How much climate change will cost Exxon
A sign hangs at an Exxon Station July 31, 2008 in Miami, Florida.
The oil and gas industry is slowly coming to grips with the hard truth about its business model: Extracting and burning fossil fuels is at odds with efforts to reduce carbon emissions. And shareholder activists have been making demands on oil and gas companies to address this issue. Now Exxon Mobil, the biggest oil company in America, has agreed to do just that.
Exxon will release a report at the end of this month, detailing the impact that carbon emission regulations will have on its bottom line.
That Exxon is releasing this report is a sign that the company's thinking about climate change has evolved, says Mark Brownstein, vice president and chief council of the U.S. Climate and Energy Program at the Environmental Defense Fund.
"Many years ago they were thought to be the champions of the climate denier club ,and now what you are seeing is that there is a certain maturity, a realization that the challenge is real."
The report Exxon will release will lay out the costs that carbon regulations could have on the company’s future projects. For example, Exxon wants to extract billions of barrels of crude from tar sands in Canada, but that’s an energy intensive process. So the margins on profits are already narrow, and emissions regulations could make that margin even narrower. Just how narrow is exactly the kind of information that shareholders want to know.
"They owe it to the shareholder," says Fidel Gheit, a senior oil analyst with Oppenheimer. "They have to state their position and educate the politicians and the public about the ramification of imposing this cost.”
This report is necessary if Exxon wants to be a part of the debate over how to regulate carbon emissions, Gheit says. "It is probably the biggest issue that the world will have to grapple with. And Exxon, because of its position as the largest energy company in the world, they have to have a voice in the debate."
Exxon is the first major oil company to release this information, which sends a message to other shareholder activists that they, too, have a voice in this debate.