Exxon chief urges stability in US climate policy, knocks carbon border tariffs

Exxon Mobil Chair and CEO Darren Woods urged the incoming Trump administration to avoid making turbulent climate policy swings — and he pushed the president-elect to reject carbon border taxes favored by some GOP lawmakers.

In an interview with POLITICO, Woods signaled that one of the most powerful players in the energy industry might serve as a moderating influence in Washington, even as Republicans seek to dismantle Biden-era climate policies. The future of the Inflation Reduction Act and other clean-energy programs is one of the most important questions hanging over the incoming administration.

"I don't think the challenge or the need to address global emissions is going to go away,” Woods said. “Anything that happens in the short term would just make the longer term that much more challenging.”

Woods made the comments via telephone from the COP29 climate negotiations in Baku, Azerbaijan, just days after President-elect Donald Trump won the White House with a vow to turbocharge United States’ fossil fuel production and roll back Biden policies aimed at reducing greenhouse gas pollution and speeding the growth of clean energy. Trump is widely expected to withdraw the U.S. from the 2015 Paris climate agreement, and his election has scrambled climate diplomacy at the annual talks.

Despite the forecasts that the world is on pace to set a new annual high temperature for the second year in a row, Trump has repeatedly called climate change a “hoax,” demonized policies promoting electric vehicles and castigated wind and solar energy.

But some members of his party, including a sizable number of Republicans in Congress, have spoken out against wholesale repeal of the IRA, citing the economic benefits it has delivered to their districts.

Woods, who took the top job at Exxon after his predecessor Rex Tillerson became Trump’s first secretary of State, said he opposed carbon border tariffs, which would impose fees on imports that are produced through processes with higher carbon emissions than in the U.S.

That type of tariff has been touted by Robert Lighthizer, who was Trump’s first-term trade representative, as well as some Republicans in Congress who said it would benefit U.S. companies whose products are cleaner than their foreign competitors. It is widely viewed as a response to the European Union’s carbon border adjustment mechanism, which would tax imported raw materials from countries that do not have a price on carbon emissions.

“I think it's a bad idea. It's a really bad idea,” Woods said. “I think carbon border adjustment is going to introduce a whole new level of complexity and bureaucratic red tape. I don't think it's going to be very effective.”

Instead, he said, a regulatory system based on the carbon intensity of products would be a better solution. That would still require the government to enforce some basic accounting standards and a framework assessing the carbon dioxide footprint across a range of products.

“Regulation will play a really important part of that,” Woods said.

The EU’s carbon border adjustment mechanism has emerged as a COP29 flash point. China, Brazil, India and South Africa lodged a formal complaint against governments using trade measures to curb emissions, arguing it raised the costs of deploying green technology in low- and middle-income countries.

Several countries initially raised similar objections to Biden’s IRA, contending it subsidized U.S.-based companies while shutting out foreign competitors. Trump has vowed to scrap many of those incentives. Woods said Exxon would adapt to whatever happens with IRA provisions that benefit the oil and gas industry, such as tax incentives for carbon capture, utilization and storage technology.

“I've been advising that we have some level of consistency,” Woods said. “One of the challenges with this polarized political environment we find ourselves in is the impact of policy switching back and forth as political cycles occur and elections happen and administrations change. That's not good for the economy.”

Woods said Biden’s energy policies had amounted to “limiting the supply of traditional sources of energy and trying to force through expensive alternatives,” though he cautioned against complete about-face on climate change. He warned American industries that fail to address environmental performance during Trump’s second term risk worsening the problem.

“We all have a responsibility to figure out, given our capabilities and ability to contribute, how can we best do that,” Woods said. “How the Trump administration can contribute in this space is to help establish the right, thoughtful, rational, logical framework for how the world starts to try to reduce the emissions.”

Woods’ preferred approach on carbon intensity echoes several legislative proposals floating around Congress. Those are similar to other models that effectively reduced sulfur content in marine fuel oil and automotive diesel.

“Once we can specify carbon intensity, you can then unlock the capability of industry to meet those carbon intensity specifications, and every government can set that level based on their set of circumstances in their country,” Woods said.

Exxon has also launched a carbon capture business that aims to collect emissions of the greenhouse emitted from petroleum operations and store them in underground reservoirs in Louisiana and Texas as well as the seabed below the Gulf of Mexico. That technology has been embraced by the oil sector and received lucrative tax incentives in the Inflation Reduction Act, though it has been criticized by environmental groups.

Despite Biden’s focus on green policies, the U.S. still became the world’s top oil and gas producer during his term and hit production levels unequaled by any other country in history. The U.S., the world’s largest economy and second-largest emitter of planet-heating gases, remains off track of Biden’s goal to cut emissions in half this decade, relative to 2005 levels.