Chevron "Triple Investment in Low-Carbon Sector to $10 Billion"...Opposes Biden's 'Carbon Neutrality' Plan

Continued Emphasis on Fossil Fuel Investment... "Will Meet Demand"
Concerns Over Potential Punitive Carbon Tax... Shareholders Expected to Apply Pressure

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Chevron, a major U.S. oil company, announced that it will triple its investment in the low-carbon sector from its current level and invest $10 billion (approximately 11.72 trillion KRW) by 2028. However, concerns are growing that Chevron will become a target of the "punitive carbon tax" promoted by the Joe Biden administration, as it stated that it will continue its existing fossil fuel investments at the same level without any reduction alongside the increased low-carbon investments. Major Chevron investors have also reportedly expressed unease with Chevron's management challenging the Biden administration's carbon neutrality policy and have voiced opposition to this strategy.

On the 14th (local time), Mike Wirth, CEO of Chevron, said at an investor meeting held that day, "We will increase our current low-carbon sector investment of about $3 billion by more than three times to invest $10 billion by 2028," emphasizing, "Through this, by 2030, more than 7% of Chevron's total refining production will be low-carbon fuels such as biofuels and hydrogen, and we expect the operating profit from the low-carbon sector to exceed $1 billion annually."

However, he also stated that investments in existing fossil fuel sectors such as oil and natural gas will not be reduced. Last December, Chevron announced plans to invest $14 billion to $16 billion annually in the fossil fuel sector. Even with the increase to $10 billion in low-carbon investments, this amount is still much higher. CEO Wirth made it clear by saying, "We will build systems for the future and meet current demand," indicating no intention to shrink the fossil fuel sector.

This stance is seen as a direct challenge to the Biden administration's carbon neutrality policy aiming to reduce carbon emissions to zero by 2050, leading to investor concerns. Following CEO Wirth's announcement at the meeting, Chevron's stock closed at $96.20, down 1.82% from the previous session.

Major Chevron investors have also reportedly expressed opposition to the management's strategy. According to CNBC, at the shareholder meeting held in May, about 61% of Chevron shareholders opposed the management's existing strategy to maintain fossil fuel investments as they are. There are concerns that if management continues to pursue policies contrary to carbon neutrality, pressure from activist shareholders will intensify.

Previously, another U.S. oil major, ExxonMobil, significantly revised its strategy after being attacked by the activist hedge fund Engine No. 1 for lacking an eco-friendly strategy. On May 26, at ExxonMobil's shareholder meeting, Engine No. 1 persuaded shareholders, defeated the existing management, and entered the board of directors to comprehensively revise the eco-friendly strategy.

The reason shareholders are demanding such strategic revisions is due to growing concerns over the "punitive carbon tax" being promoted by the Biden administration and the Democratic Party. Earlier, The New York Times (NYT) reported, "The U.S. Democratic Party, led by Senator Chris Van Hollen, is drafting legislation to impose a punitive carbon tax worth hundreds of trillions of won on major U.S. energy companies such as ExxonMobil and Chevron."

According to NYT, the Democratic Party and the Biden administration plan to impose carbon taxes based on carbon emissions from 2000 to 2019 through this carbon tax legislation and hold companies accountable for recent abnormal climate events and disasters such as floods and wildfires.