ExxonMobil Cannot Dodge Climate-Friendly Accounting
It’s corporate annual meeting time again. Last year marked the start of some corporate responsibility and pro-renewable action in oil and gas company stockholder gatherings. This spring, green shareholders of ExxonMobil, arguably the most contrary of the petro-giants, have just won a victory for clean energy and transparency in the boardroom wars.
The company recently received an innovative shareholder resolution. It asks ExxonMobil to augment the traditional “barrels of oil equivalent” standard by reporting its energy resources in an energy-neutral metric–BTUs, originally called British Thermal Units.(One BTU is equal to the amount of energy used to raise the temperature of one pound of water one degree Fahrenheit.)
The reasoning behind the measure is to establish a climate-friendly and unbiased way to report energy reserves. Proponents believe that a universal measure will incentivize markets and managers to support the increasingly popular transition to diversification and a clean energy economy. Exxon moved to defeat the resolution.
However, Securities and Exchange Commission authorities ordered the company to stop in its tracks. Danielle Fugere, President and Chief Counsel for the Oakland-based non-profit corporate responsibility group As You Sow, explains what happened:
“In a rapidly decarbonizing economy, fossil fuel companies must develop climate change-responsive business models…. We are pleased the SEC sided with shareholders concerned with climate risk. Exxon must allow shareholders to vote on this first step on the path toward clean energy. Broad support will give management the latitude to develop a diverse and profitable low-carbon business plan, while maintaining 100% BTU energy replacements.”
As You Sow pointed out that the BOE accounting measure discourages decarbonization. The expression “BOE” ties calculation of a company’s asset calculations, and hence its value, to a carbon-based standard. In advocating neutral reporting, the resolution would ensure that solar, wind, biofuels, geothermal, and other renewables will be measured on the same yardstick as oil and gas.
The proponents add:
“This metric decouples Exxon and its shareholders from oil’s declining profitability, its escalating climate damage, and Exxon’s decreasing ability to economically replace its oil reserves.”
Shareholders have also asked ExxonMobil to prioritize capital returns to shareholders in light of the company’s increasingly risky investments. These may soon become stranded carbon assets due to clean energy’s rapid ascendance and the climate problems raised by continuing exploration, production, distribution, and use of oil and gas.
Last year, the company nixed a similar proxy, telling the SEC that its dividend had been increasing—despite declining capital distributions and the lack of a realistic climate strategy. Today, however, the SEC ruled in favor of the measure, citing three years of consecutive drops in Exxon capital distributions and management’s unwillingness to address the stranded asset risk. Chevron is involved in a similar struggle.
New York’s attorney general is currently investigating ExxonMobil for lying since the 1970s about the risks of climate change.
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BTUs may not be tied to fossil fuels but they are still a quaint Anglo-Saxon survival, on a par with farthings, gallons and bushels. The only way to go is SI. Joules are not intuitive, so let’s stick with kilowatt-hours and the usual multiples and fractions.
BTW, isn’t it odd that the one industry in the US that is firmly metric is the illegal sale of cocaine and heroin?
No worries, kilowatt-hours will ultimately prevail despite objections.
I think everything should be measured in Jigawatts.
Great Scott! But of course that’s a measure of power, not energy.
Joules is probably the best choice, as kWh are to electricity as barrels are to petroleum. Joules is the neutral measure of energy in SI. Let’s use that!
A racing cyclist can generate around 400 watts. A kilowatt is the power of a small horse or a powerful microwave oven. Match that in joules for intuitiveness. You need watts anyway for the power unit, to go with joules or kwh for energy.
I think you’re confusing power and energy, James. The SI unit for power is Watt. The SI unit for energy is the Joule, which is a Watt of power applied over a second of time – or a Watt-second.
A kilojoule is then a kilowatt of power applied over a second. Apply a kilowatt of power over an hour and you get 3,600 kilojoules, or 3.6 MJ, or 1 kilowatt-hour (kWh).
So your cyclist who is generating 400 watts of power is consuming 0.4 kilojoules per second of energy, or 0.00011111 kWh per second of energy.
Your small horse is consuming a kJ of energy each second, or 0.0002777 kWh per second.
Which is more intuitive?
In practice, we tend to use kWh for electricity, because we more often think in terms of hours. But for general energy discussions, gigajoules is the official SI unit, and this IMHO makes more sense.
“I think you’re confusing power and energy, James.” No, I’m not. Read the comment again.
Vernor Vinge IIRC used a decimal time system based on the second in his space operas. There is logic in favour of this, but little else. The French Revolution succeeded in decimalising weight and distance, but failed with time, so we are still with the hexadecimal Babylonians. I doubt if this will change. The joule (= watt-second) is just too small a unit of energy to be graspable. Its decimal multiples are disconnected from the hexadecimal or solar time system. When did you last see the unit used in a general-interest publication? The SI bureaucracy’s campaign for its general adoption has failed.
“Read the comment again.”
OK.
“A kilowatt is the power of a small horse or a powerful microwave oven. Match that in joules for intuitiveness.”
Still looks like you’re comparing kilowatts to joules. *shrugs*
“we are still with the hexadecimal Babylonians”
Um, no. Hexadecimal is base 16. The Babylonians weren’t known for using base 16. It’s possible you meant sexagesimal, which is base 60? However, SI is base 10, which is certainly superior to ancient Babylonian sexgesimalisms for modern use!
But the article wasn’t discussing “general-interest publications”. It was discussing energy reserve reports from major corporations such as Exxon Mobil. Those reports are by their nature technical, so using the correct terminology is important.
And the correct terminology is joules.
Food labeling in Europe lists energy content in kJ (kilojoules).
Rather convenient for your cyclist example earlier, isn’t it?
In the US in particular, units typically used in “general-interest publications” are football fields, thickness of human hair, homes (for power or energy, and the two are generally confused, like you demonstrated earlier), olympic swimming pools, libraries of Congress…
If “intuitive” is what you want, this is what you’ll get. Others prefer unambiguous and coherent, and that’s why scientific publications use SI.
BTUs may not be tied to fossil fuels but they are still a quaint Anglo-Saxon survival, on a par with farthings, gallons and bushels. The only way to go is SI. Joules are not intuitive, so let’s stick with kilowatt-hours and the usual multiples and fractions.
BTW, isn’t it odd that the one industry in the US that is firmly metric is the illegal sale of cocaine and heroin?
I think the SEC should have said oil/gas/coal (all FF) should be in BOE and others in KWh that way you can easily to see if they are making any movement.
Rockefeller family just announced to sell their Exxon shares.
http://www.reuters.com/article/us-rockefeller-exxon-mobil-investments-idUSKCN0WP266
I fear that by finding a common energy denominator that the possibility exists of confusion as to what amount is from renewable sources vs. fossil fuel. The advantage of Barrels of Oil is that I have a good feel for how much damage is being done.
A “green” Exxon shareholder???
Hey, I used to own Exxon. I figure if someone is gonna make money off the nasty black stuff, better me than Lee Raymond.
The trouble is, Exxon is now setting fire to their money with “exploration” which doesn’t find anything. It’s a bad investment now. It doesn’t have to be a bad investment — if Exxon terminated all oil exploration, and just pumped the existing old gushers and sold the oil and issued dividends, it would still be a good investment.
This is what the shareholders are trying to explain to the idiot management.
“Lay down and die” is never kind to the ears.
I’m just clad that the shareholders are finally waking up, the shareholders have had so much “smoke” blowen up their ass, that when they fart “smoke comes out”