New York lawsuit alleges company was exposed to far greater risk from climate change than investors were led to believe
ExxonMobil is to face trial in New York City on Tuesday, accused of misleading investors over the business risks caused by regulations aimed at addressing the climate crisis.
The oil and gas giant has been taken to court by New Yorks attorney general for allegedly covering up the costs it will incur from government rules designed to reduce greenhouse gas emissions.
This represents just the second time a climate case has gone to trial in the US.
Exxon has long been a target for environmentalists, not only for being a major contributor to the climate crisis but also over revelations that it knew for decades that burning oil and gas would dangerously heat up the planet, only to obfuscate and even deny this to the public.
A slew of lawsuits across the US have sought to hold major oil companies to account over the climate crisis. The New York case is different in nature as it essentially revolves around investor fraud. From 2010, Exxon told the public it had assigned a price to carbon to account for how government regulation would affect its business. However, it privately used a much lower figure, allowing it to make carbon-heavy investments such as in the tar sands of Alberta, Canada, that would appear much less profitable otherwise.
The lawsuit, now led by the New York attorney general, Leticia James, alleges Exxon ran a longstanding fraudulent scheme.
Exxon in effect erected a Potemkin village to create the illusion that it had fully considered the risks of future climate change regulation and had factored those risks into its business operations, the lawsuit states.
As a result of Exxons fraud, the company was exposed to far greater risk from climate change regulations than investors were led to believe.
Exxon has said the allegations are false and it expects to be exonerated in court.
An Exxon spokesman said that it properly applies two different metrics a proxy cost, intended to reflect the impact of all climate policies on global demand, and a greenhouse gas cost which relates to actual levies placed on fossil fuel projects in a certain jurisdiction.
The New York attorney generals case is misleading and deliberately misrepresents a process we use to ensure company investments take into account the impact of current and potential climate-related regulations, the spokesman said.
ExxonMobil applies proxy costs and GHG costs precisely as disclosed and takes both into account to help make sound business decisions and meet its fiduciary responsibilities to shareholders.
James declined the opportunity to comment further, although her office wrote to the court in August to complain that Exxon was trying to discourage potential witnesses by swamping them with demands for documents.
I do think this is an extremely important case in that it focuses on the climate risks posed to Exxon through its own accounting processes, said Michael Burger, a climate law expert at Columbia University. The lawsuit is seeking to ensure this company and others are on notice that climate change matters materially for business purposes, as it should.
Exxon is one of just 20 fossil fuel companies responsible for a third of all greenhouse gas emissions in the modern era, Guardian-commissioned data has found. The Texas-based company has contributed nearly 42bn tonnes of carbon dioxide equivalent since 1965.