Among the many contradictions and oddities created by Donald Trump’s ascendance to the U.S. presidency are open questions about how the private sector, and particularly the fossil fuel industry, will adapt its stance on climate action under Trump.
Consider the fact that Trump’s recent history of climate denial puts fossil fuel giants like ExxonMobil, which pays lip service to the need to cut carbon emissions and has (with caveats) supported putting a price on carbon pollution, out of sync with the incoming White House – a precarious position.
On the one hand, fossil fuel companies could walk back on their commitments to cut emissions, quietly shy away from prior advocacy regarding carbon pricing and just enjoy the tenure of a less regulatory-minded presidency.
Yet these companies still have to operate on the rest of the planet, where governments and markets are forging ahead with climate action and sticking to the Paris Agreement. In addition, divisions exist both within and between oil majors about the path towards medium and long-term survival, with companies like Shell making a concerted pivot into natural gas and Total expanding its renewable energy portfolio.
There has also been recent evidence of a growing divide between top European and American oil companies over open advocacy for carbon pricing. In June 2015, BP, Eni, Royal Dutch Shell, Statoil, Total and BG Group (since purchased by Shell) jointly called on governments to agree on a carbon pricing framework at the then-upcoming Paris climate talks. Most notably, U.S. majors Chevron and Exxon were absent from the announcement. “It’s clear that the subject isn’t viewed in the same way on both sides of the Atlantic,” said Total CEO Patrick Pouyanne at the press conference.
Exxon has been vaguely supportive of carbon pricing for years, but only under the “right circumstances.” When former Exxon CEO Rex Tillerson (recently nominated by President-elect Trump to serve as Secretary of State) was asked about his company’s divergence from its European counterparts at the 2015 annual general meeting, he called their motives into question. “We’re not going to be disingenuous about it. We’re not going to fake it… Just speaking out to be speaking out about it doesn’t seem particularly helpful to me.”
But the one thing that global oil majors can agree on is their continued membership in industry trade associations such as the American Petroleum Institute (API), American Legislative Exchange Council, National Association of Manufacturers, Western States Petroleum Association and others.
Good cop, bad cop
One strategy that has developed over the years is a pattern of using their memberships in trade associations for cover when leadership wants to break with its public stance through backdoor lobbying and influence peddling.
When challenged by campaign groups as to why they would continue paying dues to a trade association whose anti-climate advocacy flies in the face of their corporate pro-action stance, companies often argue that membership is warranted due to the trade group’s advocacy on other issues such as taxes or employment law. So a company can claim one position that looks friendlier to climate action, while funding and lobbying within trade associations that work to undermine actual policy efforts.
A 2016 report by U.K.-based watchdog InfluenceMap scrutinized the amount of money spent by two oil majors and three of their biggest trade associations on “obstructive climate policy.” It concluded that at least $114 million (U.S.) was spent on corporate staff costs, advertising and PR campaigns, direct political contributions, lobbying and supporting trade organizations. This did not include untraceable “dark money” being donated through the political process, as well as donations to think tanks like the ExxonMobil Foundation.
Another InfluenceMap report analyzing the gap between the positions of oil companies and those of their trade associations found that Shell, BP, Total, ExxonMobil and Chevron all notably misaligned with their trade associations over climate policy positions. The gap was particularly pronounced between the trade groups and their European members, despite holding board positions on a number of these associations.
Similarly, Exxon’s Tillerson has said his firm would accept a “revenue-neutral” carbon tax. But that policy approach is openly opposed by trade groups where Exxon executives hold board positions, including the National Association of Manufacturers and the Business Roundtable, according to InfluenceMap.
Exxon even boasts of its high-level influence within trade associations it is part of on the current issues section of its website: “ExxonMobil employees also hold key leadership positions with many trade associations that engage on climate change issues.”
Big oil companies might advocate carbon pricing, while API trumps their position
You might wonder why corporations whose products emit CO2 emissions would want a price on carbon. First, these entities despise uncertainty over their future costs, which is mitigated by the relative certainty afforded by carbon pricing compared to commensurate regulatory measures.
Reading the writing on the wall that carbon pricing is an inevitability at the national and international levels, these companies have taken a proactive stance that if they posture themselves, however sincerely, as supportive of carbon pricing they can earn a seat at the planning tables of any actual policy.
Furthermore, companies with advanced understanding and certainty of the risks that climate change poses to their operations would want to encourage government spending to safeguard energy infrastructure from rising sea levels and extreme weather, for example. This is especially true for ExxonMobil, which evidence strongly suggests knew by the late 1970s that climate change threatened its future operations.
There’s also the fact that Exxon and Shell, along with numerous other oil companies, have been operating under an internal carbon price for years, which has affected their long-term capital investments.
The oil industry’s main U.S. trade associations, however, all oppose policy measures to put a price on carbon or other climate actions, along with many of their European counterparts.
API argues that carbon pricing would cripple the economy, and even trumpeted its “long history opposing carbon taxes" during the 2016 election season when it looked like Clinton would surely win and some form of carbon pricing policy (likely through the Clean Power Plan) was inevitable.
Exxon was ready to play along. "We have supported a revenue-neutral carbon tax as the best policy approach for governments to consider since 2009," Exxon spokesman Alan Jeffers told Politico this summer.
Of course, the prospects for any action on climate change at the federal level under president-elect Trump are extremely dim. That fact alone may lead some oil companies to pivot backwards to completely oppose any climate action or carbon pricing regulations, at least in the U.S.
With the rest of the world carrying on with their Paris Agreement commitments, and Europe continuing its regulatory responses to climate threats, those U.S.-based companies would risk losing their seat at the tables of influence the world over. This is when those membership dues to the intransigent trade associations like API could prove valuable.
It will be easier for Exxon and Chevron to continue to issue vague statements in support of carbon pricing, but it remains an open question what the European oil majors do on this front. Complicating this equation is intensifying shareholder pressure to disclose climate risks and the potential for stranded assets, a desire to shift towards natural gas development and some internal support for increased diversification.
Merger of strange bedfellows
But not all is roses and caviar in the oil patch under a Trump administration. There’s still the issue of competing lobbying priorities among the fossil fuel corporations. In late 2015, the API merged with America’s Natural Gas Alliance, integrating the main oil trade association with the main natural gas trade group to create a lobbying powerhouse. Whether the alliance lasts in a more fossil-friendly Washington is an open question.
What seemed like a great idea late in 2015 – combining forces to defend fossil fuel interests writ large from looming climate policy impacts and competition from clean energy – may cause headaches under Trump. Because oil and gas sometimes mix like oil and water when it comes to lobbying priorities.
Oil and gas companies aren’t always natural allies in their congressional lobbying priorities, so the attempt to fold all of the disparate oil and gas interests under one umbrella is likely to result in some acrimony. Last year, warring factions within the oil and gas sector faced off in pitched battles over the lifting of the crude oil export ban.
While major shale fracking companies and integrated multinationals wanted to end the Nixon-era ban in order to maximize profits by selling crude at higher prices on the global market, U.S.-based refiners and the petroleum-intensive chemical industry preferred the status quo, which kept their petroleum feedstock prices as low as possible. It devolved into an awkward fistfight and left some open wounds that might reopen in the API’s scramble to maintain a unified lobbying front under Trump.
