
Our Outlook reflects increasingly stringent climate policies and is consistent with the aggregation of pledges that were submitted by signatories to the United Nations Framework Convention on Climate Change (UNFCCC) 2015 Paris Agreement. Our Outlook seeks to identify potential impacts of climate-related policies — which often target specific sectors — by using various assumptions and tools, including application of a proxy cost of carbon to estimate potential impacts on consumer demands. Key insights from The Outlook include:
- From 2015 to 2040, global demand for energy is expected to increase by about 25 percent and will require all forms of energy;
- Oil will remain the world’s primary fuel through 2040 due to transportation and petrochemical demand;
- Natural gas will grow more than any other energy source, overtaking coal as the world’s second- largest energy source, due to power generation and industrial use;
- Wind, solar and biofuels will average combined growth of about 5 percent per year — by 2040 these resources will comprise about 4 percent of global energy demand;
- Conventional cars will remain most popular due to cost, functionality and increasing fuel efficiency through technology improvements. Decreasing battery costs are likely to enable small, shorter-range electric cars to account for approximately 10 percent of new car sales by 2040; and
- Energy-related CO2 emissions will peak in the 2030s, then gradually decline.
To enhance the robustness of our Outlook, we assess a wide range of assumptions for key supply-and-demand drivers to test the range of potential energy mix outcomes. Many third-party scenarios that represent a 2-degree Celsius pathway, including IEA’s 450 Scenario, show natural gas demand continuing to grow and oil continuing to play a prominent role in meeting the world’s energy demand through 2040. Even under the 450 and the New Policies scenarios, substantial upstream oil and gas investment of $11 trillion to $18 trillion will be needed through 2040 to meet global demand. While ExxonMobil currently contributes less than 3 percent of global production, we are well-positioned to support additional development required to meet demand as a result of our diverse resource base, superior project execution capabilities and industry-leading, long-term returns on capital employed.
We evaluate potential investments and projects using a wide range of economic conditions and commodity prices; we also financially stress test our investment opportunities, which provides an added margin against uncertainties and further enables us to consider various market environments and investment drivers in our planning and investment process. All business segments are required to include, where appropriate, an estimate of the costs associated with greenhouse gas emissions in their economics when seeking funding for capital investment.