As governments worldwide struggle to keep the Paris agreement’s goal of limiting global average temperature rise to 1.5°C within reach, pressure on oil and gas companies is reaching an all-time high. Global bodies such as the Intergovernmental Panel on Climate Change and International Energy Agency are emphatic about the urgent need for transparent, immediate, and ambitious decarbonization in the oil and gas industry. This year’s COP 28 negotiations, hosted by Abu Dhabi National Oil Company chief Sultan Al-Jaber in the United Arab Emirates and notably attended for the first time by ExxonMobil CEO Darren Woods, have finally included language about “transitioning away from fossil fuels.”

Despite this, the concerning industry practice of divesting upstream exploration and production assets with significant greenhouse gas (GHG) emissions and claiming “emissions reductions” continues to be commonplace at U.S. oil and gas companies. Purchasers almost universally alter the management and operation of assets, and data show that in aggregate, upstream oil and gas assets are moving to smaller operators who often have weaker climate standards. This means emissions reductions claimed from divestments can be misleading, and often lead to overall emissions increases.

Reaching a net-zero world by 2050 requires a rapid decrease in emissions. But when companies like Chevron and ExxonMobil sell assets and transfer emissions to less climate conscious operators, they are falling short of their aspirations to contribute to a net-zero economy. As BlackRock CEO Larry Fink noted in 2022, transferring carbon-intensive assets from one organization to another will not help the world reach net-zero emissions.

As You Sow has filed proposals at both Chevron and ExxonMobil asking them to report on whether their asset purchasers disclose GHG emissions or have 1.5°C-aligned emissions reduction goals. These proposals seek transparency. “Transferred emissions” must be urgently addressed. Chevron and ExxonMobil were the top two American sellers of upstream oil and gas assets between 2017 and 2021, but neither provides investors with enough information to accurately determine if the divestments have resulted in higher realized GHG emissions.

The Environmental Defense Fund and Ceres’ Climate Principles for Oil and Gas Mergers and Acquisitions, developed in conjunction with more than 30 industry partners, are clear that sellers should engage with buyers to maintain or improve the emissions reductions strategy associated with divested assets. The Principles cover four key areas: pre-deal due diligence, disclosure, emissions reduction targets and strategy, and decommissioning.

Adopting these best practices would only require Chevron and ExxonMobil to ask asset purchasers two “yes” or “no” questions: “do you have GHG emissions disclosures” and “do you have GHG emissions reduction targets”. Both companies could still divest and acquire assets as they see fit, but investors could determine if the divestments increase collective GHG emissions.

Parker Caswell
Climate and Energy Associate, As You Sow