Thursday, February 08, 2007

My Date with the Giant Part 2: Exxon on Global Warming Solutions

(Part 1 can be found here)

In our conversations and in comments made over at Green Options, ExxonMobil’s Vice President of Public Affairs, Ken Cohen, has been explicit with his company’s position that global warming is happening, human activity is causing it, and something has to be done about it.

But the waters get a bit muddy when he is asked Exxon’s opinion on the best route to take to slow global warming. For example, Cohen explained that any carbon policies that are enacted need to be global in nature:

If we focus on Western Europe and focus on the USA to the exclusion of the developing economies in Asia, we’re not successfully addressing the problem…The developing world must be encouraged to join us.

But at the same time, he continued, industrialized nations should recognize that carbon emissions aren’t high priorities in many developing countries, where issues like public health and education take precedence.

So, Tom Yulsman from Prometheus asked, does that mean Exxon would support a cap-and-trade program? Cohen explained that Exxon is “not anti cap-and-trade or pro cap-and-trade. The devil’s in the details.”Does this mean that Exxon would favor a carbon tax instead? asked Susan Smith of the Environmental Law Prof Blog. Cohen answered that most economists have found that a carbon tax makes the most sense because of its efficiency and because it doesn’t favor one sector of the economy over the other. Again, though, “the devil’s in the details.”

I was perplexed. Exxon believes that action should be taking to mitigate global warming, but doesn’t appear to have a course of action. It seemed that they were advising a rather slow, cautionary approach and insisting every question under the sun be answered before a particular policy direction is taken. I’m not advocating that we rush to impose sky-high gas taxes or outlaw air conditioning either, but the world has got to take decisive action now to make a difference.

So in an email, I asked Cohen what a market-based solution to global warming would like, if Exxon had its way. Although Exxon does not officially endorse any particular policy, it does envision

…a world-wide approach in which countries take action - but these action steps look different depending on where you are starting. For example, a cap and trade approach might not be a viable proposition for rapidly growing economies in the developing world. Options like a carbon tax and cap and trade are under consideration (or, are actually in place) in several countries in the [Organization for Economic Cooperation and Development], but as we discussed, the design features of these specific policy measures can vary significantly.

A market-based solution would preferably be something applied to the broadest possible cross section of the economy…We believe there are existing policy mechanisms that would be available to take into account different market-based approaches to climate policy.

Cohen is very aware that Exxon’s stamp of approval on any policy could also be the death of it. During our phone conversation, in response to a question by Stuart Staniford of The Oil Drum as to whether anyone would take Exxon seriously on its global warming commitment, Cohen admitted that if Exxon came out in favor of a particular policy, many people’s first reaction would be: “If Exxon’s for it, then something must be wrong with it.” I saw this myself when I commented to a colleague about Exxon’s lack of investment in renewable energy projects like wind and solar. “Good,” he said. “They’d just screw it up anyway.”

But Exxon has to stay competitive in this changing fossil fuel market. Its competitors like BP and Chevron are increasing their use of renewable energy and are talking about impending carbon regulation. I asked Cohen, “What is Exxon doing on the ground right now to prepare for carbon regulation and the shift to renewables? How is the company assuring its investors that they’re staying competitive with this regulation coming down the pipeline?”

The answer I got was perhaps one of the most straightforward of the conversation.

Cohen flatly stated that until Exxon sees its competitors making money from renewable energy projects, Exxon is keeping its distance. The company invests heavily in biofuels, is the biggest blender of ethanol in the United States, and the most efficient petrochemical company, according to him. But Exxon will only work with technologies that are “robust enough to stand on their own two feet” and at this time, solar and wind don’t fit the bill.

Good news, Mr. Cohen! Chevron is reporting double digit increases in revenues from renewable energy projects, and last May, BP recorded its first profits from its solar division. Looks like this is the perfect time for ExxonMobil to make a move into the renewable energy market and diversify its business. I’ve got great recommendations on some flat land in the Upper Midwest that could use a few wind turbines.

Cross posted on Green Options.

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