Stuck Earning $1 a Day? Exxon Wants to Help

Big Oil and King Coal are in it for the little guy.

Exxon Mobil Corp., Chevron Corp., Peabody Energy Corp. and Glencore Plc have increasingly taken to portraying themselves as champions of the world’s poor. Billions of people in developing countries, they say, need access to cheap oil, natural gas and coal to pull themselves from poverty into the middle class.

With environment envoys from almost 200 countries gathered in Lima to negotiate greenhouse-gas limits, Exxon this week urged governments to heed what it called “this imperative of human progress” when designing climate rules. The chief executive officer of Peabody, the largest U.S. coal producer, was more direct in September, arguing it would be “misguided and anti-poor” to spurn fossil fuels.

“They’ve decided they can be on the side of the angels and still sell a lot of oil and gas,” said Michael Lynch, the president of Winchester, Massachusetts-based Strategic Energy & Economic Research. “They’re finding that they can say, ‘This is what’s going to happen, but it’s not all immoral and ugly.’”

Exxon spent years denying the existence of human-made climate change altogether before saying people could adapt to warmer temperatures. Lining up with the bootstrappers of the developing world and calling for a balanced approach is a more subtle stance. It’s also one that may divide governments seeking agreement on how to avert climate change.

Stumbling Block

Tensions between industrialized nations and developing countries have long been a stumbling block in global climate talks. Greenhouse-gas emissions, widely attributed to the burning of fossil fuels, reached an all-time high in 2013 -- a record linked directly to rising prosperity in the developing world and all the cars, consumer goods and electricity consumption that accompanies it.

Another point of conflict is that the worst effects of climate change risk are hurting most those who have the least. Crop-ravaging droughts in sub-Saharan Africa, for example, can spark food shortages and civil unrest. Among the countries that face “extreme risks” from climate change, according to the U.K. researcher Maplecroft, are Bangladesh, Sudan, Burundi and Afghanistan.

“The living conditions of the economic and the energy impoverished are startling,” Peabody CEO Greg Boyce said in an interview in October. “I’m not saying that, you know, we’ve got to forget about CO2, that’s never been our starting point. But we are saying that, poverty is the number one human and environmental issue we have today.”

“The best way to reduce carbon and further human development is to accelerate use of today’s advanced coal technologies,” Chris Curran, a Peabody spokesman, said in an e-mail.

A Tough Job

Defending fossil fuels and the billions that flow from them as scientists warn of looming, irreversible damage to the environment has never been easy, and the job is getting harder as governments from Beijing to Washington accept that energy policies need to change.

Resource companies “cannot afford to go on putting their heads in the sand,” said Helen Westropp, global business director at London branding agency Coley Porter Bell. “They could face such a backlash if they’re not careful, not just from customers but from shareholders and governments.”

Previous attempts downplayed the effects, or even the reality, of climate change. Exxon Chief Executive Officer Rex Tillerson, for example, in 2012 described global warming as “an engineering problem” to which humans would adapt. His predecessor, Lee Raymond, denied climate change existed.

Emerging Economies

“People need to understand the critical role of energy in both developed and emerging economies,” Exxon spokesman Alan Jeffers said.

Tillerson’s current approach is mirrored by rival Chevron, whose CEO John Watson in October said he expects almost one-third of the world’s population to switch from burning dung and wood to fossil fuels as they move toward the middle class over the next two decades. Other alternatives would not be affordable, he said. A Chevron spokesman declined to comment beyond Watson’s remarks.

Meanwhile Glencore, the world’s biggest exporter of coal to the power industry, says in its position statement on carbon that climate policy must “balance the social and economic aspirations” of the developing world. Glencore also declined to comment.

Electric Cars

While development is closely linked to increased energy usage, economists, energy experts and environmentalists disagree about whether clean energy alternatives might provide a more climate-friendly route to prosperity. Despite advances in renewable energy and a small but growing fleet of electric cars, large-scale electrification still usually means coal or gas-fired power plants, and mobility depends on the internal combustion engine, just as it did for Europe and North America.

Eighty percent of global energy comes from fossil fuels now, according to the Paris-based International Energy Agency. Demand is set to rise by a quarter through 2030, with most of the increase coming from developing economies.

“There is no question fossil fuels will be a part of the energy mix of the future in developing economies,” IEA executive director Maria van der Hoeven said in an e-mail. “But for reasons of energy security as well as sustainability, it would be unwise for these countries to copy the model of advanced economies and rely on these fuels to such a high degree.”

IEA Views

The IEA, an energy watchdog for the developed world, predicts that based on current policies about three-quarters of global energy supply in 2040 will still come from oil, gas and coal. Aggressive climate policies would bring that number down. By how much is a matter of debate.

Oil companies aren’t suggesting a future without a role for alternative forms of energy -- just that those sources can’t be widely exploited affordably. In its Energy Outlook released this week, Exxon said that though fuel-efficient hybrids will represent about half of new sales by 2040, fully electric cars will be just 5 percent of the total fleet.

Companies like Exxon are “betting that governments won’t be resolute in fighting for climate policies,” said Richard Baron, the head of the roundtable for sustainable development at the Paris-based Organization for Economic Co-operation and Development. “It’s understandable that oil companies want to sell more fossil fuels; one can’t blame them because that’s their job,” Baron said. “But they shouldn’t lock populations into using them.”

Subsidies

Environmentalists point to what they say are obvious measures that would reduce emerging economies’ dependence on fossil fuels, like cutting gasoline subsidies in countries including Indonesia and Venezuela that let drivers fill up for a fraction of the market price.

Many also advocate putting a price on carbon emissions -- something Exxon assumes in its own calculations -- to encourage a switch away from coal, the most carbon-intensive form of generating power. Some make comparisons to the evolution of the telecommunications industry, in which developing countries have mostly leapfrogged copper-wire infrastructure in favor of cellular networks and mobile broadband delivered wirelessly.

Academics have tried to quantify the economic cost of switching to low-carbon technologies.

A team led by Imperial College London researcher Ajay Gambhir estimated in a 2012 study that, with an economy about 2 percent smaller in 2050 than it would be otherwise, China could meet most of its future energy growth from low-carbon sources. That scenario, though, is premised on a “huge shift” away from oil for cars as well as a near-total switch from coal to nuclear, wind, solar, and hydropower, with carbon capture technology in place for whatever coal remains, Gambhir said.

Rosy View

Given the vast energy needs in emerging economies, many experts view such predictions as optimistic at best. Solar and wind power haven’t yet solved the problem of “intermittency,” or how to keep the lights on when it’s cloudy and calm. Electric cars are a niche product, held back by limited range and high costs.

“I don’t think you could get from here to there in development terms just with renewables. They’re still very expensive and intermittent,” Harlan Watson, who led climate-treaty negotiations for the George W. Bush administration, said in an interview in Lima.

Fossil-fuel producers staking their climate-change arguments on the needs of developing countries have one other significant problem: it isn’t clear those countries want what they’re selling in the quantities they want to sell it.

Delhi’s Smog

Amid sometimes-violent protests over pollution, nuclear power and renewables will account for 79 percent of funding for power plants built in China by 2040, the IEA estimates. India’s government, responding to a diesel-laced smog worse than Beijing’s that clouds New Delhi, this week unveiled a plan to spend $100 billion on projects including wind and solar installations.

Similar aspirations are evident elsewhere. Ethiopia is seeking to develop into a middle-income economy by 2025 without growth in carbon emissions. “We have every opportunity to do it greener,” Environment Minister Belete Tafere said in Lima. “We have this potential in wind, solar, hydro and even geothermal and biomass.”

Manuel Pulgar-Vidal, environment minister of host country Peru, earlier this month said the country is exploring “scenarios of growth divorced from carbon,” including using solar panels to electrify rural areas.

Energy Poverty

Nor are all citizens of developing countries in a position to become major users of energy, and thus emitters of carbon, anytime soon anyway. The IEA says more than half a billion residents of sub-Saharan Africa, where wages can be less than $1 a day, still won’t have access to electricity in 2040 because of weak infrastructure, and the region as a whole will represent just 3 percent of energy-related carbon emissions.

Another hurdle: 84 percent of the billions of people suffering from “energy poverty” are in rural areas, according to the IEA. That means building a central power grid fed by cheap coal would cost billions, and environmentalists argue electrifying these communities might be more easily and cheaply accomplished with small-scale solar and wind installations.