On May 26, Engine No. 1, an activist hedge fund owning 0.02% of ExxonMobil’s stock, led a shareholder revolt against the oil giant, ousting three of Exxon’s board members despite opposition from senior management. The change was part of a recent tide of losses for the global oil industry. Chevron’s shareholders also displayed an intolerance for corporate negligence toward climate change when they passed a resolution mandating the company to account for and cut down on Scope 3 emissions, which are released in the process of oil combustion. These emissions make up a far larger share of the company’s carbon footprint than emissions from operations and extraction. Together, these shareholders are jointly calling on the oil industry to adapt its business model to align with a decarbonized economy.
Overseas, there is a burgeoning judicial willingness to compel governments and corporations to actualize a decarbonized economy. In Australia, the federal court found that the Environment Minister has a duty of care to protect the country’s youth from future harm. This marked the first time an Australian court determined that members of the government have a statutory obligation to protect vulnerable people from the effects of climate change. Meanwhile, in The Hague, a high court ordered Shell to reduce its greenhouse gas emissions by 45 percent, including its Scope 3 emissions, by the end of 2030 compared to 2019 levels. The court determined that Shell’s sustainability policy was vague, unenforceable, and detrimental to the Netherlands’ Paris Agreement goals.
Collectively, these developments suggest a gradual yet critical shift in the roles that major financial and judicial institutions are willing to play in the global struggle to reduce greenhouse gas emissions. There is a growing sense of urgency as the window for keeping global temperature rise below 1.5 degrees Celsius rapidly closes. Earlier in May, the International Energy Agency reported that the world will not reach net-zero carbon emissions by 2050 unless countries immediately stop approving new oil and gas fields. Yet, major fossil fuel companies continue to operate business as usual, as if investments in carbon capture technology make up for their ongoing exploration and extraction of fossil fuels.
Since around 2010, U.S. coal production and consumption have gradually fallen as plummeting wind and solar prices, as well as stricter federal regulations limiting mercury and other pollutants from coal-fired power plants, have rendered coal uneconomical. In contrast, production and consumption of oil and gas have steadily increased, leaving the burden of significant climate action on governments. Despite historical knowledge of climate science and attribution, fossil fuel companies have dragged their feet for decades and prioritized profits over human well-being and ecological health. As recently as 2019, ExxonMobil has underwritten organizations and lawmakers that espouse climate denial, despite its statements acknowledging climate change and committing to action. Clearly, achieving an environmentally equitable and carbon-free society cannot depend on the good will of fossil fuel companies.
The week of May 25 was a watershed moment for the oil industry, as shareholders and judges forced it to truly reckon with its inherently unsustainable business model. However, immediate changes are unlikely. In Australia, there remains ambiguity over what the duty-of-care ruling actually entails, as an injunction was not granted. Meanwhile, the ruling in the Netherlands for Shell has a limited effect on the company’s actions outside of the country—and Shell is also expected to appeal. Here, in the United States, the Chevron resolution still lacks specific targets and deadlines for emissions reductions. In a similar vein, ExxonMobil’s new board members seem more invested in keeping the company profitable than transforming it into an advocate for climate justice.
Despite these caveats, these developments still lay the legal and financial foundations for monumental changes to the energy sector. Keep in mind that these events are not occurring in a vacuum. Domestically, the Biden Administration rejoined the Paris Agreement and passed a flurry of Executive Orders on climate change, environmental justice, and clean energy. The Administration has also been clear in its desire to end fossil fuel subsidies, limit the permitting of oil and natural gas leases, and pursue an ambitious sustainable infrastructure bill. These federal efforts and the growing ethos of shareholder and judicial activism build on a legacy of ongoing community-led organizing. In tandem with grassroots struggles against fossil fuel investments, unjust and inequitable siting of pipelines, environmental racism, settler colonialism, and many other ills of the carbon economy, these recent events indicate a growing trend toward corporate climate action and accountability.