Recently, ExxonMobil issued two reports Energy and Carbon--Managing the Risks and Energy and Climate in response to a request by certain shareholders to disclose information related to climate change and potential constraints on the ability to produce its oil reserves. In an editorial in The Guardian ExxonMobil’s response was called “consummate arrogance.” But if we consider the predictions of fossil fuel use by the U.S. Energy Information Agency (EIA), the use of fossil fuel will continue apace through 2040. So the question is, based on the EIA predictions, is ExxonMobil’s reporting arrogant, or is it accurate based on current information and regulatory regimes?
I am teaching a climate change law course this year at the University of Texas Law School, and one of the reports I discussed with my class is the Energy Outlook published annually by the U.S. Energy Information Administration. The EIA in the AEO 2014 Early Release Overview predicts the use of large amounts of petroleum in the United States through 2040.
"Total U.S. consumption of petroleum and other liquids, which was 35.9 quadrillion Btu (18.5 MMbbl/d) in 2012, increases to 36.9 quadrillion Btu (19.5 MMbbl/d) in 2018, then declines to 35.4 quadrillion Btu (18.7 MMbbl/d) in 2034 and remains at that level through 2040."
The following graph shows primary energy consumption through 2040, based on current facts and circumstances.
Based on the projections of the well-respected EIA, there is no expected curtailment of the ability to produce oil and gas from existing reserves, but a continued use of fossil fuels in the United States at around current levels through 2040. Prohibition of the use of fossil fuels does not appear likely at this time.
While this may not bode well for greenhouse gas emissions from the United States, not to mention China, India and other countries, it appears to be what is expected based on current information, at least as evaluated by the EIA.
This of course is what the parties who requested the reports from ExxonMobl would like to avoid. Ceres and As You Sow, among others, sought disclosures from the company. However, disclosure does not affect change in current energy sources, infrastructure, and technology, or existing or reasonably likely restrictions on oil and gas use or on production of these resources.
As an attorney who has advised clients on environmental and climate risk disclosures, it would be difficult to expect a public company, based on current circumstances or reasonably foreseeable circumstances, to conclude in reports to shareholders that oil and gas reserves are likely to be restricted, and that the value of those reserves or the company shares are likely to be devalued.
Much of this has to do with the current need for fossil fuels to power transportation and electricity generation. Without replacements, fossil fuels will be used.
Key questions are: What replacement do we have for transportation fuels? What technology do we have to provide low cost and dispatchable electricity without use of fossil fuel? What would be the impact if we ceased using fossil fuels today? In five years? Ten? The reality has to be faced.
In discussing these issues with my class, I provided the conclusions of the Berkley National Laboratory in California reviewed the capability of the State of California to reduce greenhouse gas emissions by 85% by 2050.
California is on track to meet its state-mandated targets for reducing greenhouse gas emissions for 2020, but it will not be able to meet its 2050 target without bold new technologies and policies. This is the conclusion of the California Greenhouse Gas Inventory Spreadsheet (GHGIS), a new model developed by the U.S. Department of Energy’s Lawrence Berkeley National Laboratory (Berkeley Lab) to look at how far existing policies and technologies can get us in emissions reductions.
"Bold new technologies" are necessary, in my view, to use fossil fuels in ways that reduce emissions.
To provide an insight to new technologies under development, in another class, I invited the leader of the UT Clean Energy Incubator and he brought four of the companies in the incubator to discuss their developing technologies that if adopted would reduce greenhouse gas emissions. One has developed a new piston for interanal combustion engines that reduces fuel use by as much as 50 percent. The company is working with the U.S. Department of Defense to test the technology to see if the Army could replace the pistons in their transportation trucks, and significantly reduce fuel use--a critical issue issue in warfare as seen in Iraq and Afghanistan.
Another company I invited is able to reduce electricity use in small office buildings by 10 or 20 percent with energy management software in the cloud and smart thermostats. I have a friend who is selling a fuel additive that can cut diesel use in large trucks from 10 to 30 percent. Yet another local company is installing technology to capture CO2 from a cement plant near San Antonio and use it to make a product that can be sold in well established markets. If it works, it could be used on other sources of CO2 emissions like power plants.
These and hundreds if not thousands of other companies, professors, or inventors are developing, testing, or seeking capital to try to commercialize numerous other potentially promising low carbon technologies in the United States and in other countries.
This is where the real work has to be done. Accurate disclosure is critical by public companies. However, mandatory disclosure or voluntary disclosure may not be the best focus to resolving the climate challenges at hand.
Climate change, greenhouse gas reductions, and fossil fuel use are very complex issues. Simple arguments or attempts to deal with them will not lead to solutions.
Private and governmental investment in research and development and new companies and technologies may be a better approach to reducing greenhouse gas emissions, particularly if the EIA and ExxonMobil are right about future use of fossil fuels.