Chevron aligns strategy with Paris deal but won't cap output

By Kevin Crowley and Eric Roston on 2/7/2019

HOUSTON and NEW YORK (Bloomberg) -- Chevron Corp. vowed to cut greenhouse gas emissions in alignment with the Paris Accord on climate change, potentially averting a shareholder rebellion at its annual general meeting.

The U.S. oil major pledged to reduce air pollution intensity by 25% to 30% by 2023, as recommended in the Paris agreement that took effect in 2016. The target applies across the company’s global portfolio, including assets in which it owns stakes but is not lead operator. The metric will also be a factor in determining employee bonuses, Chevron said in a report published Thursday.

While the reduction targets won’t apply to emissions created by consumers using Chevron products, a key demand from environmentalists and activist investors, the move is a significant policy shift for Chevron, whose CEO Mike Wirth is one year into the role. It follows a similar change by rival BP Plc earlier this month. In last year’s report, Chevron said the 2016 Paris deal was only a “first step” toward a global climate framework.

Chevron’s decision may defuse an investor proposal to be considered at its annual meeting this year. Shareholders As You Sow and Arjuna Capital asked the oil supermajor to adopt the Paris targets, including the use of Chevron’s products by consumers as well as emissions from refineries and other plants.

Climate initiative

In September, Chevron announced it was joining the Oil and Gas Climate Initiative, with ExxonMobil Corp. and Occidental Petroleum Corp. It will also contribute $100 million to the OGCI’s billion-dollar fund that invests in greenhouse-gas reduction technologies within the industry.

The move has drawn attention within the policy-making community.

“It’s significant that Chevron, Exxon and Occidental joined the Oil and Gas Climate Initiative in 2018,” said Robert Orr, dean of the University of Maryland School of Public Policy and special adviser to the United Nations secretary general on climate change. “It shows recognition that American companies are seeing the same science and the same economics that other leading companies are seeing.”

The company vowed general support for using climate-related metrics and market-based policies to reduce carbon emissions -- as long as policies don’t punish specific companies.

“Compelling select oil and gas producers to unilaterally reduce their production or change their portfolios to align with a possible future energy mix does not advance the goals of the Paris Agreement,” Chevron said in the report.

Fossil fuels

Even under the most aggressive climate scenarios, oil and natural gas will still underpin almost half of the world’s energy needs through 2040 and will require substantial new investment, Chevron said. The company’s oil production of 2.93 MMbpd last year was a record and it expects as much as 7% growth this year.

“A decrease in overall fossil fuel emissions is not inconsistent with continued or increased fossil fuel production by the most efficient producers,” the company said. “Our strategy is to be among the most efficient producers.”

The report humanizes Chevron’s workforce by highlighting select individual employees’ photographs and biographies. Nearly 52,000 people worked for Chevron in 2017, with a quarter of its workforce female. In 2012, the last year with available data, women made up almost 27% of management, and minorities made up more than 36% of the workforce and 11% of management.

Mark Nelson, Chevron’s V.P. of strategy and midstream, said the decision had been taken after consulting investors, as well as employees and civil society groups.

“If we’re going to continue to provide this ever growing demand for energy we’ve got to be sure we’re doing that in the cleanest most responsible way,” he said in a phone interview. “This is the right ting to do because it’s actionable and accountable for our company and our stakeholders.”

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