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ExxonMobil on carbon policy and business planning

Recently there has been media interest in how large corporations like ExxonMobil address the potential for new regulations addressing climate change risk when drawing up future business plans. In light of this, I thought the most helpful thing would be to share our corporation’s view on the topic.

Each year, ExxonMobil produces the Outlook for Energy – which provides educated estimates about global energy supply and demand and other economic trends – in order to help guide our internal business and investment decisions.

Enclosed is the section on greenhouse gas emissions in our 2013 Outlook for Energy: A View to 2040. Keep an eye on the Perspectives blog next Thursday, December 12, when we unveil the 2014 version at an event in Washington, D.C. 



Over the past decade, countries around the world have been working to address the risks associated with rising greenhouse gas emissions. Global emission growth patterns are already changing – reflecting the more widespread use of energy-efficient technologies and less carbon-intensive energy sources. After decades of growth, energy-related CO2 emissions are expected to plateau around 2030, despite a steady rise in overall energy demand. From 2010 to 2040, the Outlook shows the growth rate of global CO2 emissions will be about half that of energy demand.

Climate change policies will play a key role in limiting the growth of greenhouse gas in the future

Public policies are a key factor in assessing the energy future, particularly in the area of greenhouse gas (GHG) emissions.

Policies related to GHG emissions, and carbon emissions in particular, remain uncertain. But, for purposes of the outlook to 2040, ExxonMobil assumes a cost of carbon as a proxy for a wide variety of potential policies that might be adopted by governments over time to help stem GHG emissions such as carbon emissions standards, renewable portfolio standards and others.

For example, in most OECD nations, ExxonMobil expects the implied cost of CO2 emissions to reach about $80 per ton in 2040. OECD nations will continue to lead the way in adopting these policies, with developing nations gradually following, led by China.

As seen in the electricity generation sector, these policies are likely to have a direct and significant impact on the fuel choices made by individual countries, including a shift away from coal as CO2 costs rise.

The introduction of rising CO2 costs will have a variety of impacts on the economy and energy use in every sector and region within any given country. Therefore, the exact nature and the pace of GHG policy initiatives will likely be affected by their impact on the economy, economic competitiveness, energy security and the ability of individuals to pay the related costs.

Greenhouse gas emissions related to energy use are projected to plateau by 2030

A notable finding again in this year’s Outlook is that CO2 emissions are likely to peak in 2030 due to efficiency gains and a gradual transition to less carbon-intensive energy supplies.

Globally, from 2010 to 2040, the rate of increase of CO2 emissions will be about half that of energy demand growth. Two factors impact this: the wise and efficient use of energy and a shift to less carbon-intensive fuels. Of these factors, the most important over the Outlook relates to improving efficiency of energy use as people continue to improve their living standards.

In fact, emissions patterns through 2040 will vary greatly between OECD and Non OECD countries, reflecting the different stages of economic development and varying degrees and types of energy used at a national level. Overall, Non OECD emissions will rise close to 50 percent, as energy demand rises by about 65 percent. Over the same period, OECD emissions are likely to decline about 20 percent.

Non OECD emissions surpassed OECD emissions in 2004, and by 2040 Non OECD nations will account for about 70 percent of the global total. However, on a per-capita basis, OECD emissions will remain substantially higher. At the same time, OECD emissions will remain much lower on the basis of emissions per unit of economic output, reflecting a significantly higher degree of energy-efficient practices and technologies across their economies.

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