May 26, 2021: A Day of Reckoning for Big Oil

May 26th, 2021 was a day that forced oil and gas companies — specifically Exxon, Chevron and Shell, but with implications for every company across the globe — to reckon with their responsibility for the climate crisis and their strategies to survive in a world that must dramatically cut industry pollution.

It was also a day that highlighted: a significant divide between European and US oil and gas majors on their approaches to meet climate obligations. (Noting here, of course, that no company has put forth a plan to do enough).

In Europe, companies like Shell, BP, and TOTAL have made promises to shift away from extraction of oil and increase investment in renewable energy. In the US, companies like Exxon, Chevron and Occidental have doubled down on a commitment to fossil fuels but added a new promise to use unproven technology to capture oil and gas pollution and bury it underground.

Yesterday was a rebuke of both approaches.

Out of Europe, the good news first

Rejecting Royal Dutch Shell’s claim that individual private companies should not be held responsible for climate change, a Dutch Court issued an order requiring the company to do better by reducing pollution 45% by 2030 (including scope 1, 2, and 3 emissions). The court’s decision–based on human rights law–acknowledged that these measures would “serve the interest of the entire world population in curbing dangerous climate change caused by CO2 emissions.” The decision also came with a requirement for Shell to begin these emissions reductions efforts immediately, regardless of any appeals. 

This is one of the first times a court has ruled on a demand for a company to reduce its emissions in line with human rights law and has set a solid precedent for further efforts to force other oil and gas companies (at least those operating in the E.U.) to do the same.

On the other side of the pond, the OK news

On the same morning, in the United States, a very different scenario was playing out at ExxonMobil and Chevron’s Annual General Meeting. Here, it was investors who were forcing these oil and gas companies to do better on climate.

At ExxonMobil Shareholder group Engine No. 1 won a proxy battle to replace at least two of Exxon’s board members with candidates they felt would put the company on a path to handle “the immense risk to ExxonMobil’s current business model in a rapidly changing world” including a pledge to reduce its emissions to net zero by 2050, something that most U.S. oil and gas companies have not pledged to do.

Meanwhile at Chevron, 61% of investors voted to back a proposal that would force the company to cut its scope 3 emissions. The vote went against the wishes of Chevron CEO Mike Wirth, who believed that the company was already offering ways for their customers to reduce emissions. To date Chevron has only made promises to cut scope 1 (direct emissions from the production process) and scope 2 (indirect emissions from the production process) emissions, which only make up 10% of the emissions associated with their oil and gas product. The other 90% comes from scope 3 emissions which are the emissions associated with the actual burning of their fossil fuels.

Still So Far to Go

The ground is moving fast under the feet of oil and gas company executives.  Whether making promises that fail to meet climate goals in Europe or trying to re-entrench in fossil fuels in the US, oil and gas companies are getting punished for not doing enough on climate.

According to the International Energy Agency–which was originally founded to prevent global disruptions in oil supply –the world cannot afford new fossil fuel expansion. Yet no company has made a commitment to stop oil and gas exploration and companies continue to pollute methane into the atmosphere at alarming rates. Neither has any government, unfortunately.

Oil and gas companies will continue to find themselves on the wrong side of history until they support a just transition to a fossil free economy.  This will not happen overnight but we know that cutting methane is one the fastest ways to slow global warming

So, if companies want to prove they are part of the solution, a great first step would be to support a growing call to the Biden Administration to use the full force of the Clean Air Act to cut methane 65% by 2025. If we cannot all get behind that–regardless of what side of the pond we are on–then we cannot prevent the climate crisis.

 

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