Big oil’s bad, bad day

Tremendously good news from court rulings and shareholder votes that may finally Force the fossil-fuel industry to make systemic changes.

From an email sent by Bill McKibben for The New Yorker dated May 26, 2021:

In what may be the most cataclysmic day so far for the traditional fossil-fuel industry, a remarkable set of shareholder votes and court rulings have scrambled the future of three of the world’s largest oil companies. On Wednesday, a court in the Netherlands ordered Royal Dutch Shell to dramatically cut its emissions over the next decade—a mandate it can likely meet only by dramatically changing its business model. A few hours later, sixty-one per cent of shareholders at Chevron voted, over management objections, to demand that the company cut so-called Scope 3 emissions, which include emissions caused by its customers burning its products. Oil companies are willing to address the emissions that come from their operations, but, as Reuters pointed out, the support for the cuts “shows growing investor frustration with companies, which they believe are not doing enough to tackle climate change.” The most powerful proof of such frustration came shortly afterward, as ExxonMobil officials announced that shareholders had (over the company’s strenuous opposition) elected two dissident candidates to the company’s board, both of whom pledge to push for climate action.

Image may contain: Text, Banner, Human, Person, Clothing, Shoe, Footwear, Apparel, Label, Word, and CrowdPhotograph by Erik McGregor / Sipa / Alamy

The action at ExxonMobil’s shareholder meeting was fascinating: the company, which regularly used to make the list of most-admired companies, had been pulling out all stops to defeat the slate of dissident candidates, which was put forward by Engine No. 1, a tiny activist fund based in San Francisco that owns just 0.02 per cent of the company’s stock, but has insisted that Exxon needs a better answer to the question of how to meet the climate challenge. Exxon has simply insisted on doubling down: its current plan actually calls for increasing oil and gas production in Guyana and the Permian Basin this decade, even though the International Energy Agency last week called for an end to new development of fossil fuels. Observers at the meeting described a long adjournment mid-meeting, and meandering answers to questions from the floor, perhaps as an effort to buy time to persuade more shareholders to go the company’s way. But the effort failed. Notably, efforts by activists to push big investors appear to have paid off: according to sources, BlackRock, the world’s largest asset manager, backed three of the dissident candidates for the Exxon board.

The decision by the Dutch court, which Shell has already said it expects to appeal, is at least as remarkable. Drawing, in part, on European human-rights laws, it finds that, though Shell has begun to make changes in its business plans, it is not moving fast enough to fall in line with the demands of science, and that it must more than double the pace of its planned emissions cuts. “The court understands that the consequences could be big for Shell,” Jeannette Honée, a spokeswoman for the court, said in a video about the ruling. “But the court believes that the consequences of severe climate change are more important than Shell’s interests,” Honée continued. “Severe climate change has consequences for human rights, including the right to life. And the court thinks that companies, among them Shell, have to respect those human rights.”

No one knows quite how the ruling, if it stands, will play out. Shell is based in the Netherlands, but it has operations around the world. The ruling, though, is the firmest official pronouncement yet about what a commitment to climate science requires. The forty-five-per-cent reduction in emissions by 2030 from 2019 levels that the court ordered is very close to what, in 2018, the Intergovernmental Panel on Climate Change (I.P.C.C.) said would be required to keep us on a pathway that might limit temperature increases to 1.5 degrees Celsius.The court gently dismissed Shell’s attempts to evade the science: the company, the judges wrote, believes that “too little attention is paid to adaptation strategies, such as air conditioning, which may contribute to reducing risks associated with hot spells, and to water and coastal management to counter the sea level rise caused by global warming. These adaptation strategies reveal that measures can be taken to combat the consequences of climate change, which may in result reduce the risks. However, these strategies do not alter the fact that climate change due to CO2 emissions has serious and irreversible consequences.”Instead, it’s clear that the arguments that many have been making for a decade have sunk in at the highest levels: there is no actual way to evade the inexorable mathematics of climate change. If you want to keep the temperature low enough that civilization will survive, you have to keep coal and oil and gas in the ground. That sounded radical a decade ago. Now it sounds like the law.

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