Last week, I participated in the 2nd Conference on Fossil Fuel Supply and Climate Policy at the University of Oxford in England. It was an exciting opportunity to discuss policies and actions aimed at limiting the supply of coal, oil, and natural gas with academic researchers, civil society leaders, and other experts from across the globe. Along with my UCS colleague Peter Frumhoff, I organized a panel on “Well Below 2°C Reporting by Major Fossil Energy Companies: The Good, the Bad, and the Ugly.” Since the 2015 adoption of the Paris climate agreement, companies such as Chevron, ExxonMobil, and Royal Dutch Shell have begun to publish reports in response to mounting investor demands that they disclose their plans for a world in which global temperature increase is kept well below two degrees Celsius (2°C) above pre-industrial levels. Panelists looked at climate risk reporting by major investor-owned oil and gas companies from legal, shareholder, scientific, and advocacy perspectives.
You can watch the whole session here. Below are a few highlights.
No progress in reducing emissions that matter most
Peter Frumhoff of UCS provided an overview of the growing demand by the business and investment community for well below 2° Celsius scenario planning by fossil energy companies—including, for example, the shareholder resolution that passed by a two-to-one margin at ExxonMobil’s 2017 annual meeting. He teed up the discussion with a provocative quote from a recent report on Paris-compliant shareholder engagement by the US-based nonprofit shareholder advocacy group As You Sow:
“One hundred and sixty climate change shareholder resolutions were filed at 24 U.S. oil & gas companies between 2012 and 2018… These resolutions resulted in a range of successes—from appointing climate competent board members to reducing some operational greenhouse gas emissions.
“Despite this movement, none of these U.S. oil & gas companies have adopted plans, or targets, to limit their full lifecycle contribution of greenhouse gas emissions…. Specifically, there has been no material progress in reducing the emissions that matter most, Scope 3 product emissions, in alignment with the Paris Climate Accord.
“These emissions, because of their size and scale, are the relevant proxy for assessing company progress on climate change goals, as is a company’s disclosure of Paris compliant business plans to rapidly ramp down these emissions.
“The fact that global greenhouse gas emissions, and oil & gas company capital expenditures on exploration and production, keep rising signals a fundamental limitation of the current shareholder engagement strategy.
“Shareholders must grapple head-on with the implications of an oil & gas business model that continues to invest unabated in products which, when used, run counter to science-based targets and the Paris Agreement.”
Sophie Marjanac of ClientEarth sketched out the reporting that oil and gas companies are currently doing in the context of existing climate change disclosure obligations and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). She then outlined potential climate-related litigation risks to companies, including failure to mitigate global warming emissions, failure to manage physical and transition risks of climate change, and inaccurate reporting of climate risks.
Jo Alexander a former BP geologist now with the UK-based responsible investment charity ShareAction, showed the power of shareholder resolutions to influence climate-related financial disclosures. She zeroed in on the climate risk disclosure resolutions that won the support of 98% of BP and Shell shareholders in 2015, the companies’ response since then, and the forward-looking information that socially responsible investors need to align their investment portfolios with the goals of the Paris climate agreement.
Ben Franta of Stanford University, standing in for Geoffrey Supran of MIT and Harvard, gave a quick overview of Geoffrey’s peer-reviewed study (with Naomi Oreskes) of ExxonMobil’s misleading climate change communications (read my blog about the study here). Ben then walked us through Geoffrey’s proposal to bring a content analysis approach to so-called 2°C reporting by major oil and gas companies. As a case study, Geoffrey examined how explicitly ExxonMobil and Shell acknowledged climate change as real and human-caused in their climate risk reports vs. in their broader communications and actions. Ben added his own analysis of how these companies use words like “address” or “risks” (instead of “halt” or “harms”) to obscure the dangers of climate change—just as tobacco companies use similar language to downplay the deadly effects of their products and shift the responsibility onto their consumers.
Myles Allen of the University of Oxford pointed out that ExxonMobil’s 2018 Energy and Carbon Summary projects no emissions reductions from the energy sector through 2040 and no date by which emissions must reach net zero. Myles proposed three simple questions—based on the Oxford Martin Principles for Climate-Conscious Investment— that activist investors could be asking of fossil energy companies:
- At what global temperature will your activities, and the products you sell, be consistent with net zero carbon dioxide emissions?
- What is your strategy for achieving net zero, and who will pay for it?
- How do you propose to monitor progress to net zero as the world warms?
Sneak preview of scorecard findings
I closed by giving a sneak preview of findings from the forthcoming 2018 update to UCS’s Climate Accountability Scorecard in three areas that are particularly salient to interpreting major oil and gas companies’ so-called 2°C reports:
- How are they aligning their own business models with net-zero emissions?
- To what extent are they directly supporting Paris-aligned public policies?
- How well do they ensure that business groups lobbying on their behalf actually support their stated positions on climate change?
(Spoiler alert: most of the scores were “poor” or “egregious”, meaning that the eight companies we studied are, by and large, falling short of emerging societal expectations—or, worse, acting very irresponsibly—in these areas. Keep an eye out for the full scorecard report later this month.)
Three immediate demands
Then I suggested three things that shareholders, policymakers, and others should be demanding of these companies in the immediate term:
- Set a company-wide, net-zero emissions target consistent with the Paris climate agreement’s global temperature goal.
- Publicly and consistently advocate for specific policies and/or regulations to implement the Paris climate agreement.
- Disavow positions and actions taken by affiliated third parties that are inconsistent with their stated positions on climate science and policy.
ExxonMobil, Chevron, and Occidental Petroleum recently made a media splash by becoming the first US-based companies to join the Oil and Gas Climate Initiative (OGCI), which aims to reduce the industry’s carbon footprint through investments and policy advances. The OGCI subsequently announced a target to reduce the collective average methane intensity of its members’ upstream operations. While these moves are welcome, none of the companies UCS studied has set a company-wide, net-zero emissions target consistent with the Paris climate agreement’s goal of holding global temperature increase well below 2°C above pre-industrial levels and pursuing efforts to limit it to 1.5°C.
Furthermore, even companies that are members of the OGCI simultaneously hold leadership positions in trade associations and other industry-affiliated groups that spread disinformation about climate science and/or seek to block climate action.
Until BP, Chevron, ExxonMobil, and Shell make a public break from climate deception and climate policy obstruction by groups such as the American Petroleum Institute and the National Association of Manufacturers, they are at best canceling out any positive impact they could have through OGCI. Worse still, they are fueling speculation that this and other industry-led initiatives are nothing more than a smokescreen by an industry that is pulling out all the stops to resist the clean energy transition.