‘Big Oil’ is a term often used to describe the largest publicly traded oil and gas companies in the world. These corporations also happen to be some of the most significant heat trapping gas emitters, lobbyists against climate action, and even science deniers who have led us to the current state of the climate crisis. But the tides seem to be finally turning against Big Oil’s corporate strategies, which continue to prioritize shareholder gains over the health of people and ecosystems, and even the long-term livability of our planet.
Over the past month, major shifts within the industry seem to have marked a new era of corporate accountability and unprecedented reckoning for their role in this crisis. In the words of activist and author Bill McKibben, “crushing blows to three of the world’s largest oil companies have made it clear that the arguments many have been making for decades have sunk in at the highest levels.”
Significant shifts in the way the International Energy Agency conceives of decarbonization and its pathways, as well as changes stemming from external and internal pressures for oil corporations, seem to signal an end to business as usual for big polluters. This is good news. True change is on the horizon, and the business models that rely on destroying ecosystems, polluting the planet, and lying in order to get away with it, are simply no longer viable.
IEA Says No More Fossil Fuels
The International Energy Agency, set up during the oil crisis of 1973, has become an important player in the international energy market, and consequently also in global politics. For the first time in its history, the agency called for the almost immediate end to all new oil and gas developments worldwide.
The report, titled Net Zero by 2050, states, “Global commitments and actions are growing, but they still fall well short of what is needed to limit the rise in global temperatures to 1.5 °C and avert the worst effects of climate change.” It lays out milestones for this pathway to decarbonize the global economy in three decades.
One of those critical milestones, and perhaps the most significant takeaway, is the need to halt the development of new fossil fuel facilities and infrastructure this year. Moreover, the report highlights the need to stop sales of new internal combustion engine passenger cars by 2035, and the phase out of all unabated coal and oil power plants by 2040.
To anyone who understands the reality of the climate crisis and the rapidly increasing concentrations of heat trapping gases in the atmosphere, this is a foregone conclusion. It is in fact something that many have been advocating for fiercely. Yet such a direct and prompt call to cease all new fossil fuel projects in 2021 is a hugely consequential new development. For an agency that had in the past been remarkably averse to catching up with the realities of continuing to rely on fossil fuels for global energy production, and understated the potential for renewables, this is a big shift.
Dutch Court Ruling Against Shell
On May 26th, a Dutch court ordered Royal Dutch Shell to cut its net carbon emissions by 45% by 2030 compared to 2019 levels in a landmark case that opened the doors for what the power of courts and legal enforcement might look like for other massive polluters. The case against Shell was brought on by a group of environmental and human rights organizations, as well as private citizens, who sought a mandate for the firm to cut emissions in a way that aligned with the goals of the Paris Climate Agreement. While the corporation has outlined policies to reduce its emissions, the court ruled these were far too vague, and did not go far enough.
Covered under the ruling are “emissions of the Shell group, its suppliers and its customers,” and importantly, since Shell is headquartered in the Netherlands, “a Dutch judge can impose a judgment that should be enforced in the 80 countries where Shell is active.” The decision is therefore a serious warning call to other highly polluting multinational corporations around the power of legal enforcement to act in line with emissions reductions pledges and needs.
A key argument in Shell’s defense was that Paris Agreement goals are the responsibility of governments to keep, rather than private corporations, and while the oil giant does plan on appealing the decision, it seems this defense doesn’t hold much water. The outcome is great news for the prospects of keeping this planet a livable one, and achieving the emissions reductions necessary to do so. It signals to big polluters that it is not enough to greenwash their business plans, or even to invest some (tiny) percent of their portfolios on renewables, as long as they are continuing to rely on and expand their extractive oil and gas operations. The court’s decision aligns with both growing public concern with, and scientific consensus around the tight timelines and deep decarbonization efforts that are urgently needed.
New Board Members At Exxon
Following the landmark ruling of the Dutch court, another major fossil fuel corporation faced radical internal shifts related to its corporate governance. In a contested election over four board seats, ExxonMobil shareholders elected three new board members (out of 12 total board seats) who share a climate and clean energy focus. Opposed by Exxon’s management, the new members were nominated by Engine No. 1, an activist hedge fund that owns around 0.02 percent of shares. Their victory was secured through the support of other, much larger financial players, like BlackRock, Vanguard, and State Street.
From Engine No 1’s website, “There is a compelling thesis today for a convergence of traditional investor activists and climate-aware investors […] and Exxon is the clearest case even within the oil and gas sector for a new kind of campaign.”
The most significant part of this story might just be the sour rebuke of corporate leadership, who have for decades refused to adapt and change in the face of the unprecedented climate crisis. The vote sends a clear signal to the company and its management that investors are not happy with the status quo and the continued lack of responsibility for the pollution and subsequent climate catastrophe Exxon is partly responsible for. It’s important to note that there are also shifting financial outcomes for the corporation, as oil, gas, and coal continue to be quickly outpaced by cheaper, cleaner, more favorable renewable energy sources. Investors seem to finally understand that there no longer is a long-term financial gain in legacy energy, and that is brilliant news for decarbonization potential.
Shareholder Demands At Chevron
In another boardroom shakeup, Chevron shareholders adopted a proposal to cut Scope 3 emissions, meaning the emissions produced from consumers’ combustion of their products. The total tally came in at 61% of shareholders favoring the resolution, and went against the interests of the company’s board, which had urged shareholders to reject it. Two additional climate-aligned resolutions failed narrowly after gaining only 48% support. One of them would have required a report analyzing how a significant reduction in fossil-fuel demand would affect its business, and the other would have required lobbying disclosures from the company.
Behind the vote was Follow This, an organization focused on changing the oil and gas industry from within in a way that “unites responsible shareholders in oil to become a powerful voice that demands change.” They have led similar campaigns targeting Shell, as well as ExxonMobil, and hope to make true change in the most polluting industry in the world through shareholder pressure, even against opposition from corporate management.
Finally In Decline
The fossil fuel industry has long been in decline, and we’re seeing its fall from grace play out today. Just this week, the company behind the controversial and long-contested Keystone XL pipeline announced it was terminating the project, which was once thought to be almost inevitable. The massive win comes after years of unrelenting activism led by Indigenous leaders and allies across the country that led on Standing Rock, and have continued to shift public opinion. Currently in Minnesota there are protests around Enbridge’s Line 3 project that’s under construction. Hundreds of opponents have been calling on the Biden administration to end construction based on concerns around Indigenous rights including Treaty violations, water rights, as well as massive environmental harm.
While we can surely expect resistance and backlash from these corporations, it’s evident that oil and gas developments will no longer continue to happen without huge pressure from activists and supporters, who understand the nonsensical nature of these developments today. Simply put, we have finally eroded these corporations’ social license to operate to the point where their own shareholders are no longer standing behind the risks and harm of their business.
The oil and gas industry, and their business models, plans, and future investment decisions are unfortunately still at the core of the achievability of Paris Agreement goals. Fortunately, unlike any time before, they are finally seeing pressure from within their own boardrooms and investors, as well as regulatory assessments, and even legal mandates that might just have a chance to keep them in check.