A Landmark Climate Trial Turns on Whether Exxon Cooked the Books | Hacker News Reader

A Landmark Climate Trial Turns on Whether Exxon Cooked the Books

bloomberg.com

138 pointspseudolus70 comments

I was pretty surprised by the smallness of the claimed fraud. $500M - $1.5B is barely half a percent of the Exxon's market value, which is $300B. Does this mean that the internal projections regarding climate change were / are relatively accurate? What benchmark is being used as the "true cost" in the case?

I had seen before the articles about Exxon's own scientific studies and internal documents showing a very clear understanding of climate change back in the 70s, so I was expecting much more meaningful numbers for the claimed fraud, given how much one would expect it to impact their business across the decades.

The cost of climate change to exxon mobile is nearly binary. It is much more existential than a measurable vector.

If we are to stay under 1.5C, 80%+ of their reserves, and therefore their book value, must stay in the ground.

These accounting investigations are a fun little exercise in trying to wedge open cracks, but no, the numbers don't really mean much.

> 80%+ of their reserves, and therefore their book value, must stay in the ground

Can we please stop with the "stay in the ground" meme? It makes for a nice sound bite/slogan, but is not the only way to keep the carbon in oil from becoming carbon dioxide in the atmosphere.

What other ways are there that are commercially viable now?

There are two issues.

First is fuel versus non-fuel usage of oil. Oil for non-fuel purposes can be drawn indefinitely with little climate impact, provided oil for fuel usage is phased out.

Second, on fuel usage you are correct there is currently no commercially-viable way to make it carbon-neutral. There may be in the future, and companies like Exxon are understandably working towards that. It might never happen, but that is not a reason to engage in sensationalism.

It isn’t sensational at all. Imagining some future tech where oil can be used for fuel in a carbon neutral manner is essentially science fiction.

Reducing petroleum demand to just plastics and lubricants eliminates demand to the point at which most of the reserves do remain in the ground.

Mild oversimplification is not sensationalism.

Reducing demand changes the rate of extraction. That, in turn, means reserves stay in the ground longer than they would if they were burned.

"Needs to stay in the ground" says extraction must stop. That is not the case.

> "Needs to stay in the ground" says extraction must stop.

If burning it releases carbon which we can't viably recapture, which you acknowledge[0], then saying...

> That is not the case.

...is wrong. Unless you mean climate change causes by anthropogenic carbon release isn't happening.

[0] "you are correct there is currently no commercially-viable way to make it carbon-neutral" (https://news.ycombinator.com/item?id=21325863)

As I understand it, GP is essentially saying this: there are two main uses for oil - fuel (burning) and plastics. The former emits carbon to the atmosphere, the latter doesn't. To achieve full success emissions-wise, we need to kill off the first use. Second use is fine from emissions standpoint - but keeping it implies extraction needs to happen.

To me, GP is quite precise and also correct. I don't understand why you try to cast them as a climate change denier.

I can't find figures but I expect the amount of crude used for fuel is very high compared to its other uses. Maybe 99% but that's just a guess. I'll try to find figures tomorrow (it's late here). Let's call it 95% for now.

If 95% of energy is not burnt but extracted for other uses then it stays in the ground 20 times longer (ok, not forever).

But we have no way of replacing that huge energy source that is crude. So we will not stop because there's no alternative. What he suggests is a counsel of perfection - "precise and also correct", I agree, but it's not going to happen. So it's a useless suggestion AFAICS.

Basically I'm confused as to what he's suggesting.

Some quick digging regarding proportion of use of crude for energy vs chemical products:

"This demand for chemical products has a direct impact on energy demand (and consequently CO2 emissions). The sector accounts for approximately 11% and 8% respectively of the global primary demand for oil and natural gas."

https://www.iea.org/newsroom/news/2018/june/commentary-from-...

So my 99% and 95% estimate was way off, if I'm reading this correctly - which I may not, as it seems to be referring to energy used to create chemical products, not necessarily the proportion of oil used as chemical precursors. Best I can find though.

It's somewhere between 10% and 15% of the volume: https://www.eia.gov/energyexplained/oil-and-petroleum-produc...

It's tough to get more precise, because there are trace fuels, as well as some products like kerosene that are used as fuels and solvents.

Further up I was specifically referring to non-fuel usage and specifically rejecting the notion that extracted == burned.

Reducing demand massively drops price, it means that in a very real way, tons of reserves that are too expensive to access due to a lower price stay in the ground.

Hold on.

You are saying there aren't ways to keep oil extraction carbon neutral, but saying that we can't make oil extraction carbon neutral is sensationalism?

No.

I'm saying that "we need to leave it in the ground" is sensationalism, because the real issue is "we need to not burn it unless we can capture the carbon (which might be never)".

Plastic has some other issues that are coming to light. Still, even if burning oil ceases we will undoubtedly have need for some of the chemicals and plastics that have no alternatives yet, some of them important, like medical etc. We probably will for quite some time. If we stop combustion of oil that would dramatically improve emissions, and leave centuries of reserves for those non-combustive uses.

"stay in the ground" seems a perfectly reasonable shorthand to avoid a paragraph of caveats.

> "stay in the ground" seems a perfectly reasonable shorthand to avoid a paragraph of caveats.

I don't agree, particularly in the context of the post I replied to. The post mentioned book value going to 0, which means the oil is permanently in the ground. The paragraph of caveats does not make proven reserves worthless, just worth significantly less.

Also, I generally dislike oversimplifications on technical topics, particularly controversial ones. It tends to turn discussion into a battle of sound bites where the nuance gets lost. I can tell that already just by the reaction to my initial post.

My post clearly say "80+%" not "to 0".

There is no need to lie or put words in my mouth, you can see the actual statement on your screen just a couple inches above this one.

It is incredibly suspicious that you would accuse others of losing nuance and over-simplifying after doing so.

You are correct, rereading my post I did not say what I meant to say. What I meant to refer to was the book value of the reserves that are not extracted. You stated

> 80%+ of their reserves, and therefore their book value, must stay in the ground.

That statement, to me, clearly says the oil that "must stay in the ground" is worthless, and demonstrates that you do mean permanently. If you didn't, the book value of the company would not fall by the same amount as the fraction of reserves, because those reserves still have diminished value at lower rates of production.

Those articles seem to overstate their case a tad. For example, here's a quote from one of the internal-use-only documents being bandied around as proof Exxon knew about the impacts of climate change:

"However, the quantitative effect is very speculative because the data base supporting it is weak. The CO2 balance between the atwosphere, the biosphere and the oceans is very ill-defined. Also, the overall effect ofi ncreasing atmospheric CO2 concentration on the world environment is not well understood, Finally, the relative effect of other impacts on the earth's climate, such as solar activity, volcanic action, etc. may be as great as that of CO2."

Sound familiar?

In any case, that doesn't seem to be what this lawsuit is about. If I'm understanding it correctly, Exxon used a higher proxy cost of carbon ($60/ton) in their externally-published justification for why their fossil fuel reserves are unlikely to become "stranded" (economically unviable to extract) due to carbon taxes than they used internally when deciding what would be most profitable to invest money in ($40/ton). The prosecutor alleges that by doing this, they mislead investors into thinking they were applying higher projected carbon costs than they were actually using.

Frankly, it doesn't sound like a very good case. The stranding analysis literally says "We do not publish the economic bases upon which we evaluate investments due to competitive considerations." In addition, higher carbon taxes can affect the profitability of future investments in both directions - making efficiency improvements and clean energy investment more profitable but ones that produce more carbon emissions less so - but only increases the risks of reserves being stranded, so it seems highly prudent to use a higher carbon tax figure than they're actually expecting when assessing the risk of stranding, especially given that it could entirely wipe out the value of their reserves.

As Matt Levine puts it, Everything Is Securities Fraud

They cooked the books like they cooked the Earth.

And you and everyone else benefited from the cheap energy that oil provided.

It's possible to benefit from things that will make later generations suffer, yes.

Your point being?

It's possible to benefit from cheap oil without the oil companies blatantly lying, covering up, and paying off governments all over the world to enhance their bottom-lines. Oil is not on trial here, just the illicit practices of covering up extreme harm.

I don't recall being given an alternative option. My local power utility burns natural gas, the buses run on diesel, and the local supermarket has only recently begun stocking items that do away with unnecessary plastic. Can someone really be a hypocrite if they are forced out of necessity to use fossil fuels due to a system they had no hand in designing?

oh you eat so you should never criticize the food.

The article is paywalled to me, so I googled another article about the same trial. It says: "The industry had the science 30 years ago and knew what was going to happen but made no warning so that preemptive steps could have been taken." [1] Seems like they're just looking for convenient scapegoats. We had public, publicly funded, published science already 40 years ago [2,3].

[1] https://insideclimatenews.org/news/04042018/climate-change-f...

[2] https://en.wikipedia.org/wiki/Jule_Gregory_Charney#Charney_R...

[3] https://phys.org/news/2019-07-charney-years-scientists-accur...

The pretext of the lawsuit is that Exxon misled its investors, but the real aim is to attack a fossil fuel giant. Suing Exxon obviously hurts its shareholders. There is a Wall Street Journal editorial on "New York’s Climate Show Trial" https://www.wsj.com/articles/new-yorks-climate-show-trial-11... .

Wow this was a really interesting read. I didn’t expect the lawsuits to be as frivolous as claimed here, and it makes sense that these are essentially abusing legal processes for activism or public theater.

https://www.bloomberg.com/opinion/articles/2019-06-26/everyt... (Matt Levine, Money Stuff: Everything Everywhere Is Securities Fraud)

That's a really fascinating article. The "Chicken LIBOR" collusion will be a case that I'll have to follow closely in the future.

Here's a great Planet Money episode about Chicken LIBOR if you want to deep dive on it: https://www.npr.org/sections/money/2018/05/09/609890025/epis...

Take with a grain of salt as this is an opinion piece (not a news article) written in a publication owned by Rupert Murdoch, who has substantial oil interests.

Note that it is widely said that the WSJ does good news, but that its editorial section is considered by many to be biased. To quote Wikipedia's summary of that view, "The Journal editorial board has promoted pseudoscientific views on the science of climate change, acid rain, and ozone depletion, as well as on the health harms of second-hand smoke, pesticides and asbestos." They go into more detail at [1].

That's not a statement one way or the other about this particular editorial, but the WSJ editorial page does have a history of climate denial and I'd take their views on this trial with a grain of salt.

[1] https://en.wikipedia.org/wiki/The_Wall_Street_Journal#Editor...

The WSJ has gotten much, much worse since it was purchased by the Murdoch empire a decade ago. Even their non-opinion stuff reads like a business tycoon's lens on Fox News. It is absolutely a mouthpiece in the alt-right Murdoch propaganda machine.

I think you may be reading a different WSJ than I am

considered by many to be biased

If you're going to cite Wikipedia as authoritative, at least don't use weasel words at the same time - https://en.wikipedia.org/wiki/Wikipedia:Manual_of_Style/Word...

From a pragmatic perspective, dealing with the climate crisis is the pretext.

There's a history of using the judicial system in this way in the US (particularly on race issues), partly because the judicial appointments tend to be the longest, and so judges can take the long view and make decisions that aren't politically expedient in the short-term.

In an era where the failures of the legislative branch to come up with good ways to deal with market externalities are culminating in mass extinction and global crisis, maybe it makes sense to try to get the judicial branch to find interpretations of existing laws that can help mitigate the problem?

I don't think it does make sense. It's not like climate change is an issue the legislature hasn't addressed at all; many people have thought it through, and both Congress and individual states have passed many laws about it. It's very dangerous to let prosecutors and judges make up reasons why things they don't like are illegal.

The issue has not been fully addressed by the legislature at all. There is real harm being caused by these externalities, and relief in court is the normal route for seeking remediation when there isn't some other mechanism in place to compensate for the harm. Same as anything else. If a big company causes harm to someone through malfeasance, they have a right to seek compensation through the civil courts. Criminal courts have a different standard.

People should definitely be free to sue Exxon if they think Exxon has harmed them. But that's not what this case is about.

In the current trial, the government is only looking to show that Exxon didn't plug in the right numbers to some financial models. If they can, they'll exact a huge fine to punish Exxon for causing climate change, even though they never proved in court that Exxon isn't allowed to cause climate change.

They absolutely can seek damages for Exxon hiding an enormous long-term liability. Which still exists and still hasn't been paid for.

Certainly, hiding liabilities to inflate your company’s value is bad. But is that really what anyone cares about here? If Exxon can show that their financial models were always properly adjusted for the future risks of climate change, how many people do you think will conclude that they did nothing wrong?

Actually, yes. If Exxon and all other companies operated as if those future liabilities mattered and didn't hide the full price from investors and engage lobbyists to keep that full price from being levied on them, then we wouldn't be in this pickle.

If anti-environmentalism, funded by the likes of Exxon were less prevalent, we wouldn't need these show trials.

But you reap what you sow.

And what do these people think would have happened if Exxon had made their findings public? Everyone would have dropped everything and suddenly stopped using oil? How many other companies factor in climate change when valuing their assets? (none) I have nothing but contempt for these activists who try to blame corporations instead of recognizing that it is their own desire for modern convenience that creates demand for oil.

We could have had a carbon tax years ago and this is a clear example of the deception that corporations have done in order to avoid that outcome.

A revenue neutral carbon tax that puts money back into people’s pockets at that.

It's 50 years later and we still don't have a carbon tax even though everyone has known about global warming basically the whole time and much more comprehensive research than Exxon ever did is now public domain. There is about a 0% chance this would have been different if Exxon had released its research.

The point is that if Exxon went public with these findings (and in general was more honest about climate change sooner) it would be harder for them and others to lobby politicians against a carbon tax.

Even though the science is clear, nearly every republican congressperson on the relevant committees doubts that humans are the main driver of climate change which is pretty necessary belief if you want to put in a carbon tax.

This same type of argument applies to the large subsidies that exist to this day. It would have been politically much harder to secure subsidies of the magnitude that exist today if they too had research out that supported the scientific consensus.

The political hurdle to a carbon tax has nothing to do with Exxon's lobbyists. Politicians are scared shitless of raising gas prices. When France tried to do it recently it caused massive riots.

French riots were caused by a large number of things, but the pro-global warming lobby managed to focus public anger on the carbon tax, instead of all the other causes for their economic woes.

Mailing each man, woman, and child two equal cheques, with the words 'CARBON PROPSPERITY TAX', one at Christmas, and one at Thanksgiving would very quickly turn public opinion towards a carbon tax.

This is brilliant. A progressive enough government could even give people “a free trial” of a carbon tax by having this part of it kick in a few months before the tax starts, with the check explaining what the money was coming from.

It wouldn't be as easy as that. A carbon tax will result in higher prices of a lot of goods, including food: anything that has to be shipped has some carbon built into the price, and farming uses a lot of oil-fuelled machines. It wouldn't necessarily be a large increase, but it would make a potent talking point against it. Even if you got it passed, they would see prices rise before the "carbon prosperity check" arrived.

It's a good idea even though there are more difficulties than I mentioned. But it's not an easy sell.

Are you really going to claim that the fossil fuel industry’s massive lobbying effort has had no impact on fossil fuel subsidies or taxing carbon? You think it’s entirely due to gas prices?

If you or anyone could prove this, they would be in a position to save the fossil fuel industry massive amounts of money (and therefore probably also figure out a way to get a cut of that).

Well. If they had released their research and not thrown container loads of money at denialist lobby groups and think tanks, I think it could have been different. Perhaps all those US Republican politicians who used to accept climate change before George HW Bush was elected would still be convinced. Exxon brag about the billions in Arctic drilling rights they secure from Russia after they bloody melted it enough. Maybe they should have released research with a plan to pivot to mostly not oil.

BP and Exxon annoy me particularly. They paint themselves so damn eco-friendly in ads, but chuck blank cheques at those working against eco-sustainability and carbon reduction.

Hopefully the next generation find a way to prosecute when they get into positions of influence and power.

Greenpeace, but the timeline is right:

[1] https://www.greenpeace.org/usa/global-warming/exxon-and-the-...

If Exxon and all the other fossil fuel companies had not spent large sums of money to suppress climate research, perhaps we would have started moving away from fossil fuels and become concerned about climate change sooner, or be more concerned about the impending climate catastrophe.

The fact that governments invested heavily in oil for the benefit of these corps, it's really a stretch to blame consumers. What other choice in energy did they have ? Consider the fact that half the cars in the early 20th century were electric. What we are dealing with is called a market failure, of the most extreme kind.

None whatsoever, which is why it is silly to blame a corporation for an engineering problem. The gas powered engine won because it was vastly superior until the invention of the lithium ion battery. Not having the technology you wished you had is not a market failure.

If we had priced in the externalities of using a gas powered engine right from the start it wouldn't have been nearly as dominant. There might have been an actual market for electric cars for in-town driving, getting groceries, etc...

Who else do we hold accountable except the companies that profit on the short sighted behavior? I am willing/wanting to pay more for my luxuries but unless we make everyone do it, nothing changes.

If Exxon doesn't release the information, definitely nothing happens, if they do then maybe something happens.

You don't hold anyone accountable, even though we all are. You fix the damn problem. Pointing fingers and assigning blame is pretty much useless in solving any type of problem.

Charles Koch and other billionaires and oil interests are literally spending hundreds of millions of dollars per year funding the ultra-right wing US ecosystems of think tanks and academics, and a large part of the motivation is to prevent action to deal with climate change. They're fighting. But fighting back is wrong?

Dark Money by Jane Mayer is a good place to read more. Charles Koch hired private investigators to tail her back when she was working on the book. That's a strong endorsement!

How many cities could’ve been designed with density and pedestrians prioritized over cars had we been aware? How many lives and how much of our desires had been shaped by it?

By this logic, paid assassins shouldn't get in trouble and only the people that pay them should.

Personally, if it were not for Exxon’s lying to its own employees (I was one), I would have switched from being skeptical to believer a good ten years earlier.

That times a few hundred thousand is a political difference.

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