The Guardian reports, "When an international group of 77 institutional investors with more than $3tn in assets asked the world's 45 largest fossil fuel companies to assess the risks that climate change poses to their business, they were aware they were asking a tough, complex question.
Knowing this, investors launched the Carbon Asset Risk Initiative to spur fossil fuel companies to assess the risks climate change poses to their business based on two scenarios: a business-as-usual scenario under which the world's fossil fuel use continues to grow, warming the earth to levels society may not be able to adapt to; and a low-carbon scenario where governments achieve their stated goal of limiting the average temperature rise to below 2C.
Many of the 45 companies that received this request are responding – among those, Exxon Mobil, the world's largest publicly traded energy company, which agreed to publish a report after investors agreed to withdraw a pair of related shareholder resolutions.
Exxon Mobil does expect increasing government action to curb emissions, but not to the level required to limit global warming to below 2C, which the company claims would be unaffordable. In fact, the report says the emissions projections in the company's Outlook for Energy are comparable to the Intergovernmental Panel on Climate Change scenario that projects a temperature rise well above the international two degree goal. The company focuses on the costs of action and largely ignores the costs of inaction, suggesting that policymakers should balance mitigation, adaptation, and other social priorities.
This key issue – that inaction on climate change will carry significant economic costs – was underscored by a report the Intergovernmental Panel on Climate Change (IPCC) released the same day as Exxon Mobil's report. According to the IPCC, "Throughout the 21st century, climate-change impacts are projected to slow down economic growth, make poverty reduction more difficult, further erode food security, and prolong existing and create new poverty traps."
To make the case that a low carbon scenario would be unaffordable, Exxon Mobil cites a 2008 International Energy Agency (IEA) report that concluded: "To halve today's emission levels would require additional investments of the order of USD 45 trillion." What the company does not point out is the second half of IEA's conclusion, which said: "Although this is a large number in absolute terms, it is small relative to the expected growth in global economic activity over the next forty years - and small relative to the cost of inaction." More recently, the IEA said in 2012 that achieving a low carbon scenario would be affordable, requiring an investment of $36tn that would generate fuel savings of more than $100tn.
Considering that Exxon Mobil not long ago denied the science of climate change outright, this report shows the company has come a long way and this is an important step forward.
No one can predict the future. The oil and gas industry is accustomed to boom and bust cycles and also has a history of overestimating demand. Exxon Mobil itself paid tens of billions for its shale gas specialist subsidiary XTO just before the natural gas price dropped precipitously. Profits from the investment have yet to materialize, demonstrating that even Exxon Mobil can be wrong about the future".
