ExxonMobil has 25.2 billion barrels worth of oil and gas in its current reserves, it's going to extract and sell all of it, and isn't expecting any meddling climate regulations to get in the way.
That's the main takeaway of a report the company released this week to its investors, examining the risk that greenhouse gas emissions rules in the US and worldwide might pose to its fossil fuel assets. Exxon made headlines a couple weeks back when it promised to issue the report after facing pressure from shareholders led by Arjuna Capital, a sustainable wealth management firm.
If stricter limits on carbon pollution or high carbon taxes force energy companies to keep their holdings buried underground, the thinking among environmental economists goes, it could topple the companies' value and leave investors holding the bag. The result, economists warn, would be a collapse of the so-called "carbon bubble."
Some big energy companies (including Exxon) have already nodded to this problem, by building a theoretical carbon price into their projected balance sheets. But this report is the first time a large oil and gas company has published a detailed assessment of its own climate risk exposure, according to the New York Times.
The report doesn't present a very optimistic view of the prospects for aggressive climate action by world leaders.
"We are confident that none of our hydrocarbon reserves are now or will become 'stranded'," the report says. "Stranded assets" is a term climate economists use to refer to fossil fuel reserves that could be stuck in the ground if countries around the world implement sufficiently stringent carbon regulations to limit global warming to 2 degrees Celsius above preindustrial levels—a threshold agreed to at the 2009 UN climate summit in Copenhagen. The amount of carbon humans can release without exceeding this limit—roughly 485 billion metric tons of carbon beyond what we've already emitted—is often called the "carbon budget."
Exxon's report suggests that its planners don't believe serious carbon limits will be on the books anytime soon, leaving the company free to burn through its reserves of oil and gas. That's a disconcerting vision to come just on the heels of Sunday's new Intergovernmental Panel on Climate Change report, which predicted a nightmarish future if greenhouse gas emissions aren't slowed soon.
"The reserves are going to be able to turn into money, because they're assuming there isn't going to be a policy change," said Natural Resources Defense Council Director of Climate Programs David Hawkins. "They're definitely saying that no matter how bad it gets, the world's addiction to fossil fuels will be so overwhelming that the governments of the world will just suck it up and let people suffer."