No Surprise: No Surprises from Exxon

(Original 1/30; revised 2/6 to add links to other participants' reports)
Here's the scoop from our conference call with Ken Cohen, VP Public Affairs, Exxon/Mobil.  Obviously, as one would expect, given his background, bio Ken Cohen is an intelligent, well-informed, and articulate spokesman for Exxon/Mobil's position on climate change.   

Cohen attempted to downplay Exxon's historic role on climate change by (a) tracing criticism of Exxon back to its opposition to Kyoto (which everyone is supposed to forgive and forget), (b) noting its defunding of CEI in 2005 (but not addressing the remainder of disinformation organizations supported by its "policy" funding), (c) pointing to its generous funding of scientific research, and (d) arguing that Exxon is energy efficient internally.  He answered criticism of Exxon by investors and investment advisers by noting that their criticism is based upon (a) and Exxon's limited involvement in alternative energy projects due to its refusal to fund energy projects that are not currently economically viable without government subsidies. 

Cohen did not foreshadow Exxon's position on any of the pending national legislative proposals -- merely noting that Exxon would study them with certain "first principles" in mind:

In our view, assessing these options requires an understanding of their likely effectiveness, scale and cost, as well as their implications for economic growth and quality of life. Within ExxonMobil, we analyze and compare the various policy options by evaluating the degree to which they:

• maximize the use of market forces
• ensure a uniform and predictable cost of reducing CO2
• promote global participation
• minimize complexity and administrative costs
• provide transparency to companies and consumers
• adjust to new developments in climate science and the economic impacts of policies

As Cohen analyzes cap and trade, it is a market based approach, so far so good.  However, he differentiates between "downstream" and "upstream" caps -- on whether the caps are upstream caps on energy production or downstream caps on carbon emission.  The former flunk the "uniformity" test.  Cohen also suggests that cap and trade, at least as administered in the EU, may flunk Exxon's "minimize complexity and administrative costs" criterion.  Cohen avoids taking any position by arguing that "the devil is in the details."  Similarly, when questioned about whether a carbon tax better meets Exxon's policy principles, Cohen noted that economists would argue it does, that any tax must be "revenue-neutral", and that as always "the devil is in the details." 

Cohen suggests that Exxon will need to examine current policy proposals "under a microscope."  Personally, I find it implausible that Exxon has not analyzed these proposals and has not suggestions about how they could be modified to better comply with its first principles.  Exxon is remaining uncommitted in order to be the dealmaker.

Cohen artfully stresses the need to consider costs in choosing mitigation options, pointing to Exxon's comparison of cost of avoiding a ton of CO2:
basically modifying power generation rather than the use of gasoline in light duty vehicles is far cheaper.  As to power generation, Exxon considers gas to be the cheapest option, followed by nuclear and clean coal, followed by wind -- with solar currently infeasible.  As to vehicles, Exxon considers cellulose ethanol to be most promising, although still requiring research, with conventional ethanol and hybrids much more costly.  Cohen noted that conventional ethanol has costed roughly $ 4 whereas the price of gasoline has been about $ 2.  [So it would take a pretty sizable carbon teax to shift consumers towards ethanol!!!].

Cohen disclaimed the position that developed countries should not act on climate change unless the developing countries act.  He indicated that Exxon's statements raising the competing priorities of poverty eradication, standards of living, and economic development were merely designed to highlight the reality that the developing world will address climate change with these competing priorities in mind.   But, sub silentio, he suggested that developed countries should consider these priorities in formulating climate change policy.

Cohen also stressed that alternative energy is not likely to contribute greatly to meeting the world's energy demand, without suggesting in any manner that the projected demand must be significantly reduced.

So....Exxon wants to change perception, without changing its position.  It carved out its niche as a climate change policy resister and a single bottom line evaluator of alternative energy projects.  It is seeking to modify the public's perception that it is a environmental neanderthal.  That perception is underscored by recent news about Exxon's appeal of the Valdez verdict and spills from its NY refineries (see stories from Energy 360 below).  Exxon thinks that communicating its climate change position more clearly will make public reaction more favorable.  But, that position seems to be that oil can and should remain king in transportation, that climate science remains uncertain (although they concede that some climate mitigation action needs to be taken), that it loves free markets, that we need to go slow on climate change policy ("move gradually")and that alternative energy is currently too expensive to develop.  Good luck on getting favorable public reaction to that!

Exxon, however, is not necessarily evil or stupid.  Exxon is simply betting that the best niche to carve out is: alternative energy pessimist and "go slow" advocate.  Because of its massive size, it does not need to seek to be perceived as an industry leader on climate policy -- especially because Exxon would have to dramatically change its position in order to achieve that honor.  Exxon apparently believes it can just sit back, wait, and be the dealmaker on climate change policy, and the spoiler of any climate policy it doesn't care for.

We'll see.  I think that responsible American lawmakers will be loathe to let Exxon stand in the way of a sensible climate policy.  And if Exxon doesn't attempt to secure more of a leadership position in the industry, it may simply lose its place at the table.

Here's the information Exxon provided:
climate_framework_exxonmobil.pdf
exxonmobil_climate_change_backgrounder.doc

Links to other participants:
Oil Drum:  Initial conference call report and AEI follow-up
Watthead: Initial conference call report
Energy Bulletin: Republishing Oil Drum

See these stories from Energy 360 (subscription required -- trial subscription available).