How Do Oil Companies Become Carbon Neutral?
In a speech at Switzerland’s World Economic Forum in January 2020, Swedish climate activist Greta Thunberg said, “Forget about net zero, we need real zero.” Companies aren’t forgetting about net zero, and many of them—including ExxonMobil (NYSE:XOM)—are setting new carbon-neutral goals.
How does an oil company manage to become carbon neutral? Let’s look at the logistics and see if ExxonMobil’s latest goal is feasible for climate sustainability.
ExxonMobil has pledged net-zero emissions by 2050.
ExxonMobil announced on Jan. 18 that it plans to achieve net-zero greenhouse gas emissions for operating assets by 2050. The company pairs the goal with an emission-reduction roadmap defining how it will achieve this.
The new goal is an addendum to the existing 2030 emission reduction plan, which specifies that the company’s Permian Basin operation will produce net-zero emissions by that time. Now, ExxonMobil is upping the ante to adhere to the latest research that suggests limited sustainability isn't enough.
The latest move comes months after ExxonMobil’s boardroom coup.
By June 2021, a small and impact-driven hedge fund called Engine No. 1 managed to score three seats on ExxonMobil’s board of directors. The sustainability-minded voting power was a big deal for ExxonMobil. Engine No. 1 members wanted to use their platform to push renewable energy investments and fossil fuel divestments.
A 2050 net-zero goal isn't that, and many people consider it a greenwashing effort in an increasingly climate-focused shareholder landscape. However, the gig isn't up—and it’s possible that ExxonMobil’s fresh-faced board members could make a tangible change moving forward.
How oil companies achieve net zero despite unsustainable emissions?
It’s time to address the elephant in the room. How can an oil company (the epitome of unsustainable operations) claim sustainability through net-zero goals?
ExxonMobil states that it will prioritize three methods to help it achieve net-zero emissions within the next 28 years:
Carbon capture and storage
The first point, carbon capture and storage, wouldn't reduce ExxonMobil’s environmental impact. Instead, it would offset that impact. ExxonMobil would have to conduct a lot of carbon capture in order to achieve net-zero emissions at its current production. A switch to alternative fuels and renewable energy would reduce the load that it would need to offset.
From 2016–2019, ExxonMobil spent more than $220 million on corporate promotion advertisements in the U.S. The ads mainly focused on algae biofuels research and efficient vehicles—two things that make up a minute portion of ExxonMobil’s overall business.
ExxonMobil’s net-zero goal excludes Scope 3 emissions.
ExxonMobil’s net-zero goal only includes Scope 1 and 2 emissions, which are emissions from owned or controlled sources, plus indirect emissions from purchased energy generation that the company consumes.
The net-zero goal entirely excludes Scope 3 emissions, which “includes the indirect emissions resulting from the consumption and use of the company’s products.”
Why is there a major focus on decarbonization?
BlackRock CEO Larry Fink wrote in his annual letter, “The next 1,000 unicorns won’t be search engines or social media companies, they’ll be sustainable, scalable innovators—startups that help the world decarbonize and make the energy transition affordable for all consumers.”
Carbon capture isn't the be-all-end-all for sustainability, but it’s something. Experts worry that corporations are using it as a crutch and avoiding real change. Perhaps more impact-focused board members will enter the arena, but until then, net-zero goals set for decades from now continue to roll in.