Reframing the Climate Challenge

Making oil and gas companies into villains is easy, says Darren Woods, ExxonMobil Chairman and CEO, but it does nothing to accomplish the goal of reducing CO2 emissions.

By Darren Woods, ExxonMobil Chairman and CEO

I’m fully aware that there are many who question ExxonMobil’s commitment to the climate challenge because of what was said over 30 years ago or what they think Exxon knew back then.

Frankly, I’m more interested in what ExxonMobil knows today.

So, allow me to share this with you—here’s what ExxonMobil knows:

• Climate change is real,
• Human activity plays a major role,
• And, it is one of the major problems facing the world today—the need to address the very real threat of climate change.

But it’s not the only one.

Here’s another global problem, equally important: the need to continue producing affordable energy to maintain and raise living standards around the world.

Three billion people fall short of modern living standards, and far too many remain trapped in extreme poverty with no access to electricity or clean cooking fuels.

The global North-South divide will only be bridged when we commit to solving the world’s energy and emissions challenges simultaneously.

Oil and gas are at the center of both. Combusting them is a leading source of man-made greenhouse gas emissions. That’s the societal cost, and it’s real.

At the same time, the societal benefits of oil and gas are unmatched in human history. They’ve done more to grow economies, eradicate poverty and improve quality of life than anything else.

If some of you are surprised by the clarity of ExxonMobil’s position on the climate challenge, even more noteworthy is the scale of our effort to address it.

If you were to list the biggest challenges facing humankind, addressing energy poverty and climate change are at the top.

And if you list the companies with a realistic chance to help improve access to energy and “bend the curve” on emissions, ExxonMobil would also be at the top.

To understand why, it’s important to grasp where the bulk of the world’s energy-related emissions come from. It’s not from the passenger vehicle sector that gets so much of the attention—cars and light trucks only account for 10 percent of energy-related CO2 emissions.

More than 80 percent comes from commercial transportation, heavy industry, and power generation.

Wind and solar power have great utility as a source of low-carbon electricity, but they just can’t get the job done in these hard-to-decarbonize sectors.

We need to open the aperture to a much broader set of solutions.

While renewable energy is essential to help the world achieve net zero, it is not sufficient—wind and solar alone can’t solve emissions in the industrial sectors that are at the heart of a modern society.

The technologies ExxonMobil is pursuing can.

Consider carbon capture and storage, where we capture emissions at the source, transport them by pipeline and permanently store them deep underground.

Just in the last year, we’ve signed carbon capture and storage agreements with a steel company, a fertilizer company, and an industrial-gas company.

These three projects alone will reduce CO2 emissions by the same amount as replacing 2 million cars with EVs. This is roughly the total number of electric vehicles on U.S. roads today.

And, as we announced recently, we’re making a major investment in lithium production, which is essential to the world’s effort to electrify as much of the economy as possible.

All of this—and more—is supported by our investment of approximately $17 billion over six years … and our almost $5 billion acquisition of a company with the largest pipeline system in the U.S. for transporting and storing CO2.

When it comes to developing additional solutions, beyond wind, solar and EVs, nobody is investing more.

World-scale problems like climate change need world-scale companies to help solve them—like ExxonMobil.

Despite progress toward net zero, serious obstacles remain. Many of the ideas being put forward to accelerate the energy transition are not based in economic, technological, or political reality.

To get serious about net zero, the world needs to get real.

We cannot replace—overnight—an energy system that took 150 years to build. The size and complexity are simply too vast.   

Those who would tear down the existing energy system have the wrong problem statement. The problem is not oil and gas. It’s emissions.

Never before have we stopped using an energy source because of the byproduct it produces. The solutions to climate change have been too focused on reducing supply. That’s a recipe for human hardship and a poorer world.

Leaving oil in the ground does nothing to stop the
demand for it. It simply raises the price and makes it harder to alleviate poverty around the world.

At the moment, net zero by 2050 remains an aspiration.

To get serious, three things are needed: supportive public policy, significant technology advancements, and a smooth transition from government subsidies to market-based mechanisms.

The governments of the Asia-Pacific, and elsewhere, need to embrace constructive policy to encourage the shift to a lower-emissions future.   

As a business leader who spends his time solving challenging large-scale problems, I’d like to suggest, some guiding principles:

Don’t pick winners and losers.

Don’t focus on an answer that fails to solve all aspects of the problem.

For really complex issues like climate change… keep all viable solutions in play—even if they don’t align with your beliefs or ideology.

And, most importantly, leverage the power of competitive markets. 

Market incentives for carbon reduction like a price on carbon, or policy incentives such as the U.S. Inflation Reduction Act (IRA), will drive innovation and engage all relevant players—leading to better solutions, faster.

We should allow technologies and companies to compete—and let the best solutions win.

For example, the IRA made the playing field for carbon capture more level by raising the incentive for CO2 removal to $85 a ton. I say “more level” because the subsidy for electric vehicles is still $450 dollars a ton—or five times as high. 

Technology-agnostic subsidies can kick-start a range of low-emission solutions, but they must have an expiration date. No government can afford to subsidize the energy transition forever.

Beyond incentives, we need a concentrated effort on advancing technology. Collaboration is key. In simple terms, governments fund research, universities and labs conduct it, and companies develop and deploy it.

And we need an all-of-the-above approach. It’s far too early in the process to rule out any technology.

Let me close with this.

Oil and gas companies reliably provide affordable products essential to modern life.

Making them into villains is easy. But it does nothing—absolutely nothing—to accomplish the goal of reducing emissions.

In fact, it puts the reliable supply of energy at risk…
destabilizing global economies, degrading people’s standards of living, and, as we saw in Europe, actually raising emissions. 

The better approach—the constructive approach—is

to harness the industry’s capabilities for change.

Put us to work. We’ve got the tools—the skills, the size,

and the intellectual and financial resources—to bend the

curve on emissions.

That’s what ExxonMobil knows.

For the Record is an edited excerpt of ExxonMobil Chairman and CEO Darren Woods’ speech at the APEC CEO Summit in November 2023.

Q1 2024