Saturday, October 16

Oil company bosses’ pay ‘incentives to undermine climate action’ | Emissions of greenhouse gases

The lucrative payment and stock options have created an incentive for oil company executives to resist climate action, according to a study that casts doubt on recent net zero commitments from BP and Shell.

Compensation packages for CEOs, often in excess of $ 10 million (£ 7.2 million), are linked to continued fossil fuel extraction, exploration of new fields and promoting strong market demand to through publicity, lobbying and government subsidies, the report says.

The setup with the executives runs counter to efforts around the world to keep global warming at 1.5-2C (2.7-3.6F) above pre-industrial levels.

Boardroom rewards also underpin a skewed corporate logic that is slowing the world’s path to decarbonization, according to the study, which was shared exclusively with The Guardian prior to publication. in the journal Energy Research and Social Science.

Richard Heede of the Institute of Climate Responsibility In the United States, a co-author of the paper said the discovery showed that the need for changes in corporate structures was more urgent than changes in consumer behavior.

“We show that executives have personal ownership of tens or hundreds of thousands of shares, creating an unrecognized personal desire to explore, extract and sell fossil fuels,” Heede said. “That mindset on carbon needs to be revised by realigning the offset towards success in reducing absolute emissions.”

The study tracks ExxonMobil, Chevron, Shell and BP, four of the largest “carbon major” oil companies, since 1990. This was the time when the global public heard the first high-profile warning about the dangers of carbon dioxide. burning of fossil fuels.

Executives had been informed of the threat many years before, but instead of working on a transition to cleaner and safer forms of energy, they increased production, minimized risks, and adopted public relations campaigns that misrepresented companies. oil companies as part of the solution. than the source of the problem.

Between 1990 and 2019, the four companies made a combined profit of about $ 2 trillion. A tiny fraction of these funds have been invested in low-carbon energy.

ExxonMobil allocated 0.22% of its capital spending to low-carbon energy in the eight years through 2018. The stake in Chevron was nearly identical. Shell managed 1.3% and BP 2.3%. Neither was aligned with a 1.5 ° C pathway, the report says.

Instead, the overwhelming majority of the profits were reinvested in oil and gas extraction, invested in share buybacks, paid in dividends to shareholders, or used to pressure politicians, undermine climate science, and pay for green wash ads.

In the US, the lobbying expenses of the four companies totaled $ 731 million between 1998 and 2019. Their corporate political donations in the US, dating back to 1990, were worth $ 59 million.

As public pressure and scientific evidence strengthened, the big four moved through the gears, the study states. “Business as usual” (pretending there was no problem) in the 1980s became an “incremental adaptation” (questioning science as an excuse to move slowly) in the 1990s and early 2000s, and today it has become a “partial diversification” (accepting the science, but gradually moving towards long-term goals).

Despite the change in public rhetoric and tactics, the long-term strategy was always the same: obtain a social license to extract oil and gas. The four companies plan to continue extracting fossil fuels after 2050.

The paper’s co-author, Dario Kenner of the University of Sussex, said Shell and BP’s recent announcement of a net zero target by 2050, and Exxon and Chevron’s endorsement of carbon pricing, should be seen as tactics. Similar.

Kenner said: “When BP, Shell and others talk about net zero, they are trying to remain part of the decision-making process. They want to be in charge of the transition as much as possible so they can stop it; that’s the point of trying to convince society to trust them. “

He added that comparisons of targets set by individual companies were a distraction from the more important role that government should play.

“It can’t just be about what Shell or BP is doing. It should cover the entire industry. And it should be about acting on climate science and phasing out oil and gas in accordance with a 1.5 ° C target. ”However, he said the executives’ fortunes depended on continued production and sales.

The study examines the high levels of board compensation that motivate people to continue corporate practices that are destabilizing the climate.

At least seven executives received more than $ 10 million in 2018, the most recent year covered by the study. Shell CEO Ben van Beurden earned the most at $ 23,069,040.

Stock options make up a growing part of that compensation, which the study authors say encourages executives to use the proceeds to buy back shares rather than invest in renewable energy.

Another set of data ranks the carbon weight of each senior executive’s stock, based on the amount of oil and gas the company extracted from the ground in a given year. In 2018, John Watson, CEO of Chevron, topped this list with a personal emissions share of more than 600,000 tons, which is more than 100,000 times that of the average UK citizen.

“This document sheds light on incentives in corporations that may not align with their public commitments to reach net zero by 2050,” Heede said. “Companies should review the offset and align it with low-carbon reinvestment targets.”

He acknowledged that recent announcements from Shell and BP go beyond US companies in investing in renewable energy and pay structures, but said industry-wide transition plans should provide details on absolute emissions reduction targets and targets. reinvestment plans, and companies should be more transparent and less dependent on tree planting offsets.

Corporate lobbying and advertising should shift, Heede said, from greenwashing to outspoken recognition of the dangers of fossil fuels and promoting clean alternatives.

The document suggests that they will need a push from the outside. It concludes that oil and gas companies are poorly structured to decarbonize at the speed and scale demanded by climate science. “This raises the need for greater external pressure, particularly from governments.”

In the last two years, there have been some changes, although the pace varies from company to company. Shell told The Guardian that it had introduced an energy transition performance metric that was now worth 20% of its long-term incentive plan. “We were the first major energy company to connect executive pay to the energy transition in this way,” said a spokesperson. This february Shell said the salary of more than 16,500 employees was now tied to a set of short-term and long-term decarbonization targets. The company said there was no longer a link between production volumes and executive pay.

Chevron said the study’s conclusions were inaccurate and misleading. “Executive compensation is determined by the independent directors of the board, advised by an independent compensation consultant. Our program design aligns with shareholder interests and supports the company’s focus on ‘higher returns, lower carbon’. The energy transition performance measures are directly linked to the compensation of our executives and most of our employees in the company’s annual bonus program, ”said a spokesperson. The company said it was working help the world achieve low-carbon energy by increasing the use of renewable energy and offsets and investing in low-carbon technologies.

ExxonMobil said its compensation program was designed to incentivize actions that create sustainable value for shareholders based on careful consideration of current and future risks, such as those related to climate change. In a statement, it said executive compensation was aligned with the results of its decisions and long-term shareholder returns.

The authors of the new report said that Shell, and to a lesser extent BP, had increased low-carbon investments, but its measures were still insufficient to meet the 1.5 ° C target without significant excess emissions. US firms, they said, were much more behind in responding to the risks. The key was an industry-wide approach in line with global climate governance rather than voluntary commitments that could be reversed later, as has happened in the past, the report’s authors said.

“Our study clearly shows why it is time to stop wasting so much time being distracted by what these companies promise,” said Kenner. “Instead, we should be discussing the role of policy makers more.”

BP said its compensation policy supports the company’s goal of reducing greenhouse gas emissions to net zero by 2050 or earlier, in line with the Paris targets. A spokesperson said this will involve the most extensive transformation in BP’s history. “By 2030, the strategy aims to increase our investment in low-carbon energy to $ 5 billion a year, have developed 50 GW of renewable generation capacity and have reduced BP’s upstream oil and gas production by 40%.” .

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