Paying for restaurant meals is a cost. Taking classes to learn how to cook your own meals is an investment. Similarly, suffering through the effects of climate change is a cost, but spending money to avoid the worst climate outcomes is an investment. The difference is meaningful — as Exxon Mobil Corp. has inadvertently reminded us.
In a regulatory filing last week, the oil giant argued it shouldn’t have to bother disclosing more-detailed estimates of the cost of phasing out its fossil-fuel business to meet the International Energy Agency’s Net Zero Emissions scenario for 2050, calling the goal too unrealistic to merit careful accounting. That’s fair enough, considering the world isn’t on a path to keeping its net-zero promises. But then Exxon apparently couldn’t resist adding: “[I]t is highly unlikely that society would accept the degradation in global standard of living required to permanently achieve a scenario like the IEA NZE.”
The IEA’s net-zero scenario is indeed a remote possibility. But a lot of shareholders — more than half of whom voted for a net-zero accounting in 2022 — want to see such details anyway as a form of stress test. Presumably, they worry that what seems aggressive today may not be within a generation. And they might be displeased that what little disclosure Exxon does provide is, shall we say, impressionistic, with future cash flows represented with vague charts.
But with that extra zinger about global living standards, Exxon went from arguing narrowly about accounting requirements to presumptuously opining about what humanity will tolerate over the next three decades. It’s certainly ironic, given that Exxon spent decades sowing doubt about climate change, discouraging all of us from an earlier and presumably less jarring transition.
More importantly, the remark illustrates a fundamental problem with how decarbonization is framed in the public arena.
People may well balk at the behavioral changes and increased spending required to stop burning fossil fuels. But that’s only one side of the ledger.
If society won’t accept the “degradation in the global standard of living” that Exxon alludes to, then it implicitly would be accepting the degradation that will be inflicted by unaddressed climate change — in the form of floods, mass migration, shrinking food supply and a host of other frightening and economically damaging effects.
Exxon’s warning that society isn’t ready to confront a diminished “standard of living” also glosses over the fact that inaction on climate change might preserve immediate convenience only to worsen quality of life over the longer term. (When asked for comment, an Exxon spokesperson said “energy poverty” affects health, education and economic development. In a statement after this piece was published, Exxon said: “Whatever the likelihood of the IEA NZE scenario today, we’ve done the work to test the resiliency of our business under the IEA NZE. What we’ve found is that our low-carbon solutions business may very well grow to be bigger than our current oil and gas operations under this scenario, and we’re investing in that today.”)
The harms from continuing to burn fossil fuels are increasingly hard to bear. To take just one harrowing example: The Australian wildfires that burned an area half the size of California in 2019-20 have saddled children there with a lifetime of health problems, Bloomberg News reported last week. Some babies of mothers who breathed smoke were born prematurely with “blackened placentas,” and young children now must take medication daily just to breathe.
A new study in the journal Science of the Total Environment suggests the air-quality effects of wildfires cause 4,000 premature deaths and $36 billion in economic damage every year in the contiguous US alone. Alberta, Canada, is already on track for its worst wildfire season on record, with five more months of potential burning to go, triggering air-quality warnings as far away as the eastern US.
As carbon keeps accumulating in the atmosphere and the planet continues to warm, these wildfires will only become more frequent and destructive, putting more generations around the world at risk of deleterious health effects. Will society really prefer to face those kinds of costs over the shorter-term pain of transitioning away from fossil fuel?
The world also looks increasingly certain to be in the grips of a strong El Niño system in the western Pacific Ocean by the end of this year. Typically these weather patterns cause global temperatures to spike, triggering wildfires in Australia, deadly droughts in Africa and mass coral-reef destruction.
There is a good chance global warming will at least make such El Niño effects more intense, if not more frequent, in the decades to come. A new study by Dartmouth researchers in the journal Science suggests El Niño events could lead to $84 trillion in economic damage over the next century, even if countries stick to current net-zero pledges. Even half of such costs would represent quite a “degradation in global standard of living.”
We have an awful habit of talking about the “costs” of decarbonization. In reality, time and money spent strategically to address the problem is an investment. We should reserve “costs” for the damage inflicted on people and infrastructure by ignoring a glaring problem.
More From Bloomberg Opinion:
• There Are No Climate Change Winners: Mark Gongloff
• Where’s the Justice in Pushing for Net Zero? Lara Williams
• Keeping the Lights On Is About to Get Less Deadly: Liam Denning
(Includes new comment from Exxon.)
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mark Gongloff is a Bloomberg Opinion editor and columnist covering climate change. A former managing editor of Fortune.com, he ran the HuffPost’s business and technology coverage and was a reporter and editor for the Wall Street Journal.
Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he was editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’s Lex column.
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