ExxonMobil could benefit from carbon tax

ExxonMobil, the most outspoken sceptic about climate change, would actually benefit more than other oil companies from measures such as carbon taxes to stop global warming. This is the paradoxical claim made in a report published and sponsored by several US-based investor groups.

The claim is based on the fact that the oil and gas output of ExxonMobil, the world's largest listed oil company, has for several years been growing more slowly than that of several of its rivals. ExxonMobil's "business model is less dependent on aggressive growth than some of its competitors, like BP or TotalFinaElf", says the report by Mark Mansley of Claros Consulting.
It notes the number one oil company spends a relatively small share of its cash flow on finding and producing new oil and gas, and returns a relatively large share of cash to investors. "Relative to its competitors, Exxon would probably benefit from more aggressive policies to mitigate climate change, as these would bring its strengths [such as financial discipline] to the fore," it concludes.

The report is sponsored by CampaignExxonMobil, a coalition of religious and environmental shareholders, by the Ceres coalition of environmental investor groups and by Robert Monks, a US campaigner on corporate governance. It comes as the ExxonMobil management prepares at the company's May 29 annual meeting to face down several "green" shareholder resolutions.
Heavily defeated every year, these resolutions have become a feature of ExxonMobil AGMs. One this year requests the ExxonMobil board to report on plans to promote renewable energy. In a statement to shareholders that effectively rebuts the Claros report, ExxonMobil makes clear it has no intention of returning to renewable energies such as solar power in which it once invested some $ 500 mm.

Paul Sankey, a Deutsche Bank analyst, said a carbon tax would cost ExxonMobil more than others, because its oil and gas output was larger. TotalFinaElf, for instance, needed to increase its output of 2.47 mm boe by 7 % a year simply to match ExxonMobil's 3 % increase on its base of 4.5 mm boe.
The global warming stance of ExxonMobil, which is reported to have spurred the Bush administration on to replace the US scientist leading the UN climate change panel, is exposing the company to "unnecessary risks and missed opportunities", claims the Claros report. These include risks to reputation, eventual litigation, possible sudden change in government policy and missed opportunities in emissions trading.