An ocean oil rig (photo: bigstockphoto.com)
ExxonMobil has responded to a shareholders’ resolution with a detailed analysis of climate risks to the company's business future. The report acknowledges the seriousness of global warming, yet Exxon VP Ken Cohen tells host Steve Curwood that he does not expect carbon regulation to disrupt the company's core businesses.
CURWOOD: The International Energy Agency, the IEA, says that two-thirds of all fossil fuel reserves will need to stay in the ground to stop the earth warming more than two degrees Celsius.
Well, last week we talked with Danielle Fugere, the President of a shareholder advocacy group called As You Sow. Her group filed shareholder resolutions with major fossil fuel companies asking them to disclose their plans to cope with potential carbon regulation.
ExxonMobil is the world’s largest investor-owned gas and oil company, and the first to respond. So As You Sow withdrew its shareholder resolution, and ExxonMobil released a detailed outlook which acknowledges the reality of climate change and the possibility of future carbon regulation. But Ken Cohen, Vice President of Public and Government Affairs for ExxonMobil Corporation, believes demand for fossil fuels will remain strong. He spoke to us from Irving, Texas.
COHEN: The risk of climate change is clear and it warrants action, but it doesn’t exist as a risk in isolation. We have to manage the risk of climate change while at the same time that we provide economic opportunity, that we lift billions of people out of poverty. 1.3 billion people in the world do not have access to electricity. People around the world want the same things that you and I take for granted here in the United States. They want access to modern forms of energy. They would like to heat their homes. They would like air conditioning. They would like to have modern forms of transportation and all available sources of energy are going to be needed to meet this growing demand and both the IEA and ExxonMobil’s outlook predict that carbon based fuels are going to provide approximately 75 percent of global energy needs out to the year 2040.
CURWOOD: Now many of the world’s leaders, major world leaders including President Obama, have agreed that in order to keep global temperature rise below two degrees centigrade and avoid the worst consequences of climate change, we need to reduce our carbon emissions by as much as about 80 percent by 2050. What do you make of that?
COHEN: We factor into our energy outlook, and we expect, additional regulations that would apply to hydrocarbon fuels. In fact, we use a...what I would call a ‘proxy cost’ for carbon regulation in our annual energy outlook. And in fact, going out from today to the year 2040, we use as a proxy cost, about $80 a ton of carbon. Now when you think, today the European trading scheme, emissions trading scheme, has an $8 to $10 a ton price affixed to it, we are being very prudent in our planning process, in taking into account additional regulation on our business.
CURWOOD: So, if I understand you correctly, in looking through your report, it would seem that it would take carbon being $200 a ton to severely restrict the use of fossil fuels...that you see that as an unlikely outcome at this point?
COHEN: Again, we need to address the challenge of climate change in the context of other pressing societal challenges. And one of the most pressing the world is still dealing with is the economy, the strength of the economy. And governments are proceeding very cautiously in the application of regulations that are going to impose additional costs on consumers.
CURWOOD: You point out it’s really important to help less developed societies move forward in the modern world, but what about the question of using alternative energy to fuel that development as opposed to energy containing a lot of carbon.
COHEN: That’s a good question, and our outlook contemplates the continued growth of renewable energy on a global basis, and in fact, in our outlook, you will note that the fastest growth rate is attributable to renewables like wind and solar. But even with that almost heroic growth rate really for renewable fuels, we still project that energy demand will be met by over 75 percent of it is going to be coming from oil, gas, and coal. And that is because of the massive size of the global energy system, and the fact that the global population today is about seven billion people. In the year 2040, there will be about nine billion people, and the nine billion consumers of energy want the same things you and I take for granted.
CURWOOD: So what about the irony that the world’s poorest people in developing countries, those that you say need this increase in energy, are most at the risk from the threats of climate change?
COHEN: The way that we, as a society, address environmental challenges is through economic development and technology. And of the 1.3 billion people in the world that don’t have access to electricity, those societies need to continue to develop economically so that they are able to take on the environmental challenges that they face. The solutions to the problems that we’re dealing with have at their bedrock, economic development and technology application, developing technology and applying technology.
CURWOOD: So look into your crystal ball, Ken Cohen, and tell me what you expect Exxon to look like in the year 2050.
COHEN: Well, I believe...we’re a company that employs 18,000 scientists and engineers, and I’ve been with the company for three decades, and the things that we’re doing today from an engineering and technology standpoint are amazing. We have a number of very very bright and talented researchers that are focused on what the future may look like.
CURWOOD: So what does that mean for your solar and wind portfolio?
COHEN: Well, so far, we have...we used to...it’s interesting, in my career, the company actually was a large player in solar energy, but we got out of that business a number of years ago because we couldn’t make money in solar energy. If we see an opportunity that matches up well for the company, then I’m sure that we will consider getting back into that space. But right now, we have our hands full doing two things, which is producing the energy that the world is running on today, but while we’re doing that, continuing to focus on reducing the greenhouse gas emissions footprint associated with that activity.
CURWOOD: Ken Cohen is Vice President of Public and Government Affairs for ExxonMobil Corporation. Thanks for taking the time with me today, Ken.
COHEN: Steve, thank you for the opportunity to talk about these issues.
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