Exxon Mobil Corp. announced Jan. 18 that it would aim to eliminate net emissions from its own operations by 2050, making it the last of the supermajor global oil and gas companies to publicly disclose a net-zero goal.
Exxon said it intends to spend $15 billion over the next five years — $3 billion per year, or
The company did not detail how much money it would allocate to each project category, but it said its interim goal was to cut emissions from its own operations — known as Scope 1 and Scope 2 emissions — by 20% by 2030 and to net-zero by 2050.
U.S. peer Chevron Corp. rolled out a similar net-zero plan in September 2021. European rivals including Royal Dutch Shell PLC, BP PLC and TotalEnergies SE previously announced net-zero goals that would add renewable resources to their energy holdings while backing out of fossil fuels.
Exxon's plan — which does not target any reduction in Scope 3 emissions, or those that come from a company's value chain and its consumers — did not go far enough to satisfy its critics. However, they described the company's acknowledgment of the need to limit carbon emissions as a breakthrough.
Plan criticism
"It's a portion of a portion of a plan," said Andrew Logan, senior director for oil and gas at investor network Ceres, which focuses shareholder activism on sustainability and environmental issues.
Logan said he was encouraged by the supermajor's move. "It's a down payment on a more ambitious plan," Logan said. "To me, it's the tangible sign that [shareholders] are having an impact."
Exxon shareholders elected three new board members in 2021 who were nominated by activist hedge fund Engine No. 1 LP, which has called for the huge oil and gas producer to prepare for a lower-carbon future. Engine No. 1 explicitly invests based on environmental, social and governance factors and data. The fund had no comment on Exxon's Jan. 18 net-zero announcement.
"Moving to zero emissions — even for own operations — is a huge change for a big organization like Exxon," industrial organization and innovation professor David Victor said in an email. Victor is the author of a paper that concluded traditional oil and gas companies must either transition to a low-carbon future or become extinct. The paper supplied Engine No. 1 with the rationale for its proxy fight for board seats.
Exxon's new plan "involves disruption of the status quo," said Victor, who teaches at the University of California San Diego. "Deep disruption means deep uncertainty, and big organizations approach these kinds of problems experimentally — they test stuff," Victor said. "The challenge is that the lack of specificity could be evidence of the lack of effort or the lack of any ability to know what exactly to do. And given the history of Exxon on climate, most folks on the outside don't know what to believe."
Historically, Exxon has tried to distance itself from the idea that human activity contributes to climate change.
Benefits for Exxon
More and more investors are filtering their decisions through an ESG lens, so the announcement could be helpful for the company, said Jake Leiby, senior analyst for investment-grade oil and gas companies at credit research firm CreditSights.
"These targets don't change Exxon's emissions overnight [or] change Exxon's carbon footprint overnight," Leiby said. What the announcement does is give ESG investors a rationale for buying Exxon stock, Leiby said.
Critics said the biggest gap in Exxon's plan is the lack of a Scope 3 emissions reduction target, such as cutting the carbon emissions of cars and planes that use Exxon fuels. U.S. oil and gas companies have resisted being considered accountable for customer emissions, saying that accountability should fall to customers.
"Today's announcement reflects a step forward for ExxonMobil," Carbon Tracker's head of oil, gas and mining Mike Coffin said in an email. But Coffin also noted that "by failing to incorporate Scope 3 emissions into its targets, it continues to lag the majority of its peer competitors (particularly Europeans), as well as failing to link through to finite planetary limits." Carbon Tracker is a London-based think tank devoted to analyzing the financial impact of the energy transition.
Matt Murphy, an analyst at energy investment bank Tudor Pickering Holt & Co., also noted the lack of Scope 3 goals in a Jan. 19 note to clients but gave Exxon's plan an overall favorable review. "We see the company's approach as striking the right mix in balancing the outlook for returns as well as addressing concerns on disclosures and emissions reduction," Murphy said.