Copyright bloomberg
When you’re one of the biggest polluters, you have a vested interest in how pollution is counted. That is why ExxonMobil has joined an industry effort to create a new carbon-accounting system, which it claims could enable more accurate calculations of emissions-intensity at a product level. Climate advocates say it’s yet another delay tactic. But Chief Executive Officer Darren Woods says it’s not. “If you want to eliminate all the emissions, you damn well better be able to account for all of them,” he said in an interview for the Zero podcast, speaking last week from the sidelines of preliminary events tied to the COP30 climate summit in Brazil. It’s his third consecutive trip linked to the United Nations-sponsored global climate meeting, and he’s putting the oil and gas giant’s weight behind what he thinks is a necessary climate solution. “I'm a big believer,” Woods said, “that 20% of products or services are causing 80% of the emissions. Let's start by focusing on those.” The new accounting mechanism is a “critical first step” that would shift responsibility onto the person or business who burns a fuel such as gasoline, rather than the company that produces it. Exxon's willingness to engage in ideas to reduce emissions is a departure from its historical stance, which has included advertorials sowing doubt about climate science that ran in the 1980s and 1990s. Under Woods, the company has been trying to change its image and is investing billions of dollars in low-carbon technologies. That process continues, albeit a little slowly, even as US President Donald Trump’s all-out attack on renewables and promotion of fossil fuels has made some question the transition to clean energy. COP30 marks 10 years since the landmark Paris climate agreement. Subscribe to our free Green Daily newsletter to follow our coverage. While Woods praised Trump for changing the “paradigms” of the energy transition, he insisted Exxon still has a role to play in lowering emissions. “We need a broader aperture. That set of solutions is more focused on the opportunity to address the real challenge here, which is emissions,” he said in São Paulo the week before climate diplomats and tens of thousands of participants arrived in the rainforest city of Belém for COP30. Exxon, along with its allies in the Middle East and now the White House, is increasingly trying to redefine the energy transition to include a long-term future for oil and gas and a market-led approach to low carbon. Under political pressure from the US, the world’s foremost energy forecaster, the Paris-based International Energy Agency has re-introduced a scenario that assumes a slower roll out of clean-energy technologies and thus rising demand for fossil fuels for decades to come. That’s a radically different world than what happens if governments adopt the policies they’ve stated in their climate plans under the Paris Agreement — a world where oil and gas consumption would peak around 2030. Most of Woods’ CEO peers in the oil and gas industry have stopped making the annual trip to climate summits, but Woods has become a veteran by now after trips COP28 in Dubai and COP29 in Baku, Azerbaijan. It raises the question of what he wants to accomplish by engaging the climate world. As the poster-child of climate obstruction for nearly two decades, Exxon lost a high-profile activist campaign at the height of the environmental, social and governance movement in 2021. Woods, who was forced to replace a quarter of his board after the proxy battle, now engages willingly in climate debates to elevate his views, even if that means facing a skeptical, even hostile audience. The company plans to invest $30 billion in low-carbon technologies through 2030 but with a focus on businesses like carbon capture and hydrogen that can sit alongside fossil fuels rather than replace them. Exxon’s record profits in 2022, less than a year after the acrimonious proxy battle, only hardened his resolve to defend fossil fuels not only in today’s energy system but for decades into the future. Woods insists Exxon can help to cut emissions but only if it can do so by reducing the carbon intensity of the overall energy system while continuing to grow oil and gas production. Criticizing ideologues “on both sides,” Woods said he wants a clean break from government-led accords that mandate emissions reductions by banning or restricting fossil fuels, which are responsible for most human-made global warming. That position can be seen as self-serving — Exxon is developing enormous new sources of offshore oil in Guyana, whose production will continue for decades — but it’s also influential. The Texas-based company’s vision of the future now has loud supporters in the White House, who are attempting to pin the blame for rising energy costs on low-carbon power in an effort to erode a long-held global consensus on climate action. The battle is likely to become increasingly fraught during Trump’s remaining three years in office as the price at the plug replaces the price at the pump as a growing pain point in household budgets. “You see even in Europe that the cost of energy has gotten so high that they’re stepping back and rethinking what needs to happen in order to achieve their emissions reductions while continuing to provide affordable energy and reliably available energy,” Woods said. Many at COP, who supported climate action when Exxon was against it, have reasons to be skeptical of the company now. Apart from activities to sow doubt about climate science, Exxon was also an outspoken critic of the Kyoto protocol in the late 1990s and the cap-and-trade effort to reduce emissions a decade later. And today, there’s an increasing likelihood that Exxon’s recent low-carbon efforts may fall short. Woods plans to “pace” his low-carbon hydrogen project in Baytown, Texas, that was announced with much fanfare two years ago under former US President Joe Biden. Analysts are speculating that the company may even reduce its spending plans on green energy at its annual investor day next month. Woods said the project is being held back by a lack of customer demand rather than Trump’s shortening of subsidies for hydrogen. “One of the big challenges there is customers buying the product,” he said. Exxon thinks the solution is an accounting system that can be used to sell products of lower carbon intensity. But climate science is clear that lowering the amount of carbon emitted per unit, rather than the absolute volume of emissions, won’t achieve reductions quickly enough to arrest global warming. A dramatic phase-down of fossil fuels, and substitution for renewable energy, is needed to avoid catastrophic climate impacts. Carbon Measures, the new carbon accounting system Exxon is backing alongside BlackRock Inc.’s Global Infrastructure Partners and chemicals giant BASF SE and Banco Santander SA, aims to provide more accurate assessments of direct emissions. That category includes all energy used across a company’s assets. The methodology would do away with indirect emissions, known in the current measurement system as Scope 3, which include those that come from customers using a company’s products. It’s a big change when one of your major products is fuel burned inside automobiles. The main goal is to avoid double-counting of emissions, which is baked into the current corporate carbon accounting system called the Greenhouse Gas Protocol. While Woods says customers’ emissions are not Exxon’s responsibility, the backers of GHG Protocol say double-counting is a feature not a bug. When multiple entities take responsibility for the same emissions, there’s a greater chance of them working together to cut those emissions. “When Exxon is out front pushing for ‘better’ disclosure, we should honestly reflect,” said Lisa Sachs, director of the Columbia Center on Sustainable Investment. “We know exactly where emissions come from and, in fact, Exxon has been the single largest investor-owned emitter in the world.” The other issue with Carbon Measures is that reaching accurate product-level emissions would need all players in the supply chain of production to report emissions. That could take years or even decades. The GHG Protocol is nearly 25 years old and already counts more than 20,000 companies reporting under its guidance. Woods wants Exxon to play a role in the climate fight regardless. “There’s something that needs to be done in this space,” Woods said. “We have a role to play and can contribute and we will work with whatever administration comes in and continue to drive an agenda that we think makes sense that doesn’t compromise economic growth or people’s standards of living.” Below is a transcript of the podcast conversation. Our transcripts are generated by a combination of software and human editors, and may contain slight differences between the text and audio. Please confirm in audio before quoting in print. Listen now, and subscribe on Apple, Spotify, or YouTube to get new episodes of Zero every Thursday. Akshat Rathi 0:00 Welcome to Zero, I’m Akshat Rathi. Today: Exxon at COP30 It’s been a year of bad news for climate policies. The biggest force has been Donald Trump, who, in his second term as US president, has systematically dismantled climate action at home and made concerted efforts to attack climate initiatives abroad. He has championed fossil fuels, and single-handedly slowed down the energy transition… at least in the US. Trump’s actions have given license to many to ignore and deny climate change. But the CEO of ExxonMobil Darren Woods isn’t quite following suit. Darren’s peers, the CEOs of other international oil companies, have stopped coming to COP climate summits. But Darren came to a side event at COP30 – his third COP in a row. For context, Exxon is one of the world’s largest oil and gas companies. And Darren is in charge of overseeing its operations, and what areas of the energy transition the company pursues, or ignores. Last year at COP29 in Baku, I got a chance to ask him questions about how Exxon – which has a long history of sowing doubt about climate science – can be trusted to now be acting in good faith to tackle climate change. I quizzed him on Exxon’s lobbying efforts and on the oil industry’s favorite climate solution: carbon capture. I also talked to him about the millions of dollars Exxon spent advertising algae biofuels, without ever scaling up the technology for commercial use. If you haven’t listened, I recommend you do, and we’ll link the episode in the show notes. Because this year I wanted to ask him different questions, and follow up on some of the questions I had last year. Why is Exxon backing a new carbon accounting idea, which many climate advocates worry is yet another delay tactic? What is his plan now that many of the tax credits under the Inflation Reduction Act for low-carbon solutions have been gutted? And how is he planning to deal with the tactics that Trump is using to go after businesses… that could be weaponized against his industry by a future administration? As you will hear, it was a good conversation with a healthy amount of disagreement. These are the kinds of conversations I’d like to see happen more often, where we aren’t questioning the accepted science of climate change, but debating the ways in which we should act quickly. Akshat Rathi 2:50 Welcome back to Zero, Darren. Darren Woods 2:52 It's good to be back. Akshat Rathi 2:54 So I know your schedule is always very tight, but you are in Brazil. Have you ever been to the Amazon before? Have you been to a rainforest before? Darren Woods 3:00 I've been to a rainforest before, but not the Amazon. Akshat Rathi 3:02 Maybe next time. Darren Woods 3:03 Maybe next time. Yeah, I'd like that. Akshat Rathi 3:07 So it's been a year since Donald Trump's election. He's been in office for 10 months, and there's been a radical shift in policies, obviously, in the US, away from climate action and in favor of fossil fuels. What changes have you liked? Darren Woods 3:23 Well, I think to me, what I focus on is the dialog that's occurring and the fact that there's a debate, and I'd say a challenge to some of the paradigms that have been established as to how best to accomplish this objective. If you think about the whole effort in this space, it's been defined, frankly, by a set of solutions that have been proposed by a lot of ideologues, primarily on the left, that this is the way we're going to solve the problem with this set of solutions. And I think unfortunately, the problem and the challenge of climate change has then been defined by this solution set in either you’re for these solutions or against them. And I think what we need to do is focus less on the proposed solutions. Some of them are valid and have merit, and they're necessary, but they're not sufficient. We need a broader aperture. And so less focus on that set of solutions, more focused on the opportunity to address the real challenge here, which is emissions. And so I actually like the fact there's a debate going on, both sides of the argument. And I think generally speaking, when you have people debating about how best to achieve an outcome or to balance one challenge or issue with the other challenges and issues, that's an important dialog and debate to have. And I feel more of that's happening today in the US than in the past. Akshat Rathi 4:41 Well, there are ideologues on the left, but there are ideologues on the right too. Darren Woods 4:45 Ideologues on both sides, absolutely, yeah. Akshat Rathi 4:48 Many of the things that have happened under the Trump administration are things that the oil and gas industry as a whole doesn't like. The API (American Petroleum Institute) came out in support of keeping the greenhouse gas reporting, which the EPA wants to get rid of, for example. But you told me last year that you liked a lot of what was there in the Inflation Reduction Act, and obviously under the Trump administration, that's been gutted. Almost all of the incentives that were there are gone. Does that change your thesis on the investments that you were looking forward to making in all sorts of low carbon solutions, like carbon capture, like hydrogen? Darren Woods 5:22 So I think what we talked about last year, what we've been very focused on, is how can we contribute to the challenge of emissions and reducing emissions based on our capabilities and our core competitive advantages. And that's very much focused on the molecule side of the equation: So carbon capture and storage, low-carbon or virtually carbon-free hydrogen, biofuels. We ended up moving into lithium based on our ability to process produced water, brine water. All those frankly, if you look at the changes the Trump administration has made to the IRA, have not reduced the incentives for those. But I will tell you that as you look at those different areas that were focused on, we always said that our investment in this space was a function of good policy, policy that incentivizes that in the short term, but very importantly, for markets developing and for there to be a customer demand. Because ultimately, any of these policies, to be successful, are going to have to evolve into market driven forces. Government can't afford to subsidize these solutions in perpetuity, and so markets have to develop, and technology needs to evolve so that we can get the cost down. Because today, in some of these areas, the costs are too high for the long term. And so those three things have to happen. They have to improve. And we're going to pace the investments associated with what we see in the development there. Frankly, with our largest project, the Baytown blue hydrogen project, one of the big challenges there is customers buying the product, and so we are potentially going to pace that based on our ability to sign customers up, much less a policy issue in that case. Akshat Rathi 6:54 But you started by saying, in terms of getting climate solutions, or solutions that would reduce emissions, being technology neutral, the starting point, having policies, is helpful. In the US, you get the swing to the left and to the right. How much does that worry you? Darren Woods 7:11 Well, your point about there being ideologues on either side of the aisle, I definitely agree with that. That's why we shouldn't be trying to solve this problem through ideology. I mean, ideology only takes you so far, and then you hit the reality of the real world, you know the practical constraints and how you manage through those. And I think from our perspective, we're trying to keep a very clear view on what is the problem statement, which is trying to find ways to productively reduce emissions that don't slow economic growth, that don't impact people's standards of living. Find ways to do that based on what we're good at, and achieve both. We refer to it as the ‘and equation’, and we're absolutely convinced that we can do that. And that dialogue that I have and the work that we're doing is consistent, whether it's a left administration or a right administration, or whether it's an ideologue or somebody who's center, the foundational fundamentals of how we address this issue over time do not change with political cycles or who gets elected. Akshat Rathi 8:06 You told me last year that, given the scale of the energy transition, no single president in any country can do much to derail or to accelerate the energy transition. Do you still feel the same, given how effective Trump has been at stifling clean energy projects? This is not just clean hydrogen projects, but also carbon capture projects, obviously, lots and lots of offshore wind projects that were canceled. Are you still of the same view that one president cannot shift the pace of the energy transition? Darren Woods 8:42 What I would say is: the energy industry, the basis on which we make decisions, the timeframe that those decisions play themselves out, and the duration of those investments exceed any political cycle. So my point is that we have to look beyond the political cycle in terms of making these decisions. I think one of the things the Trump administration is challenging is a parameter that, frankly, has not been given the attention it needs, which is the affordability of these things. And you know, is it a productive use of money? The challenge today is there's not a policy maker around that can tell you what is the cost for the benefit of a ton of carbon removed. And every government has its constraints and limits. Every organization has its constraints. We don't have unlimited budgets. And so I think every government around the world should be focused on, how do you get the biggest bang for the buck? How do I remove the most emissions for the least spend? You can't do that today because we have no carbon accounting mechanism, no mechanism to understand the benefits of the policy. So as a result, we get very expensive solution sets that, frankly, aren't sustainable. And so I think stepping back and trying to understand what are the economics, the underlying cost and the affordability of some of these solutions, is a critical part to laying the right foundation for the future. And I think challenging that today to try to get to better solutions is appropriate. Akshat Rathi 10:06 Specifically, though, how do you feel about Trump canceling offshore wind permits? Projects that were fully permitted, some were under construction. There's a risk another president comes in, who's left leaning, who's for clean energy, and uses the kind of policy and weaponizes it against oil and gas projects. Darren Woods 10:29 Well, we've certainly seen that with Biden. He came in and canceled the pipeline coming from Canada. So you're absolutely right. That challenge sits on both sides of the aisle. And I think, frankly, for businesses to be successful, particularly businesses like ours that invest very large sums of money over a very long horizon, you need stability. You need predictability. And so I think that's one of the challenges that we have today with permitting, is the way it can be challenged, the way it can be changed, challenged through the legal system. And so I think a reform in that whole area is very appropriately focused. As you advance these things, you advance projects, you get the permit, you have to have confidence that those permits are going to continue to exist and allow you to make those investments. I think that's critical for every industry, every business and for every government. Akshat Rathi 11:12 You had also told me last year that if the energy transition provides opportunities outside the US, you will pursue those in the US. It's pretty clear the energy transition is going to slow down. It's not going to stop. We know that electric car sales are going to rise, just not as much as was predicted. Solar and wind projects will get deployed, but if you look outside the US, even there, the Trump administration is having an impact. So one thing that Exxon has long supported is carbon pricing. Ideally, you would want a global carbon price that would be a level playing field for everybody. We were about to get that. The politics have been very difficult around carbon pricing, but at the International Maritime Organization, there was a vote to have a global carbon tax on shipping. Were you supportive of the net zero framework there? Darren Woods 12:01 So just to the first point that you made around things have slowed down, if you actually look at what the Trump administration did with the bill and legislation, incentives for carbon capture and storage remain. In fact, they increased them for enhanced oil recovery. And so there is a scenario that says more carbon is captured and sequestered through enhanced oil recovery as well as sequestration under the Trump administration, because the incentive for that has gone up. And for low-carbon hydrogen, the incentive remains there, it's just a shorter time horizon. So I don't think you can jump immediately to ‘there's going to be less investments made in low carbon.’ I think it'll be a question of where that low carbon sits. So keep an open mind with respect to where the opportunities present themselves. It's not as, I think, black and white as you point out. Akshat Rathi 12:41 On carbon capture, specifically, the environmental protection agency wants to get rid of the greenhouse gas reporting at the asset level, which is crucial to get your 45Q tax credit that would enable carbon capture projects to go forward. Doesn't that change your investment thesis if you're not able to tap into the 45Q tax credit, even if it's available to you, because you can't do the carbon accounting? Darren Woods 13:03 Yeah, I think that's right, but I think also the Trump administration is supportive of 45Q. And so I think the question is: what mechanism gets put in place to allow that to happen? And that story hasn't been written yet, but we're very actively involved in terms of, how can we do this. We were supportive of continuing to report emissions. We think it's important that that happens, and so we've got to find an alternative, if not that, to ensure that we can report on those emissions. So yeah, that is critical. Akshat Rathi 13:30 And on the energy transition slowing down, this is not my analysis. This is analysis done by different groups, Rhodium Group, BloombergNEF. It's more to do with the speed at which low carbon stuff will get deployed. And so emissions reductions, which is what matters, which is what you know, a lot of the low carbon work that you do is aimed at is going to slow down as a result of the policies that have been brought in. So maybe carbon capture doesn't get affected, because 45Q will be sorted out, but so many solar and wind projects have been canceled. So the energy transition does slow down in the US. Darren Woods 14:02 I think it slows down in Europe as well. I think actually what you see happening around the world is that the incentives that people have put in place, and frankly, some of the impractical aspects of the policy that have been put in place and have been rolling out, is starting to manifest itself. And so you see, even in Europe, that the cost of energy has gotten so high that they're stepping back and rethinking what needs to happen in order to achieve their emissions reductions while continuing to provide affordable energy and reliably available energy. So there's a broader recognition that's needed that these solution sets that are out there today have their limits. And to blindly follow those and to assume that that is the only solution, and not step back and think more broadly about what else can be done to address the issue, is going to slow it down. Everywhere in the world, the practical aspects of the problems associated with some of the solutions being proposed, the deeper you penetrate it, the more manifest those become. That's going to slow things down. Akshat Rathi 15:01 But one of those was having a global carbon price, at least on shipping, which the International Maritime Organization and the countries in it were going to vote for. Were you supportive of that? Darren Woods 15:12 Yeah, actually, as a concept having a price on carbon, we've always thought that a global price on carbon is an effective way to control emissions. To the extent that governments around the world want to control those emissions, I think with climate change in particular, as you think back, governments are put in place, are elected, to represent their people, and so that's what you see happening around the world. I don't have a perspective on what government should or shouldn't be doing, their obligation is to their people. What I focus on is not the what, but the how best to achieve it. Akshat Rathi 15:43 But as part of the industry, which is not just you, ExxonMobil, but you support a lot of lobbying organizations that speak the voice of the industry as a whole, was the industry supportive of the carbon tax on shipping, because… Darren Woods 15:56 We were not advocating against it. Akshat Rathi 16:01 What we saw was an extraordinary attempt by the US administration. This is, again, not my words, but we've spoken to lots of diplomats who were there in the room who said that those activities were extraordinary, that there were not just threats made at the country level, which were public and were published on the White House website, but also personal threats, visa restrictions or individual sanctions, which caused many of them to then really rethink whether they would go forward with the vote. If you get another chance to have a global carbon price, how would you speak to the Trump administration, and how would you get them to change their mind on something that they currently aren't supportive of? Darren Woods 16:40 Yeah, I'm not familiar with all the things you talked about, so I don't know if that happened or not, and I certainly wasn't involved in the Trump administration and their dialog on this. So I can't pretend to know the complexity of the discussions that were happening. What I would tell you is what we have consistently advocated for — with the Biden administration, with the Trump administration — is what thoughtful policies can be put in place to help reduce emissions that don't compromise economic growth, that don't penalize people's standards of living. We've been very consistent with that, and there are opportunities to go do that. In fact, today, at this action agenda, there is a drive for carbon accounting, that is a critical first step in establishing a more uniform approach to how we address emissions and getting from carbon accounting to carbon intensity standards. So you can start specifying that on products and letting every government around the world establish what those specs should be. It’s a very flexible approach that allows every government to tailor that to the needs of their constituency and to their specific economic conditions. That's an approach that I think has very broad application and can be very effective. Akshat Rathi 17:51 I'm definitely coming to carbon accounting, because that's an interesting change since we last talked about it. But before we get there, you told me last year that you wanted the Trump administration to stay in the Paris Agreement. I understand that you've even delivered that message directly to the President. Why did he not listen to you? Darren Woods 18:09 You'll have to ask President Trump that. There are a lot of people that don't listen to me. Akshat Rathi 18:16 So now that the US is officially going to be out of the Paris Agreement by January, what kind of harm does that do to the US? It's the only country that is leaving. Darren Woods 18:26 You know, I look at the challenge here over a very long horizon, and again, our action here, the work that we do, the engagements that we have with governments all around, remains consistent. We're going to continue trying to do that, because our view is there's something that needs to be done in this space and that we have a role to play and can contribute. And we will work with whatever administration comes in and continue to drive an agenda that we think makes sense, that doesn't compromise economic growth or people's standards of living. We think there's an option to do that and open the aperture to the solution set. You're framing all of this as a US-Trump issue. I think you should frame it more as an opportunity to open the aperture for a broader set of solutions to achieve the real objective, which is lowering emissions, versus the objective that people have been working to, which is getting rid of oil and gas. And I think that is one of the big challenges, that we've gotten the objective statement wrong, or the problem statement wrong, and we've got to go back to how do we best reduce emissions? And the approach being taken today is essentially controlled by governments dictating what the solutions need to be, and then trying to force companies to implement their solutions. We've seen how controlled economies work. The Soviet Union, North Korea, Cuba, East Germany — planned, centralized government control does not work. You need the markets to be engaged. There hasn't been a solution set out there that engages the markets. That's absolutely needed. Ideology only takes you so far, and then you need practical systems that deal with the real market constraints and the challenges of making things happen. That's what we’ve got to get to. Akshat Rathi 20:01 You didn't raise the exception: China, where things are working. Darren Woods 20:06 I would tell you that that's a mix of things. You do need some… but government has a role, don't get me wrong. I'm not suggesting government doesn't have a role. But picking the solutions as a function of ideology versus a function of, say, strategy, are two very different sets of circumstances. I think the Chinese government operates a little differently than some of the democratically elected governments around the world. So it's a different decision making process. Akshat Rathi 20:28 So one way in which you think you can address that is through carbon accounting. Last year you talked about the idea, but today you have the initiative in front of you. It's called carbon measures. It's based on a concept that's been developed by academics at Harvard University and Oxford University. The goal is to make carbon emissions work almost like financial liabilities. That once you sell the goods, you pass on the liabilities, emissions, liabilities that come with it. And you wanted that system so that you could get carbon accounting at a product level. The trouble is that the only way it's going to work is if you have all parts of the supply chain of that product also reporting under that framework. Darren Woods 21:15 Yeah, this is… but to be clear, this is not a reporting framework. This is not accounting in the pure sense of a financial accounting. This is an accounting analog. So there's a financial model that we think makes a lot of sense in terms of how to think about accounting, but it's also anchored in chemistry, and frankly, a molecule of emissions, or CO2, is created once. And so accounting for where in that value chain that emission is generated is critically important. So I don't think of it as a financial, you know, an asset register in terms of liabilities or assets. I think of it as understanding where in a value chain for a product or a service is the emissions generated, and that's critically important. If you want to eliminate all emissions, you damn well better be able to account for all of them. Akshat Rathi 22:04 Conceptually what you're saying is right, and the way the academics have put it is that once you have the concept in place, the way it will work is through reporting emissions at a product level through the supply chain, and having these liabilities be passed on from company to company as the product moves through the supply chain before it's delivered to an end customer. Darren Woods 22:26 Yeah, but I would keep… I mean, you refer to it as a liability being passed on, and then almost talk about it from a reporting standpoint. The opportunity here is to be able to understand what is the carbon intensity of a service or of a product. And when you have a standard that uniformly calculates that, there is an opportunity then to begin to regulate the carbon intensity of products that, in my mind, will bring in market forces. That's the element that's of interest to me, that I view would make carbon and carbon emissions, just like every other parameter that we control in the products that we sell, sulfur and lead and other things that we control in our products. Akshat Rathi 23:07 Liabilities is the word that academics use. They call it… Darren Woods 23:11 I’m not an academic, Akshat. I'm a realist. I mean, I'm the guy who's making this stuff, and so I think that's how we think about it. Akshat Rathi 23:16 Yeah, I mean, they call it e-liabilities. It went nowhere, and then it got rebranded as carbon measures, and I think it's now getting momentum. So from a conceptual perspective, I'm on your side here. What I wanted to get to, though, was that to get it to work, you need the entire supply chain to be able to agree on this framework. Darren Woods 23:33 Akshat Rathi 23:34 And that means it's going to take years, decades. The greenhouse gas protocol that you don't like, which has scope one, two and three emissions, it's been in place for 25 years now. So there are climate advocates who are worried that climate measures is just another delay tactic. How do you address that? Darren Woods 23:52 Well, first, I'd say you don't have to get rid of the GHG Protocol. You can do this in addition to that. So I'm not sure… You know, I think there's always this view that it's an ‘either-or’ option, I keep coming back to this as an ‘and’ option. But I would also tell you the GHG Protocol, first of all, it's not an accounting system. It's a reporting system. And the other issue with this is, if you only use it to count, it double and triple counts, which means it doesn't add up to the total planet’s emissions. That's a problem. It also attempts to assign accountability where it doesn't belong. And I make the point with scope three all the time. To ask me, as a company that produces products that are in demand and that are desperately needed by communities all around the world, that I can't sell that to them because I need to reduce their emissions, I think is unreasonable. It's an unreasonable request, and it ends up with an outcome that nobody wants. We've got 4 billion people on the planet living in energy poverty that desperately need reliable, affordable sources of energy today. Those sources have emissions associated with them. Okay, we need to address that, but we can't do that by robbing them of the tools and the leverage enabling them to grow economically and to improve their lifestyle. And so we've got to figure out how we do both. I don't know how long it takes. You know, you can start. This doesn't have to be a big bang from my perspective. I'm a big believer in Pareto, that 20% of the products or services are causing 80% of the emissions. Let's start by focusing on those. And by the way, you don't get it perfect. Get 80% of the 20% and start there, and then evolve that and get better as you go. There are lots of ways to address this in a thoughtful, objective way, but we’ve got to do it in that way, thoughtfully and objectively, based on the science of CO2 emissions and generation of CO2 and then accounting philosophy for how best you do that. Get started. Akshat Rathi 25:41 I think people who are worried about the delay tactic would welcome the view that you can have both the greenhouse gas protocol and the carbon measures accounting system, because that would allow you, in a market of ideas, competition to see which works. Darren Woods 25:53 I don’t think anybody’s suggesting you get… Yeah, that's exactly right. A market is a competition of ideas. And if you got a good product, if you’ve got a good idea, you shouldn't be afraid of competition. Akshat Rathi 26:09 Join me after the break for more of my conversation with Darren Woods, CEO of ExxonMobil. And if you’d like more from Bloomberg Green at COP30, sign up to our newsletter for daily coverage from me and the rest of my colleagues on the ground. Sing up at bloomberg.com/newsletters. Akshat Rathi 26:29 So let's come to the low-carbon side of the ideas that you are funding. You have been clear in multiple forums that Exxon’s strength is in the molecules business. And that's why you haven't really made a play in solar or wind deployment. But what we've seen over the past few decades is that the demand for electricity has been typically at double the pace of energy from molecules with AI. That's a more recent phenomenon. We are seeing the gap grow between the demand for electricity and rest of energy. Are you reconsidering getting into the electricity business as a result? Darren Woods 27:09 I would start by reminding you that electricity is generated from molecules. Akshat Rathi 27:11 Not always, but sometimes Darren Woods 27:14 The majority of them. A majority of them. Akshat Rathi 27:17 Darren Woods 27:18 And if you go well into the future to 2050, you're still going to see the majority of power being generated by molecules. So no, I'm not reconsidering that. I think there is a capability that we bring there. And I would also strongly make the point that hydrogen and carbon molecules go into a lot more products — that society needs, that enable modern living — than just combustion products. And so I'm perfectly comfortable with the idea that over time, there will be elements of the products that I make which are no longer needed by society because we found better alternatives with less emissions, maybe other benefits. I'm okay with that. We have historically evolved as a company on that basis. That doesn't change, though, the fundamental need for our ability to transform these molecules into products that society needs. I’ll just very quickly give you two examples. One of them is that we recognize that: one, carbon molecules are in low-demand, high supply, and so my business drives a low cost. What can we make with low-cost carbon molecules? Our organizations invented a unique carbon molecule that has properties that lend themselves to anodes and batteries. And we're seeing, through third party testing, that our carbon that's used in anodes gives 30% faster charging times, 30% further range and over four times the battery life. So there's a huge improvement in lithium-ion batteries with a product that I'm making out of a molecule. Akshat Rathi 28:41 Let's come to that battery breakthrough, because that's recent, the announcement at least. And batteries are something that the world wants a lot of right now, and so having new materials is good. There's lots of innovation that's happening in that space. But with any technology breakthrough, and this is not just a battery problem, with any technology breakthrough, there tends to be a certain amount of hype that comes with it, before we can see it in action, including with this company. We can take the example of algae fuels that Exxon was supportive of, thought there was a breakthrough, but now that doesn't become a practical solution. So how… Darren Woods 29:18 We should make the distinction between pursuing a technology breakthrough and announcing one. And what we talked about with biofuels was the need to produce the productivity of algae to generate the amount of oil to make it economically viable. That's what we were working on, and we saw the potential there. We never announced a breakthrough that said we were there. I would contrast that with what we're saying with this carbon material, which is to say we had a view and an idea. We've developed the molecule, we've graphitized it, we put it into application, and we've had third parties testing it, and those results are what we're reporting on. That's a very different construct. Akshat Rathi 29:53 So when might we see that carbon molecule in an actual battery in a commercial product. Darren Woods 30:00 When will we see that? We're working really hard to get that commercialized by the end of this decade. But I think, you know, again, in my mind, we don't over promise and under deliver, and what we've tried to do: is to report on what we're trying to do and accomplish. We've got to commercialize that. We have gone from the lab to a demo unit, and we have to commercialize that. So that will take time. These are large scale, and by the way, we're only going to pursue the things that are large and make a material difference to ExxonMobil. I can't have a bunch of nickel and dime businesses. So it doesn't bother me, and it should not suggest that, because it's going to take time, that it's not real. I think the difference may be in your mindset versus ours. We think in terms of decades, because we understand what it takes to make these very large scale investments, and the time that it will take to bring them online and then penetrate the markets. And that's true with all products. Akshat Rathi 30:47 Let's talk about some of the other low-carbon solutions that you've worked on. You have a lithium-extraction idea that you are working on now, lithium prices, as you well know, are even more volatile than fossil fuel prices. Does that make the investment thesis less attractive? Darren Woods 31:08 No, because we look at lithium no differently than we look at any other product that we make, which is, where does our production sit on the cost of supply curve? So you know, if I am dependent upon a commodity, if I'm in a commodity business where prices are set by supply and demand, I do not control the supply and I do not control the demand. So I'm a price taker. Across the majority of my businesses, I'm a price taker. And so I will never know where prices are going to be, and I know that they will fluctuate based on where demand goes and how much supply comes on. So our strategy for being successful in a volatile market is to bring production on. That's the low cost of supply, because I know in these markets that the least efficient supplier required to meet the demand is going to set the price. I've got to be better than that producer to get a margin, and that's what we're working on. And in lithium, that's exactly the approach that we're taking. And I would tell you, with respect to that, we're still working to convince ourselves that we can get on the low end of the cost of supply curve. So we're building small units to test that, to drive the technology. Whether that will be successful, we don't know yet, but what I'll tell you is we know we have a concept. We're demonstrating the ability to do that. We've made lithium. Now the question is, can we commercialize it at scale, at a cost that's competitive with Chinese cash cost? That's a question that's yet to be answered. Akshat Rathi 32:27 And would that be the same answer for direct air capture technology? Darren Woods 32:32 Direct air capture the same thing, everything that we're doing, it's a little different in that it's a cost of abatement, but it's the same principle, we have to be on the low end of the cost of abatement curve, because if it can't compete economically, then we're not interested. And I would tell you that's true, even for the businesses today that are being subsidized by policy. What I tell the organization is we can begin the business based on that, but we're not going to end up there. And so anything that we're doing, we have to convince ourselves that over time, we'll find a way to get on the far left hand side of the cost of supply curve, so that when market forces take over, and by the way, they have to, if we're going to be successful as a society, that I better be advantaged with respect to that production. And if I can't clear that hurdle and convince myself of it, we won't go in on that business or make those investments. Akshat Rathi 33:18 Another low-carbon commitment you have is to reduce the methane intensity of natural gas so the amount of methane that you leak as a result of the processes that are involved in extracting and delivering natural gas to customers. You have a goal for 2030 to try and be near-zero methane leaks, and that's crucial here at COP30, where there's going to be a big discussion around methane, and maybe even a methane deal of some sort. There's already a target, but how do you actually get to that target? Lots of countries are talking about that. Now, the Inflation Reduction Act would have benefited companies like yours who are starting to work on reducing methane intensity, because it was going to put a methane fee on those who leak a lot. That's gone now. Do you stop investing in methane reductions as a result of the incentive going away? Darren Woods 34:11 We were driving methane intensity reductions before the IRA came along, and we'll continue to do it long after the IRA has expired. So our commitment to reduce emissions, CO2 emissions, methane emissions, isn't a function of policy being put in place or being incentivized by penalties. Our objective is to be a responsible operator. And from my perspective, from the day I got in this job, it was, if we're producing something, it's our responsibility and obligation to keep it in the pipe, and we need to work to do that. And we've made huge progress in that, irrespective of the commitments that we've made publicly. That was, if you go back in time before methane had the profile that it has today, we began reducing our methane emissions intensity before even this became a very public issue or a high-profile issue, and we're going to continue to do that. We made great progress with it. Akshat Rathi 35:01 One of the things that has happened over the last few years, which has been exceptional relative to other oil and gas companies, is that Exxon has signed lots and lots of permitting deals around the world. So recently Greece, but also you're re-entering Iraq, Trinidad, Libya. Given where we are in oil and gas markets generally, there's lots of oversupply right now. Prices have been falling. Why are you expanding your permitting regime so aggressively? Darren Woods 35:32 This is a depletion business. The bigger you are, the more production you have, the bigger the hole you dig through depletion. So every barrel we produce is a barrel that's not available to us. So you can think of it like having a bottle of water. Every sip you take, there's less water in the bottle. Eventually the bottle runs out of water, and you need to find a new bottle. So that's the job that we have. As we continue to produce as a large producer, we have to find ways to replace the barrels that we've put on the marketplace. That's a huge challenge. And given that if you go out to 2050, and beyond, that oil and gas will continue to play an important role in the energy mix and in providing products that the world needs, we know those barrels are going to be needed. And so finding opportunities to bring more production on, to fill the depletion curve, is a critical part of the job. There's only really three levers that we have to pull there. One is for the resources that we already have today. How do we recover more? That's a technology challenge that we're working very hard on. The other is, you can go out and bring a technology advantage or a production advantage or operating advantage to buy somebody else's assets and produce those more effectively, get better recovery, do it at a lower cost. And then the third is you've got to find new things, and explorations are a critical part of that. Akshat Rathi 36:49 In getting those permits, how much has the Trump administration been helpful? Darren Woods 36:54 We don't work through the US government on those. Akshat Rathi 36:58 Would you be interested in oil and gas assets in Venezuela if they were to open up? Darren Woods 37:01 So, you know, we've been expropriated from Venezuela two different times. And so I think we have our history there. We have an experience set. And so certainly looking at what follows and what's in place, and how comfortable and confident are we that if we made investments, that we'd see the return on those investments? It would be a critical part to evaluating that, and then we'd have to see what the economics look like. So I wouldn't put it on the list or take it off the list. We'd have to see what the circumstances are at the time, which today, I don't know what they're going to be, if they're even different. Akshat Rathi 37:31 You said previously that you don't work with the Trump administration on permitting deals abroad, but there is a clear indication from the Trump administration that they would like more oil and gas production globally. Has there been any support to help you figure out where that might be? Darren Woods 37:45 We don't need any help in that area. Akshat Rathi 37:48 Now, key to your efforts to turn around performance at ExxonMobil, a 150 year old company, has been what you've classed as your focus on winning. Some of that, though, has included layoffs and cost cutting internally. It's also included suing activist shareholders and even taking a rival to arbitration court. Can you define what winning means to you? Darren Woods 38:11 Yeah, you've mixed a lot of things up in that. That question that, frankly, don't… are you’ve got apples, oranges, bananas and pears in there. I think first of all, what I would tell you is, what we've been very focused on winning is bringing a unique set of capabilities and competitive advantages to the marketplace and realizing those advantages on the bottom line. And so if you look at the transformation the company's been making, the changes that we've made in our organization, it has been restructuring to more effectively bring the advantages of scale, bring the advantages of the integrated businesses that we have, and the synergies that exist between those businesses to the bottom line. Taking advantage of and driving technology and technology benefits to the bottom line. It's a focus on execution excellence, to drive capital efficiency, to drive reliability, to drive lower maintenance, higher safety, better environmental performance. And then it's been about unlocking the potential of our people. That's what the changes that we've been driving to unlock this advantage we've been very focused on. We've made great progress. And the layoffs that came from that is a function of the restructuring and better organizing our people in a way that they can work more productively and take advantage of everything ExxonMobil has to offer. It was more about effectiveness, less about efficiency. But like everything, when you focus on being more effective, you find efficiencies. And so that's what's driving that. With respect to the lawsuits, this is really around protecting the value that we're creating for our shareholders and importantly, defending ourselves against activist attacks, which are generated by an agenda that's not aligned with the value of the company or the value that we create for our shareholders. And unfortunately, we've gotten to a place in society where the courts are being used frequently to bring challenges to some of these activities, and we're going to use the same tools that our antagonists use to defend the value that we're creating for our shareholders. Akshat Rathi 40:06 Sticking to layoffs, Exxon currently has 14,000 fewer employees than in 2019, and there are plans to lose another 2000 jobs. And Exxon isn't the only company doing this. We've seen jobs in Conoco Phillips being cut 20-25%. Chevron has said it would cut about 20% of its workforce. Do you think it's a sign of the industry shrinking, that its social license is eroding? Darren Woods 40:32 I can't speak for Conoco and Chevron. I can speak for ourselves, and it's not… If you look at the layoffs that you're talking about, for us, it’s like 3% of the workforce, global workforce. So again, we've been very focused on changing how we work, as I mentioned, the transformation that we're trying to make, to unlock our competitive advantages. What we've shifted to as we've changed the how, is to focus on the where. And if you look at our global footprint and where we were located, it is based on an operating model, a construct that was developed decades ago. And so we're bringing our operational footprint, our facility footprint, in line with how we work today. That is, with my mind, an optimization step. It is not a deep cut to drive. And again, it wasn't driven, wasn't focused, on cost cutting. It was focused on taking advantage of our people and the teamwork and the collaboration and the innovation that comes from that, that we have unlocked with these changes, and we can only do that when people are in the same location. I'm a big believer in working together, not working remotely. Akshat Rathi 41:34 Well, the 2000 are, yes, 3%. But since 2019, it's more than 25%, because you have 63,000 employees now. Darren Woods 41:42 Which comes from the transformation in the organization. We had, I think, 11 independent, unique companies, siloed in our organization. We've gotten rid of the silos today and reorganized. We have a one team-one goal mentality. People are working collaboratively together, and so you just need less people when you take away the artificial construct that exists. That's a function of improving your effectiveness, getting better at what we do, and you see that in the results that we have. If this was a pure cost-cutting exercise, you wouldn't see the improvement that we're getting in safety — personnel safety and process safety. You wouldn't see the improvement that we're getting in our reliability. And we now have record reliability with our operations. You wouldn't see that in the projects that we're delivering, which today are industry leading, both in cost and schedule. And so there's a lot of benefits that you can see that's happening in the company because of this effectiveness thing. Akshat Rathi 42:33 If we take that five year period, the stock price has certainly done wonders for Exxon. But if you just take the last 12 months since Donald Trump's election, since all these regulatory rollbacks, since the push to try and get more fossil fuels, the stock price hasn't done all that well. It's a little bit lower now than it was exactly one year ago. Darren Woods 42:54 Very much, you have to… I think anytime you look at the stock price of the company, you have to look at the commodity price market that we're in. Our stock price is highly correlated with commodity prices, and so it will move up and down. So the absolute number is less important than the relative number over time, and the things that you're doing to improve that. So I don't have any concerns in that space. Akshat Rathi 43:13 You've been in the role for nine years. How long do you plan to stay on? Darren Woods 43:17 Well, the board gets to decide that, not me. Akshat Rathi 43:22 And what would you like to get done before you step away? Darren Woods 43:24 We've made a lot of changes, as you've talked about, many of those have been recent. In fact, we just announced this week the formation of a global operations organization, and we've got to bed those in. And I think we're only beginning to see the benefits of that change. And I would like to have time to really focus the organization on improving the effectiveness of the changes that we've made. We are rolling out, I think, the largest instance of SAP where today, under our corporation, for the first time in our history, we will have a system that spans the entire corporation and a data structure that's consistent for every business we do everywhere around the world. So it unlocks huge opportunities. Think about that in conjunction with AI, where data and data consistency and integrity is so critical to the benefits of AI. We will have an unmatched platform with more data than anybody else in our industry. And so I think I'd like to see that through. We’ve got a program where we're developing that through the next several years. So there's still a lot to be done in the company that's going to keep me busy, and I'd like to see some of that land and begin to produce the results that we're counting on. Akshat Rathi 44:28 Thank you, Darren. Darren Woods 44:30 Thank you, good talking with you. Akshat Rathi 44:42 Thank you for listening to Zero. If you liked this episode, please take a moment to rate and review the show on Apple Podcasts and Spotify. This episode was produced by Oscar Boyd, with additional help from Anna Mazarakis. Our theme music is composed by Wonderly. Special thanks to Sommer Saadi, Mohsis Andam, Laura Millan and Sharan Chan. I am Akshat Rathi, back soon.
