The big energy firms have largely stopped denying the scientific consensus about climate change. But behind their rhetoric about “net zero emissions,” there’s an unflinching determination to keep profiting from oil and gas, whatever the cost.
ExxonMobil’s oil refinery in Baton Rouge, Louisiana, on February 28, 2020. (Barry Lewis / InPictures via Getty Images)
This is an extract from Crude Capitalism: Oil, Corporate Power, and the Making of the World Market by Adam Hanieh, now available from Verso Books.
A few weeks into 2023, the world’s largest oil and gas firms began to announce their end-of-year results. ExxonMobil led the way, recording a $55.7 billion profit for 2022 — the biggest in the company’s history.
Shell followed, also marking a historic milestone in its 115-year existence, with profits of nearly $44 billion, over twice the amount earned in 2021. All told, the five leading Western supermajors — ExxonMobil, Shell, Chevron, BP, and TotalEnergies — reported a total of $200 billion in profits, an eye-watering $23 million for every hour of 2022.
Yet even these record-breaking revenues would soon be overshadowed by Saudi Aramco. Coming in at just over $161 billion, Aramco’s 2022 financial results not only exceeded the combined announcements of Shell, BP, ExxonMobil, and Chevron, they became the largest corporate profits recorded in history.
Such results justifiably attracted the ire of many environmental campaigners, who rightly protested unprecedented fossil fuel profits while much of the world was facing the real costs of climate change. Indeed, according to the British charity Christian Aid, the total cost of the ten largest climate-related weather events through 2022 — floods, cyclones, and droughts — was around $170 billion, much less than the collective profits earned by the five largest supermajors and just a little bit over Aramco’s bumper results.
Rewarding the Arsonists
In human terms, the worst of these disasters were the devastating floods that occurred across Pakistan between June and October 2022, killing over 1,700 people and displacing more than seven million. The total costs of these floods in Pakistan — caused by heavier than usual monsoon rains and melting glaciers linked to climate change — were estimated by the World Bank at over $30 billion in flood damages and related economic losses. Around half of ExxonMobil’s 2022 profits could have footed the bill.
Nero was (falsely) accused of having fiddled while Rome was in flames. In today’s world, we face the spectacle of a handful of large oil firms that are not only standing by as the planet burns but are being handsomely rewarded for their role in the arson.
The total costs of the 2022 floods in Pakistan were estimated by the World Bank at over $30 billion in flood damages and related economic losses.
This reality highlights a crucial truth of the climate emergency: left to their own devices, there is no chance that the world’s largest energy firms will willingly walk away from the enormous wealth to be made from continued oil and gas production. Despite talk of “low-carbon solutions,” they have no intention of ending their core focus on fossil fuels.
While scientific consensus now states unambiguously that no new oil and gas projects can be brought online, and that carbon emissions must be halved by the end of the decade, the major oil companies are embarking on precisely the opposite course of action. A 2022 investigation found that the twelve largest global oil firms, led by Saudi Aramco, were planning to spend $103 million each day for the rest of the decade on new oil and gas projects.
The leading firms have also made final financial commitments for new projects that will produce 116 billion barrels of oil over the next seven years — equivalent to about two decades of US oil production at 2020 levels. As Chevron’s CEO Mike Wirth put it in early 2023: “The reality is, [fossil fuel production] is what runs the world today . . . it’s going to run the world tomorrow and five years from now, ten years from now, twenty years from now.”
With such investments and new production in the pipeline, we face an unmitigated disaster. As of early 2023, the world’s largest oil companies held oil, gas, and coal reserves that will release around 3,600 gigatons of CO2 into the atmosphere if burnt. This figure is more than fourteen times the world’s remaining “carbon budget” of 250 gigatons — the amount of carbon that can be emitted before global temperatures are likely to rise 1.5 degrees above preindustrial levels.
Peak Carbon
Two decades ago, a popular theory held that the world was fast approaching peak oil — the idea that global production would decline as it became harder to extract oil from older fields and replacement fields became more difficult to find. The shale boom showed that this geological determinism was wrong, its proponents ignoring the economic incentives that shape production levels.
There is no imminent physical limit to oil supplies. But today we undoubtedly face the specter of peak carbon: the world’s plentiful supplies of oil and other fossil fuels must stay in the ground if we are to hold any chance of averting the dystopic future forewarned in the extreme weather events of recent years.
The analogy is frequently drawn between fossil fuel companies and tobacco firms. Just as the latter knew about and hid the dangers of smoking, oil companies have been fully aware of the science of climate change for at least fifty years. As far back as 1977, a senior scientist at Exxon warned the company’s management committee that warming temperatures due to fossil fuel consumption meant that “man has a time window of five to ten years before the need for hard decisions regarding changes in energy strategies might become critical.”
The research and statistical models developed by oil companies in the 1960s and 1970s predicted the effects of carbon emissions on global temperatures with uncanny accuracy.
The research and statistical models developed by oil companies in the 1960s and 1970s predicted the effects of carbon emissions on global temperatures with uncanny accuracy. In the face of this knowledge, the oil supermajors took the path trailblazed by Big Smoke — attempting to muddy the waters with the idea that the science of climate change was uncertain, a matter that reasonable people could disagree on. Exxon alone would spend more than $30 million on climate change denial think tanks between 1998 and 2014, with the simple aim of creating confusion and sowing doubt regarding a scientific consensus that the company’s own research affirmed.
In 1998, an internal memo of the American Petroleum Institute (API) fully acknowledged this campaign of disinformation, noting that oil companies would achieve “victory” when “recognition of uncertainties becomes part of the conventional wisdom.” These words were written just a year after the adoption of the Kyoto Protocol, the first international climate treaty in history. And in this context, according to the API, the oil industry needed to make “those promoting the Kyoto treaty on the basis of the extant science appear to be out of touch with reality.”
Nonetheless, over the past decade — and after many years and millions of dollars spent on obfuscation and denial — the world’s leading oil firms have reversed their public attitude toward the science of climate change. All now fully endorse the scientific consensus around global warming and have explicitly affirmed their support of the Paris Agreement goal to keep temperature rises below 1.5 degrees. All have moved into a range of alternative energy technologies, and visibly brandish their low-carbon strategies in annual reports and shareholder meetings.
This shift is not merely rhetorical — and here the accusations of greenwashing, while accurate in some respects, can miss the important transformations taking place in global energy today. Oil companies are changing. But oil companies have always been dynamic, malleable institutions. In the contemporary moment, they are absorbing and adapting to the language of climate change in significant ways — and in doing so, altering the ways in which the problem of climate change itself is defined and delimited.
Net Zero
By appearing to transform themselves into part of the solution, they not only hide their ongoing centrality to the fossil economy, but aim to frame and determine the societal response to climate change. A clear illustration of these patterns is the dubious and dangerous use of the “net zero emissions” (NZE) slogan. The term gained widespread usage in the climate lexicon following its inclusion in the Paris Agreement adopted at the UN Climate Change Conference (COP21) held in Paris, France, on December 12, 2015.
Essentially, NZE refers to the objective of counterbalancing emissions resulting from burning fossil fuels by removing an equivalent amount of carbon, using techniques such as planting carbon sinks in the form of forests or cropland, developing carbon capture technologies, or directly extracting carbon from the atmosphere. With the right combination of policies and technologies, the theory goes, it should be possible to offset the amount of carbon generated, thereby achieving a state of NZE.
Today, NZE is the dominant concept driving global climate policy, with the Intergovernmental Panel on Climate Change (IPCC) asserting that net zero must be achieved globally by 2050 to avert the dire consequences of exceeding the 1.5 degree Celsius warming threshold. Over 140 countries, as well as numerous cities and regions globally, have committed to NZE targets as of mid-2024.
Oil companies have become enthusiastic converts to the idea of NZE. One of the foremost reasons for this is their leading role in carbon capture and storage (CCS) technologies. CCS refers to various techniques that can remove CO2 emitted in manufacturing or other industrial processes, which can then be stored underground or used in other sectors. Today, CCS is largely an untested technology that fails to capture a significant proportion of the carbon it is supposed to remove.
Oil companies have become enthusiastic converts to the idea of net zero emissions.
Indeed, as of 2023, there were only forty-one operational CCS plants worldwide, capturing just forty-nine million tonnes of carbon annually. Even more important than the limited scale of CCS, however, is a critical point in the fine print regarding this technology: for twenty-nine out of the forty-one existing CCS plants, the captured carbon is used in a process known as enhanced oil recovery (EOR), a technique developed by the oil industry in the 1970s that uses pressurized CO2 injected into oil and gas reservoirs to increase the quantity of hydrocarbons that can be extracted.
More than 80 percent of all CO2 captured in operational CCS projects is earmarked for EOR, and for this reason oil companies dominate the nascent carbon capture industry. ExxonMobil alone claims control of more than 10 percent of global carbon capture capacity, including ownership of the largest CCS facility in the United States at Shute Creek in Wyoming. This link between CCS and EOR raises the distinct possibility that the push to net zero might actually lead to an increase in overall levels of oil production.
The oil industry denies this, even going so far as to claim that the oil produced through EOR is lower carbon, because the carbon injected into oil wells is now trapped underground rather than being released into the atmosphere, and thus needs to be subtracted from the overall carbon footprint of the oil barrel that is produced. But this faulty logic rests on the assumption that EOR oil will substantially displace conventional oil production.
Much more likely — indeed this is why oil companies developed EOR in the first place — is that CCS technology will enable oil to be extracted from declining fields and unconventional shale oil and gas reservoirs that would have otherwise been unrecoverable. Industry experts are quite explicit about this likelihood, with some studies identifying over 280 billion barrels of additional oil that could be extracted in the United States alone using CO2-EOR — about sixty-five years’ worth of US crude oil production at 2022 levels.
Burn Now, Pay Later
The use of CCS today remains mostly limited to the oil industry, and there are currently no large-scale plants that capture carbon from industry for underground storage. Nonetheless, the rapid rollout of CCS is essential to meeting the targets established in various NZE models. According to the NZE scenario of the International Energy Agency (IEA), the total amount of captured CO2 must reach 7,600 million tonnes by 2050 — more than 150 times today’s figure. Without this expansion, it will be impossible to achieve NZE by the deadline.
Many countries are offering significant state subsidies and tax benefits in support of carbon capture.
To this end, many countries are offering significant state subsidies and tax benefits in support of carbon capture. Unsurprisingly given their existing connection to CCS, most of this support is flowing to oil companies. In the United States, for example, the oil industry has lobbied heavily for an increase to tax credits for carbon removal.
Their efforts met with success in 2022, when the Biden administration amended Section 45Q of the tax code, increasing tax credits from $50 to as much as $180 for each tonne of captured carbon. More than $1 billion in tax credits were awarded under 45Q between 2010 and 2019, almost all of which (99.86 percent) went to just ten companies.
In short, the development of carbon capture appears to be replicating the patterns we have seen throughout the history of the oil industry: billion-dollar subsidies directed from the state to oil companies, albeit this time in the name of a green transition. Such subsidies for captured carbon will be instrumental in its further commodification, turning an industrial waste product (CO2) into a profitable good that oil companies can either use in their own EOR activities, sell to other oil producers or industrial sectors, or bank as tax credits.
But beyond these monetary considerations, CCS also plays an important role in the oil companies’ own NZE aspirations. At first glance, claims of a net zero oil company may appear paradoxical — after all, how could a barrel of oil not produce any emissions? But the key to deciphering this contradiction lies in the sleight of hand that oil companies use in their own carbon accounting.
When oil companies report their carbon emissions, they refer only to the carbon involved in the actual production of a barrel of oil — not the carbon released when that oil is consumed. In reality, however, at least 85 percent of the carbon emissions associated with the industry come from oil’s final consumption — not its drilling, extraction, and refining.
When oil companies report their carbon emissions, they refer only to the carbon involved in the actual production of a barrel of oil — not the carbon released when that oil is consumed.
As such, oil companies can bank CCS against the emissions associated with their operations, claiming they are supporting the transition to net zero (and earning large tax benefits to boot), all the while ignoring the fact their product is the main driver of global warming. To return to the tobacco analogy, this is a bit like Philip Morris disavowing responsibility for cigarette deaths because lung cancer rates were very low among workers on the company’s assembly line.
All of this highlights the basic problem with the NZE framework: by claiming that the use of some (as yet mostly speculative) technologies will eventually cancel out future carbon emissions, the oil industry is able to expand production in the here and now. As with the most effective kinds of advertising, NZE works by appearing as something it is not: net zero is not zero carbon, and the focus on net emissions deflects attention away from the oil companies’ absolute levels of hydrocarbon production.
The perverse incentives that animate the calculus of carbon accounting are driving us toward even greater levels of oil production, led by newly greened oil companies. It is a dangerous wager, ultimately premised on a future technological fix, which serves to legitimize ongoing fossil fuel production and consumption. Or, as three scientists who once embraced the NZE concept now put it:
In practice it helps perpetuate a belief in technological salvation and diminishes the sense of urgency surrounding the need to curb emissions now. We have arrived at the painful realisation that the idea of net zero has licensed a recklessly cavalier “burn now, pay later” approach which has seen carbon emissions continue to soar.
This work has been made possible by the support of the Puffin Foundation.