Proxy Memo: ExxonMobil Corp.
AGM: May 27, 2009 in Dallas, TX
Item #11: Greenhouse Gas Emissions Goals
SUBJECT: Grounds for a Yes vote on ExxonMobil shareholder resolution requesting the
company to adopt greenhouse gas reduction targets
DATE: April 2009
CONTACTS: Sister Patricia Daly, Sisters of St. Dominic of Caldwell, NJ
(973) 509-8800, email@example.com
Tracey Rembert, SEIU
(202) 730-7039, firstname.lastname@example.org
Re: Proxy Advisors should support Item 11, requesting greenhouse gas emissions goals for
products and operations.
Resolved: “Shareholders request that the Board of Directors adopt quantitative goals, based
on current technologies, for reducing total greenhouse gas emissions from the Company’s
products and operations; and that the Company report to shareholders by September 30,
2009, on its plans to achieve these goals. Such a report will omit proprietary information and
be prepared at reasonable cost.”
Rationale for a Yes vote:
1. ExxonMobil’s shareholders bear significant financial and competitive risk if
ExxonMobil remains unprepared to meet existing and impending requirements to
reduce greenhouse gas (GHG) emissions from its operations and its products.
Quantitative reduction goals provide the clearest signal to investors.
2. ExxonMobil’s climate risk preparedness lags behind supermajor peers.
EXXONMOBIL’S SHAREHOLDERS BEAR SIGNIFICANT FINANCIAL AND COMPETITIVE RISKS
By virtue of its carbon-intensive products and long capital horizons, the oil sector is uniquely
exposed to economic, competitive, and regulatory risks resulting from climate change. It is
imperative that investors know which companies are prepared for these risks – and which are
not. The U.S. Environmental Protection Agency (EPA) recently issued an endangerment
finding under the Clean Air Act in April 2009 that is quite relevant to ExxonMobil’s core
business lines. It cites carbon dioxide and five other greenhouse gases (GHGs) as plausible
threats to human health and welfare, clearing the way for regulations to reduce GHG
emissions. The U.S. EPA’s endangerment finding on greenhouse gases states that, “in both
magnitude and probability, climate change is an enormous problem.”1 ExxonMobil has
acknowledged that “climate change poses risks to society and ecosystems that are serious
enough to warrant action — by individuals, by businesses, and by governments.”2 Yet year
after year, the company fails to take serious action in producing quantifiable targets to reduce
their production and operational GHG emissions.
Additionally, the House Energy and Commerce Committee has scheduled hearings3 on the
Waxman-Markey bill that would reduce emissions 20 percent from 2005 levels by 2020, 42
percent by 2030, and 83 percent by 2050. In addition, it outlines plans for clean energy,
energy efficiency, renewable energy standards, altering fuel compositions, and the creation of
a carbon market.4 The Cap and Dividend Act, proposed by Representative Van Hollen,
establishes a reduction goal of 25 percent below 2005 levels by 2020, 45 percent below 2005
levels by 2030, and 85 percent by 2050.5 The currently proposed legislation will have clear
and direct impacts on the oil sector. ExxonMobil operates in over 100 countries, most of
which have ratified the Kyoto Protocol that obliges industrialized countries to reduce national
GHG emissions below 1990 levels by 2012, which poses further pressure on the company to
reduce overall emissions.
In January 2009, ExxonMobil publicly acknowledged that it supported a carbon tax over a
cap-and-trade system for curbing GHG emissions in the U.S. market.6 However, in response
to some shareholders’ inquiry about action the company would take to advance its new
carbon policy position, Exxon’s management replied that it would not be proactively
promoting a carbon tax in Washington, D.C.
ExxonMobil also devotes considerable resources to “frontier” hydrocarbon resources, such as
oil sands and tar sands. Not only are these frontier resources far more expensive to extract
and process than conventional oil, significant GHG risk exists for them as well. A recent oil
sands development project from Imperial Oil Limited (owned by ExxonMobil) was held up
in Federal Court in order to determine how the company would manage its greenhouse gas
emissions.7 In December 2007, President George W. Bush signed an energy bill that
prohibits the U.S. government from buying fuel with life-cycle GHG emissions greater than
conventional crude. Section 526 of the bill “bars government contracts for alternative fuels –
EPA Finds Greenhouse Gases Pose Threat to Public Health, Welfare: Proposed Finding Comes in Response
to 2007 Supreme Court Ruling. 2009, US Environmental Protection Agency.
“Meeting growing energy demand and addressing climate risk.” Tillerson, Rex. June 21, 2007. Royal Institute
for International Affairs speech. http://www.exxonmobil.com/Corporate/news_speeches_20070621_RWT.aspx
“House panel launches four days of climate, energy bill hearings.” Bravender, R. and Geman, B. April 20,
2009. New York Times. http://www.nytimes.com/cwire/2009/04/20/20climatewire-energy-and-commerce-
America Clean Energy and Security Act of 2009, Discussion Draft, 111th Congress, 1st Sess.
Cap and Dividend Act of 2009, Discussion Draft, 111th Congress, 1st Sess.
“Exxon Mobil CEO prefers carbon tax.” January 9, 2009. Dallas Business Journal.
“Imperial’s Kearl Oil Sands Project Needs Further Study.” March 5, 2008. Dow Jones Newswire.
including non-conventional petroleum sources – whose lifecycle emissions of GHG exceed
those of conventional fuels.”8 ExxonMobil faces risk from regulations and decisions such as
these that seek to limit GHG emissions of fuels, placing the company’s investments in tar
sands at risk. Increased investment in oil sands will also substantially augment the
company’s emissions profile, increasing exposure as GHG-limiting regulations proliferate.
Without quantitative goals, it will be difficult for investors to assess ExxonMobil’s
readiness for a carbon-constrained economy or the effectiveness of any climate-related
EXXONMOBIL’S CLIMATE RISK PREPAREDNESS LAGS BEHIND PEERS
ExxonMobil has made efforts to increase energy efficiency by enacting a Global Energy
Management System (GEMS), which has resulted in reducing 8 million metric tons of CO2
since 2000. However, according to its most recent reporting to the Carbon Disclosure Project
(CDP6), ExxonMobil’s direct equity GHG emissions (total global Scope 1 activity) were 141
million metric tons of carbon dioxide equivalent.9
While ExxonMobil has made progress in incrementally reducing operational emissions and
investing in research partnerships, it has yet to develop a comprehensive target and strategy
to significantly reduce GHG emissions from its products. In fact, until its latest CDP
response, ExxonMobil’s GHG emissions from operations were climbing year after year.
The company’s emissions from flaring (largely in Nigeria) are a ripe target for concrete
reduction goals. While ExxonMobil has committed to substantial spending on flaring
reduction in Nigeria over the course of several years, most of those projects have faced
repeated setbacks due to the political difficulties facing the company in that region.
The proponents’ resolution does not prescribe a particular reduction target, but clearly the
company must move to diversify its product mix to include low carbon energy alternatives.10
This can be achieved through renewable energy investments, which many investors have
encouraged, or it could be done in part by the technological innovations ExxonMobil has
announced in the past four years (thin film separators for lithium ion batteries, carbon
sequestration technology in Wyoming, light polymer materials to improve fuel efficiency,
etc. But if ExxonMobil is to make substantial GHG reductions, the scale of these technology
innovations needs to be far broader with deep assets behind them to achieve large-scale
emissions cuts for the company.
“Canada Warns US Over Oil Sands.” McNulty, S. March 9, 2008. The Financial Times.
CDP6 Greenhouse Gas Emissions Questionnaire - Exxon Mobil Corporation, 2008. Carbon Disclosure
See Exxon’s 2007 Corporate Citizenship Report, pp. 12-13 and 18. While 10 percent of GHG emissions are
attributable to operations, 90 percent of emissions result from consumer use of petroleum products.
While ExxonMobil has an energy efficiency target for its refining operations (the baseline
target set by its industry trade association), the company is lagging behind competitors who
have already set company-wide GHG emissions targets.
BP Shell ExxonMobil
Goal: achieve 10% Goal: reduce direct GHG Goal: achieve 10% energy
reduction below 2001 emissions by 5% relative to a efficiency improvement
levels by 2012 of GHG 1990 baseline for all across U.S. refining
per unit of production facilities globally under operations and globally
performance.11 operational control.12 between 2002 and 2012.13
ExxonMobil clearly lags behind its peers in terms of setting clear targets for reducing GHG
emissions from total operations. ExxonMobil’s energy efficiency improvements provide
significant carbon benefit, but it has failed to promote a company-wide emissions reduction
While no companies in the oil sector have set a comprehensive target for GHG reductions
from products yet (Total has a goal of holding the carbon content of electricity generated
below 350 kg/MWh in its gas and power holding, but nothing in the oil sector14), regulations
such as those in the EU and in California (and proposed federal regulations) are increasingly
focusing on product emissions, making this an emerging risk. ExxonMobil’s peers have an
advantage on this front—at least they have begun diversifying into renewable energy
businesses in past years, and are ramping up their managerial and marketing prowess for
these emerging business lines. Peers like Chevron are even going so far as to allocate a cost
of carbon for project planning.
As ExxonMobil’s managerial team seems to perform well with clear expectations, and it
appears its team is very goal-oriented in order to achieve fiscal discipline, shareholders
believe management would also make clearer progress on emissions reductions with set goals
that are company-wide. Through the adoption of greenhouse gas reduction goals,
ExxonMobil would demonstrate its first major step in long term planning for a carbon-
constrained business environment.
CDP6 Greenhouse Gas Emissions Questionnaire: BP Corporation, 2008. Carbon Disclosure Project.
CDP6 Greenhouse Gas Emissions Questionnaire: Shell, 2008. Carbon Disclosure Project.
CDP6 Greenhouse Gas Emissions Questionnaire: Exxon Mobil Corporation, 2008. Carbon Disclosure
The Greenhouse Effect, 2007. Total.