'Net Zero by 2050' is Failing

Energy companies are jumping off the NZE bandwagon

The bandwagon fallacy, also known as the appeal to the masses or appeal to common belief fallacy, is the logical fallacy of claiming that something is true because everyone believes it. A similar phrase, “the bandwagon effect,” refers to individuals joining social movements in response to the movements becoming more mainstream. The bandwagon fallacy is often used to justify or normalize a specific position. It can also be used to make a position seem more appealing by exaggerating its popularity.

In 2021, the International Energy Agency (IEA) published “Net Zero by 2050: A Roadman for the Global Energy Sector, which, in their words, “sets out a narrow but achievable pathway for the global energy sector to reach net zero emissions by 2050.” Almost immediately, many countries and corporations pledged to achieve that goal. The bandwagon effect was in full swing. Within four months, More than 200 companies joined a pledge to hit net zero carbon by 2040 or sooner.

Commitments to NetZero by 2050, or NZE, started to waver when Germany and much of Europe experienced a “dunkelflaute” in late 2021 that reduced wind speeds in the North Sea and caused Germany’s significant investment in wind turbines to fail, and energy prices to hit record highs. Then Russia invaded Ukraine, and many European countries announced their intent to stop buying natural gas from Europe. Soon after that, the NordStream pipelines were mysteriously blown up, leaving the Europeans no wiggle room to back away from their pledge. Germany and other European countries started lining up LNG imports from the U.S. and other exporters and building LNG import facilities. Germany famously reopened shuttered coal mines, going so far as to dismantle a wind farm to expand a coal mine, obviously ignoring Net Zero policies.

This year, 2023, progress toward NZE took significant blows when major energy companies started jumping off the NZE bandwagon, as captured in these headlines:

“Shell demands profit from green energy, not just CO2 cuts”

“Exxon rebuts proxy advisor, says net zero emissions scenario 'unlikely'“

“Exxon and Chevron investors shoot down climate proposals after a year a record profits”

“BP ventures back into oil ftontiers to boost output”

“BP dials back climate pledge amid soaring oil profits”

So what changed? Two years ago, the Boards of ExxonMobil and Chevron, and other large oil and gas companies were invaded by climate activist groups, which installed board members who forced the companies to adopt agendas supporting net zero carbon emissions policies. However, both companies pushed back this year. At their annual meetings on Wednesday, May 31, 2023, shareholders at both companies rejected proposals for even stronger measures supposedly designed to reduce carbon emissions.

The founder of the activist group of 9,500 shareholders in oil and gas companies, named “Follow This,” said they were pushing ExxonMobil and other companies to adopt climate-related corporate policies, but for some reason, ” They all want to hang on to fossil fuels as long as possible.”

ExxonMobil explained why “they want to hang on to fossil fuels as possible.” In their Schedule 14A filing with the United States Securities and Exchange Commission, dated April 13, 2023, on page 77, they said:

Unfortunately, there are some anti-oil and natural gas activists who use the SEC’s shareholder proposal process to further their own interests, which are often in conflict with the interests of many of the Company’s other shareholders.

These activist firms, by their own admission, prefer not to own fossil fuels stocks yet acquire a minimal ownership stake in the Company with the sole purpose of targeting campaigns and pressuring investors to support resolutions ultimately designed to eliminate oil and gas investments necessary to meet society’s needs.

These campaigns can create a burden on our long-term shareholders, and undermine the advancement of constructive Environment, Social, and Governance (ESG) objectives. For instance, the founder of Follow This has previously stated, “We buy shares in order to work on our mission to stop climate change, not to make a financial profit.” He has also stated that his Scope 3 proposals are a “Trojan horse,” designed to eliminate fossil fuel investments and production. Of the 13 proposals below, several are put forth by anti-oil and gas activists.

We believe their activity is inconsistent with investors’ and fiduciaries’ goal of enhancing the economic value of their investments and advancing constructive ESG objectives. Forcing our company to stop oil and natural gas development would do nothing to reduce global demand. In fact, it would encourage less carbon-efficient, non-public, or less experienced operators, including those without our commitment to reducing greenhouse gas emissions, to step in to fill the supply void.

Alternatively, reducing our production would cause reduced global supply before there are viable alternatives at scale. This would significantly drive up prices and hurt the global economy and broader society in ways that are not accounted for by anti-oil and gas activists. We are working to solve the “and” equation: delivering the energy and products society needs and lead industry in reducing greenhouse gas emissions. (Paragraphs inserted to improve readibility).

These few words succinctly describe ExxonMobil’s view that the world needs fossil fuels now and for the foreseeable future. Moreover, they intend to do their part to provide fossil fuels because stopping their development of oil and natural gas “would do nothing to reduce global demand.” Instead, it would likely increase greenhouse gas emissions because other companies would step in to fill the supply void and would not likely be as focused on reducing greenhouse emissions as ExxonMobil.

The fact is that ExxonMobil is doing the world a favor by continuing to find and develop oil and gas. Fossil fuels are not going to be replaced by 2050. ExxonMobil and many other oil and gas companies with similar goals can help feed the world and keep it functioning while working toward a cleaner environment.

ExxonMobil is to be congratulated on its commitment to do its part to provide the world’s energy needs and for its boldness to say so. Many other U.S. oil and gas companies share their vision as well.