ExxonMobil’s net zero ambition wins few plaudits

The world's biggest private-sector oil company has joined the other majors in adopting a net zero emissions ambition. Yet the limited scope of ExxonMobil's target is unlikely to head off a growing investor backlash.

The company is focusing on zeroing out emissions from operated assets by 2050. Still absent from its ambition is any reference to emissions caused by the use of its oil and natural gas products, which account for the vast majority and are the hardest to tackle. And ExxonMobil is still playing catch-up with European rivals such as BP and TotalEnergies, which have set more sweeping goals that include emissions from customers - known as Scope 3 - and plan to reduce their reliance on oil.

But the new target covering Scope 1 and 2 emissions represents somewhat of a sea change at ExxonMobil, whose chief executive Darren Woods once dismissed similar efforts by rivals as a beauty contest. And it possibly reflects the influence of three climate-minded independent directors who were elected to the board after a proxy battle last year. This did not stop activist shareholders from slamming the company's plan to address its carbon footprint as nothing more than greenwashing.

"Net zero by 2050 for only operations is really tokenism," says Mark van Baal, founder of Follow This, a shareholder group that has previously targeted oil producers including Shell and Chevron. "The elephant in the room is the emissions from Exxon's products, which account for around 90pc of their impact." Follow This is targeting ExxonMobil with a motion at this year's annual meeting that calls on the firm to reduce emissions across the board, including Scope 3.

Those emissions are at least five times larger than those covered by the company's plan, says Will Scargill, an analyst at analytics provider GlobalData. And the company's Scope 3 emissions are expected to rise by around 15pc in the next five years, he says, threatening to undermine ExxonMobil's latest efforts to cut its emissions. Woods says the company has been working for several years on ensuring it has a "line of sight" to meet the new target. Occidental is the only US oil company that has pledged to eliminate Scope 3 emissions, although its ambition relies on scaling up direct air carbon capture and storage (CCS) technology.

ExxonMobil also road-tested how its investments would change if the world adopted the IEA's Net Zero by 2050 scenario, which envisages a speedy pivot away from fossil fuels. Under the report's "extreme assumptions", the firm would expect most spending to be focused on low-carbon solutions by 2040.

Returns and reductions

Some analysts give the company's latest announcement the thumbs up despite their limited scope. "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," US bank Tudor Pickering Holt says. ExxonMobil's share price climbed back to its pre-pandemic levels following its announcement.

The company has identified more than 150 potential steps and changes that can be applied across its operations to reach the goal. ExxonMobil has already unveiled a net zero ambition for its Permian operations, covering 40pc of its US net oil and gas output, by 2030. And it has earmarked $15bn for low-carbon initiatives through to 2027- around 10pcof its planned capital expenditure over the period - including hydrogen and CCS, which need incentives to take off.

"Exxon's big bet on CCS is clearly contingent on further - and perhaps unrealistic - federal policy action," sustainability non-profit group Ceres' senior director for oil and gas, Andrew Logan, says. "It's very hard to tell right now whether the announcement is the beginning of a real and significant change in direction, or just an exercise in greenwashing."

By Stephen Cunningham

ExxonMobil 2030 GHG-reduction plans vs 2016*	%
Corporate-wide intensity	20-30
Upstream intensity	40-50
Methane intensity	70-80
Flaring intensity	60-70
Permian operations	Net zero
*Scope 1 and 2 from operated assets

ExxonMobil share price