ExxonMobil Starts New Low Carbon Emissions Business

Image from Bloomberg Green

ExxonMobil has historically stayed focused on fossil fuels, even as activists called for action on climate change. The Wall Street Journal points out that, “Exxon hasn't invested substantially in renewables, instead choosing to double down on oil and gas, arguing the world will need vast amounts of fossil fuels for decades to come.”

But last week, the oil giant announced a new business to commercialize its extensive low-carbon technology. The new business, called ExxonMobil Low Carbon Solutions, will start with $3 billion in investments through 2025. 

Emission reduction efforts will initially focus on carbon capture and storage. ExxonMobil outlined plans for more than 20 new opportunities, all aimed at enabling large-scale emission reductions.

The move comes after activists and investors have pressured the ExxonMobil board to do more—and do it faster—to reduce the company’s carbon footprint and improve financial outlook. 

ExxonMobil endured one of its worst financial performances ever in 2020. Engine No. 1 LLC, an activist investor group, has argued that the company should focus more on investments in clean energy while cutting costs elsewhere to preserve its dividend.

Recapturing Investors (and Carbon)

Some in the oil and gas industry see carbon capture as a way to lower the carbon footprint of fossil fuels. ExxonMobil currently uses a process called enhanced oil recovery, which pumps carbon into older oil and gas reservoirs to increase pressure and produce more fossil fuels. Most of the CO2 is pumped up from the ground as a byproduct, and then it’s processed and sold to nearby crude operators to enhance their oil recovery.

Investors and advocates claim ExxonMobil’s announcement doesn’t go far enough. Several of the projects touted by ExxonMobil aren’t even new, and the planned investments represent less than 5% of its capital budget.

Coalition United for a Responsible Exxon (CURE), a global spectrum of stakeholders focused on sustainability, wrote in a statement, “Exxon has ignored both the desires of its key stakeholders and the financial risks and opportunities of the transition happening in energy markets toward cleaner, more sustainable forms of energy. This is no longer tenable.”

Another loud voice working to push for sustainability practices at ExxonMobil is Engine No. 1, an activist investment firm. In its response to the announcement, it said, “Today’s patchwork of announcements do not materially alter ExxonMobil’s long-term trajectory nor do they position it to succeed in a changing world.” 

These activist investor groups have been calling for ExxonMobil to refresh its board and to put a larger focus on green initiatives. 

Asking for Green

As it announces these carbon capture initiatives, ExxonMobil is pushing for government support to make the technology more commercially attractive. It has supported an existing tax credit in the U.S. (45Q, for those who want to follow along at home) for companies that capture and store carbon. In general, oil majors have been unwilling to invest heavily in carbon capture without extra government support or regulation.

When it comes down to it, we see the ExxonMobil announcement as a big deal, coming from a company historically focused on maximizing traditional fossil fuels and ignoring the activist shareholders or pivoting for the energy transition.