The Economist - USA (2022-01-22)

58 Business The Economist January 22nd 2022

Airlinesinrecovery

Flighttracker

W

orkandshoppinghave,forbetteror

worse,beenpermanentlyalteredby

thepandemic.Theairlineindustryhopes

that its owncovid­19 disruption proves

temporary.Luckilyforthosedeprivedof

holidays,visitstofamilyandfriends,or

eventheoddbusinesstrip,flyingin 2022

willlooka bitmorelikethepre­pandemic

jetage—withdifferencesbetweendomes­

tic and international routes, short­haul

andlong­haulones,andeastandwest.

Thenumberstakingtotheskieshave

risensteadilysinceMarch2020,whenthe

pandemic first grounded flights. Most

forecastersexpectthatby 2024 asmany

Thereboundoftheaviationindustryis

cominginfitsandstarts

Notquitewingingitjustyet

Thefossil-fuelindustry

Going green-ish

D

arrenwoods madesome  revealing

remarksthisweekaboutglobal warm­

ing.Hisruminationsmatterin  America’s

oilindustryforheisthebossof  Exxon­

Mobil,thelargestWesternoilmajor.  His

firmhashistoricallybeenlessenthusiastic

thanrivalsabouttaking climate  change

seriously.Buta shareholderrevolt last May

placedthreegreen­tinteddirectors  on  its

board.Thathasputpressureon the Texan

company’smanagementtocurb emissions

withmoreambition.

OnJanuary18thMrWoodsunveiled the

firm’slong­awaitedupdatetoits  climate

strategy.“Issocietysincereinits desire for

a lower­emissionsfuture?”asked  the  vet­

eranoilmanwhenpressedonthe thinking

behindtheplan.Itis,hesays.“And so are

we.”Evidenceforthisliesina newfound

willingnesstocommittohardtargets  for

cuttinggreenhouse­gasemissions.

The first, long­term targetis  for  the

companytoachievecarbonneutrality  in

itsoperationsby2050.Ithasbeen  quite

fashionableoflateforbigenergy  firms  to

claim that they will achieve “net  zero”

emissionsbysomedistantdate. Not all of

themlayoutspecificplansfor  how  they

willactuallydothis.Often,they  plan  to

relyheavilyoncarbonoffsets,which could

letthembuyemissionscreditsof dubious

qualitycheaplyratherthanmaking painful

emissionscutsandcostlychanges to their

business.MrWoods haspreviously  dis­

missed such proclamations as  nothing

more than a “beauty competition”.

In  contrast  to  such  pageants,  Exxon­

Mobil’s  new  long­term  goal  is  accompa­

nied by concrete plans for this decade. In a

big  U­turn,  the  firm  will  commit  to  abso­

lute cuts in its carbon emissions—a step it

has long resisted in favour of squishier re­

ductions  in  “emissions  intensity”.  It

pledged  to  emit  about  20%  less  green­

house  gases  by  2030  relative  to  2016,  with

emissions  from  exploration  and  produc­

tion  set  to  decline  by  approximately  30%

over that period. Thirty­plus operating di­

visions  will  each  get  a  binding  target,

which will add up to the company­wide to­

tal. Managers at each division will then be

held accountable for achieving those cuts,

with no wriggle room or trading among di­

visions permitted. 

The firm’s plans for its shale business in

America’s  Permian  region  are  illustrative.

ExxonMobil  says  it  will  achieve  net­zero

operating emissions in the patch, respon­

sible  for  over  40%  of  its  American  hydro­

carbon output, within the decade. It plans

to achieve most of that through the use of

novel  low­carbon  technologies  and  im­

provements in its practices, from replacing

leaky  compressors  and  powering  opera­

tions with green energy to carbon capture

and storage (ccs). It is flaring less methane,

a potent greenhouse gas, and working with

third parties to monitor fugitive emissions

using satellites, aerial reconnaissance and

sensors. The firm insists it will rely on car­

bon  offsets  for  at  most  “a  few  percentage

points” of emissions cuts.

ExxonMobil’s new plan is, then, an im­

provement  on  its  earlier  climate  recalci­

trance.  How  much  it  actually  does  for  the

planet  is  another  matter.  Unlike  many  ri­

vals,  ExxonMobil  does  not  count  emis­

sions from fields operated by joint­venture

partners, which gives a fuller picture. Most

important, its road map covers only emis­

sions emanating from the company’s own

operations  and  energy  use  (scope  1  and

scope 2 emissions, respectively, in the jar­

gon). European rivals such as bp, Shell and

TotalEnergies have additional targets to re­

duce the emissions intensity of their pro­

ducts by 2050. That is why they have piled

into renewables.

Some  oilmen  argue  that  the  makers  of

petrol­burning cars or their drivers should

share more of the responsibility for limit­

ing  these  “scope  3”  emissions.  Such  argu­

ments,  though  not  wholly  without  merit,

are  also  self­serving:  end  users  can  ac­

count  for  80­90%  of  the  total  climate­

warming gases associated with fossil fuels.

Ignoring  them  in  your  carbon  accounting

seems mighty convenient.

ExxonMobil’s  plan  does  open  the  door

to a pursuit of fuller net­zero goals beyond

scopes 1 and 2. But the firm has no interest

in  renewables,  which  is  a  less  profitable

business than oil (as reflected in the Euro­

pean firms’ weaker valuations). Instead, it

is  investing  $15bn  over  the  next  five  years

in  areas  such  as  hydrogen,  ccsand  bio­

fuels.  The  snag  is  that  these  climate­

friendly  technologies  have  not  yet  found

profitable business models.

They  may  never  do,  at  least  without

government  inducements.  ExxonMobil

believes  that  decarbonisation  carrots  in

the  form  of  tax  credits  and  subsidies  will

offset  some  of  the  higher  costs  of  its  low­

carbon bets and help keep the firm’s overall

margins high. Ultimately, Mr Woods says,

low­carbon  strategies  will  require  some

state  support  in  order  to  generate  good

profits. If big oil is tomakebig profits from

the  energy  transition,inother  words,  it

needs big government.n

N EW YORK

ExxonMobil unveils a new

climate strategy

Flaring to go