“Saudi Arabia and Opec are concerned about the environment,” Mr. Naimi, the Saudi oil minister said. “We need to work on emissions. Technology is available to reduce emission and Saudi Arabia is willing to participate.”

Yvo de Boer, the executive secretary of the UN Framework Convention on Climate Change explained that Adnan Shihab-Eldin, a former Opec secretary-general, had proposed a fund to which producing countries could contribute $1bn.

Mr de Boer want on to call such a fund “very constructive”, and explained that: “With appropriate technology development and deployment, essential fossil fuels can and will continue to play their role.”

“International action on climate change is a war against emissions, not a war against oil.”

While the Financial Times (and others) seems to think that this indicates a shift in policy by OPEC,

“Opec’s approach is a significant departure from its previously sceptical attitude to the climate change de-bate, when it worried about the potential impact of alternative energies and energy savings on oil demand.”

“The cartel is also expected to seek from consuming countries assurances that the global warming fight will not jeopardise crude oil demand while Opec nations are investing in capacity.”

I think that it is actually an attempt to address the above stated worry, OPEC is positioning its products (fossil fuels) so that they can compete with alternative energy in a carbon constrained world. Successful and economical CCS technology will put fossil fuels on even footing with alternative energy from an emissions standpoint. Lowering the risk of decreased fossil fuel demand in a carbon constrained world.

Initially, the SNCF responded to the increase in air and car travel by competing on price, a proposition that was facilitated by generous government subsidies. In order to compete with the faster speeds of air travel, the SNCF developed faster trains (TGV). As the TGV network expanded to more and more cities in Europe the focus of competition switched to convenience. The SNCF and it’s partners undertook an extensive advertising campaign to educate consumers on the convenience of using the train as opposed to flying. Namely, city center to city center service and the ability to hold meetings and get work done while traveling.

The rise in public convern over climate change provided the SNCF with an additional untapped resource. of the three main transport modes in continental Europe (Train, Planes and Automobiles), train travel is by far the most efficient of the three main transport modes in continental Europe (Train, Planes and Automobiles). This is especially true in France where all the trains are electric and most of the electricity comes from nuclear energy.

While an advertising campaign highlighting rail travels’ environmental benefits might have been a potential avenue for utilizing this newfound asset, the SNCF decided to go a step further by leveraging another existing asset, a travel booking website where users could compare and buy air, rail and car rentals. A new feature was integrated into the site, for each trip the CO₂ footprint of each travel mode is calculated and displayed along with the lowest price. L’EcoComparateur ^tm was born.

An escalating PR problem

In addition to drawing the ongoing ire of environmental groups for it’s repeated attacks on climate science, Exxon-Mobil has recently come under increased scrutiny after the Union of Concerned Scientists released a report stating that the company had spent large amounts of money to confuse the Climate Change debate, by using similar techniques as those used by the tobacco industry. The report was picked up by major news outlets with the report’s lead author Seth Schulman quoted as stating:

“ExxonMobil has, in a cynical and manipulative strategy, helped create a kind of echo chamber to amplify the views of a carefully selected group of spokespeople whose work has been largely discredited by the scientific community,”

“public opinion can be easily manipulated because science is complex, because people tend not to notice where their information comes from, and because the effects of global warming are just beginning to become visible.”

Regulators at the gates

Exxon-Mobil is facing a combination of regulatory threats:

1. Although Kyoto has not been ratified by the US, Exxon-Mobil’s international operations are still bound by it.
2. California introduced a broad greenhouse gas emission cap program last year and other states have said they will follow suit.
3. John McCain, Barrack Obama, and Joe Lieberman introduced a bill this week requiring that the US reduce emissions by 2% every year.

The big unknown for Exxon is which industries will be hardest hit by those regulations, and that debate is just beginning.

The Risk Management Play

At this juncture, the reality of Climate Change is irrelevant to decision processes that led Exxon-Mobil to this change of course. The regulations are coming, how do you minimize your exposure?

First you need a seat at the negotiating table. By reversing course on climate change and participating in discussions on potential solutions, Exxon-Mobil is positioning itself to influence the debate and is building credibility for future legislative debates.

Now that you have a seat at the table how do you influence negotiations in a way that shifts the regulatory burden to another industry? Exxon-Mobil decide on a combination economic and greater good argument:

“Exxon wants any regulation to be applied across “the broadest possible base” of the economy, said Jaime Spellings, Exxon’s general manager for corporate planning. Exxon says avoiding a ton of carbon-dioxide emissions is, with certain exceptions, less expensive in the power industry than in the transportation sector. Though solar energy remains expensive, reducing a ton of emissions by generating electricity from essentially carbon-free sources such as nuclear or wind energy is cheaper than reducing a ton of emissions through low-carbon transportation fuels such as ethanol.” Source, Wall Street Journal, Jan 11th, 2007

The argument is essentially that we should put the regulatory burden on sectors of the economy were we can get the largest amount of emission reduction at the lowest cost to society as whole (electricity production). It is by all accounts quite a reasonable proposal. It is also a proposal the benefits Exxon-Mobil handsomely. While the large majority (75%) of oil consumption in the US is used for transportation, only 3% is used for electricity production.