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The Great Accounting


If, by necessity or choice, our economic systems are to lead us out of our present existential crises of climate change and biodiversity degradation, then we must think and act differently as participants within those systems.  We must select and demand responsible leadership within public and private sectors.   We will set our sights on the long horizon and acknowledge and reasonably allocate resources across various types of capital – including human capital and natural capital.  Financial capital market participants will encourage and reward sustainable businesses which thrive during an unprecedented evolution.  Those regions, nations and individuals who have historically most benefited from deterioration in the planet’s condition, will step forward and materially contribute to its restoration – for moral, survival and, yes, economic reasons.

My initial objective in writing this article was to convey specific observations regarding climate-driven economic system evolutions – principally around the concept of risk.  I entered the exercise upon reading or re-reading several excellent, compelling books on topic as well as completing some very well-conceived professional training.  As I thought about my prior professional path within this recent learning context, I identified several integral factors which I had not previously adequately considered – at least with respect to our planet’s present existential crises: climate change and biodiversity loss.  My writing objective therefore expanded in scope and the following article’s length and cited resources reflect this.

The revised objective emerging from my investigation ambitiously seeks to relate foundational aspects pertaining to our climate and biodiversity crises – primarily by distilling thoughtful authors’ works as well as summarizing my own research.  In this process, I wish to connect important factors associated with learning theory, climate science, political forces and economic conditions, among others, which collectively shape our road ahead – as the journey concerns prevailing upon the two existential crises, climate change and biodiversity loss.

I so name this journey The Great Accountingone implication of which is suggested by the article’s leading illustration.  Let me begin by describing something of a retrospective – relevant to my view of our current realty.


“The mark of a good action is that it appears inevitable in retrospect.”   Robert Louis Stevenson (B1850  D1894).

Full absorption accounting is a foundational cost allocation concept taught during an introductory accounting course and I completed such course many years ago within my undergraduate business program.  It represents a managerial accounting method for capturing all costs associated with manufacturing a product.

Concurrent with my early cost accounting study, I was introduced to the important economic phenomenon of externalities.  James Gwartney’s and Richard Stroup’s Economics: Private and Public Choice text defines negative (cost) externalities as “harmful effects of an individual’s or group’s action on the welfare of nonconsenting secondary parties.”  Since negative externalities (costs) have not historically been included within the management accounting definition of all costs, their related goods and services have been underpriced, overproduced and overconsumed.

At the time of my mid-1970s introduction to absorption accounting and economic externalities, air and water pollution represented prominent examples of such externalities.  The mid-late-1970s was a time of oil embargos, gas station queues, reduced thermostats and solar panel installations at the White House.  I nonetheless admittedly made insufficient attempts at the time, intellectually or professionally, to reconcile these dichotomous accounting and economic concepts.  I went about pursuing my educational endeavors and livelihood.  I might, therefore, co-opt and turn Robert Louis Stevenson’s statement suggesting I demonstrated “the mark of bad inaction, for it appears rather evitable in retrospect”.  In any event, this accounting-economic dichotomy still begs the question – why have businesses (and therefore consumers) not been adequately charged, held to account, for the use of all resource inputs factored into production processes?

The magnitude of impacts associated with this dichotomy, this market imperfection or failure, can hardly now be overstated.  The World Wide Fund for Nature’s Living Planet Report 2022, for example, “reveals an average decline of 69% in species populations since 1970.”

The Swiss Re Institute, which maintains a biodiversity and ecosystems services index, states that “one million species are threatened by extinction, and natural ecosystems have declined by 47%. Climate change will exacerbate this deterioration. Economies around the world will feel the impacts of biodiversity and ecosystem services (BES) loss to varying degrees. This loss negatively impacts products and services, like water and food, that support our daily lives. Already today, 55% of global GDP is moderately or highly dependent on BES”.

We have also traveled approximately two-thirds of the path toward a 1.5-degree Celsius post-industrial planet warming threshold – to which scientists have sounded clear alarms.

The breadth and speed of simultaneous economic achievement and related earth systems deterioration are strikingly captured in Nigel Hawtin’s characterization of The Great Acceleration – as presented in Roman Krznaric’s excellent book, The Good Ancestor: A Radical Prescription For Long Term Thinking:


From The Good Ancestor: How to Think Long Term in a Short-Term World by Roman Krznaric. Graphic design by Nigel Hawtin. Licensed under CC BY-NC-ND

It turns out, then, that Earth has absorbed much of the cost of doing business – at least as to forfeited extent and condition of the planet’s natural capital.  What do we do about this?  I next turn to the notion of cognition.  Can our species, frankly, think and behave well enough to conquer very different problems of different scales – problems we created?


“What we see changes what we know. What we know changes what we see.”   Jean Piaget (B1896  D1980)

Sir Partha Dasgupta’s 2021 seminal report, The Economics of Biodiversity: The Dasgupta Review, characterized the degradation of our natural world as an asset management problem.  As I read through the entirety of this provocative report, some general related questions kept recurring: why must we revert to economic, finance and accounting theory and systems to solve existential challenges?  Why have we not otherwise, inherently, from a moral perspective, taken better care of our home?  Is it not the insufficient economic, finance, and accounting theories and methodologies that lead us during The Great Acceleration?  Why did I fail to acknowledge and investigate my own curiosities in the mid-1970s and then alternatively pursue an education and living as a geologist, forester, marine biologist, or environmental economist?

The best and yet insufficient answer I can provide is that our species pursues its very existence as participants in economic systems.  We therefore consciously or subconsciously utilize economic, finance and accounting concepts, among others, to guide and help govern our actions.  But, again, look where our collective behavior has left the planet and its (present and future) inhabitants.

Oxford Languages defines cognition as “the mental action or process of acquiring knowledge and understanding through thought, experience, and the senses.”  As I further pondered the results of The Great Acceleration, I returned to a text utilized within a Child Development course taken during my completion of an M.S. Education program – that text titled Cognitive Development (Fourth Edition (2002)) – written by John H. Flavell, Patricia H. Miller, and Scott A. Miller.  I essentially sought to better understand why I did not sooner wrap my own mind, priorities and actions around the events of The Great Acceleration – which has largely transpired within my lifetime.  My own marked periods of investigation, or opportunities for reconsideration, at least those periods committed to thinking-centered (academic) endeavors, occurred periodically over The Great Acceleration’s 75-year (1950 – 2024) time period.  I completed an undergraduate business degree (1980), graduate business degree (1983) and said graduate education degree in 2004.  My early conceptual foundation, therefore, was established in economic, finance and accounting disciplines – reinforcing my perspective as an economic system participant.

My return to the Flavell, Miller and Miller text reminded me of the basic processes of knowledge acquisition.  I am therefore going to quote extensively from their book in the immediately following paragraphs of this article and request your patience and “open-mindedness” as you consider their foundational observations.  The authors here utilize the term “environment” in a general sense to represent a setting in which any event may present itself to an observer.  I invite you, however, to freely associate the term environment with the natural planet / ecosystem use of the word.

The theories of renowned child development psychologist, Jean Piaget, appear early in the text.  Consider the following:

“Piaget viewed human cognition as a specific form of biological adaptation of a complex organism to a complex environment.  The cognitive system he envisaged is, however, an extremely active one.  That is, it actively selects and interprets environmental information as it constructs its own knowledge.  It does not passively copy the information as it constructs its own knowledge as it is presented to the senses.  While of course taking account of the structure of the environment during knowledge seeking, the Piagetian mind always reconstrues and reinterprets that environment to make it fit in with its own existing mental framework.  Thus, the mind neither copies the world, passively accepting it as ready-made given, nor does it ignore the world, autistically creating a private mental conception of it out of whole cloth.  Rather the mind builds its knowledge structures by taking external data and interpreting them, transforming them, and reorganizing them.  It therefore does indeed meet the environment in the process of constructing its knowledge, and consequently that knowledge is to a degree “realistic” or adaptive for the organism.  However, Piaget made much of the idea that the mind meets the environment in an extremely active, self-directed waymeets it more than half-way, as it were.” (Page 5)

“Cognition, like other forms of biological adaptation, always exhibits two simultaneous and complementary aspects, which Piaget called assimilation and accommodation.  Although it is convenient to talk about them as if they were distinct and separate cognitive activities, it must be kept in mind that they are two indissociable aspects of the same basic adaptive process – two sides of the same cognitive coin.  Assimilation essentially means applying what you already know.  You interpret or construe external objects and events in terms of your own presently available and favored ways of thinking about things. … In contrast, accommodation roughly means adjusting your knowledge in response to the special characteristics of an object or event.  You notice and take cognitive account of various real properties and relationships among properties of external objects and events.  You become aware of the structural attributes of environmental data.” (Page 5)

“Assimilation, therefore, refers to the process of adapting external stimuli to one’s own internal mental structures where accommodation refers to the converse or complementary process of adapting these mental structures to the structure of these same stimuli.” In other words, “the kinds of assimilation that can occur are constrained by what you know.  Similarly, and it the opposite direction, the kinds of accommodation you can make are limited and constrained by what is there that could be assimilated. … Both assimilation and accommodation operate in any cognitive encounter with the environment.  What you know already will greatly shape and constrain what environmental information you can detect and process, just as what you can detect and process will provide grist for the activation of present knowledge and the generation of new knowledge.  (Pages 5 – 6)

“Thus, in the course of trying to accommodate to some hitherto unknown functional properties of a relative unfamiliar sort of object, and of trying to assimilate the object and its properties to existing concepts and skills (trying to interpret them, make sense out of them, test out his repertoire of action upon them), the child’s mind has stretched just a little.  This stretching in turn broadens slightly his future assimilatory and accommodatory possibilities.  By continually repeating this cycle, the dialectical process of development continues … .  (As a result) many years of virtually continuous assimilation of milieu to mind and accommodation of mind to milieu lead to large changes … .” (Page 7)

“What was there to be assimilated”, in terms of environmental information, in 1975?  “What is there to be assimilated” in 2024?  Take another look at Nigel Hawtin’s graph.  Whatever my past inaction, I cannot now rationally ignore (fail to assimilate / accommodate) the data as I conceptualize / consider / guide my future behavior.  Further, should I wish to “meet the environment more than half-way”, I must do so with an open mind and action orientation.

Citation of a subsequent section of the Flavell, Miller and Miller text, pertaining to scientific thinking, is also in order in this context:

“… with respect to the process of scientific thinking … children and many lay adults do not appear to think like scientists … .  The essence of scientific thinking is the coordination of theories and evidence.  There are two phases.  In the investigative phase, a person designs experiments to test a theory; in the inferential phase, a person interprets the resulting evidence as supporting or refuting the theory and, if necessary, considers alternative explanations.” (Page 154)

“Over both phases children and even lay adults appear to be flawed scientific thinkers … (including in the following manner):”

“They tend to be theory bound.  Unlike scientists, children and lay adults fail to distinguish (a) conclusions based on observations from (b) conclusions based on their prior beliefs or theories.  That is, they often either ignore discrepant evidence, or attend to it in a selective, distorting way.  They sometimes adjust evidence to fit their theories; the processing of evidence is biased toward a favored theory, especially if the evidence supports an explanation that seems implausible to them.” (Pages 154-155)

“Thus, children and often even lay adults do not adequately differentiate evidence and a theory; they have trouble setting aside their own theory and viewing the evidence as separate from any theory.  They have trouble understanding what it means to test an idea and even have trouble thinking of what kind of evidence would refute their theories.  As a result, when they are asked to generate evidence to show that their theory is correct or incorrect, they simply restate their theory or give illustrations of the theory rather than refer to existing or potential evidence that stands alone from the theory and could test it. … People must learn that data and theory are different before they can coordinate them (emphasis added).” (Page 155)

“Another way that people are theory bound is that they hold their theories with certainty.  In fact, of course, evidence can only make a theory probable because future evidence could disconfirm the theory.” (Page 155)

A climate scientist reading the above excerpts might ask the question: what is the benefit in my (David’s) stating the obvious?  My answer is that I have perhaps too often insufficiently applied this framework when confronting important issues and vexing problems – especially those comprising the natural environment.  I’ll add that I have absolutely encountered the above-described phenomenon (repudiation rather than refutation) upon discussing our existential crises with climate skeptics.  The service provided by the Flavell, Miller and Miller discussion operates in the word “learn”.  Consider and reflect upon, therefore, what is going on in the mind – when it is especially important to differentiate data and theory.  My interpretation here is supported by the authors’ following comments:

“ … people must possess a metacognitive awareness of their own thought processes before they can gain control over the interaction between theory and evidence in their thinking. … people must think about their theories rather than just with them.  If people are not aware that their theories are just theories, they are unlikely to monitor carefully how well they are supported by evidence.  For scientific reasoning it is necessary to develop a meta-cognitive understanding of the nature of logic and its limits, and of why some mental strategies are better than others and what their range of application is.  In other words, scientific thinkers understand, monitor and direct their own higher order reasoning.” (Pages 156-157)

I perhaps idealistically view cognition in the collective – communities, regions, nations, the planet, in other words, could / should more effectively construct and employ a collective knowledge to confront mankind’s existential challenges and seize opportunities.  To a greater extent, to permit decisive action and progress, we would assimilate and accommodate data within AND across minds.  The collective knowledge acquisition would obviously go well beyond assimilation of mounting climate data (such as monitoring of carbon dioxide equivalent emissions).  We would better understand, accommodate, and center the concepts of time and risk, choose suitable leaders to design appropriate strategies and hold them to account for actions, and, where possible, guide our own behavior in mindful ways.

Knowledge, then, is a continual development proposition – driven by exposure to and assimilation of facts.  What are they, these current facts?  I now wish to present information regarding earth’s energy system and carbon cycle – relatively new details discoveries for me – which serve to promote my ongoing education and actions.


“There is no trifling with nature; it is always true, grave, and severe; it is always in the right, and the faults and errors fall to our share.  It defies incompetency, but reveals its secrets to the competent, the truthful, and the pure”  Johann Wolfgang von Goethe (B1749  D1832).

At the risk of oversimplifying climate science, I wish to provide the following narrative and illustrations to highlight a few climate phenomena in a manner consistent with the title of this article.  I do this out of a sense of awe, wonder, and respect for the magnificent natural processes that take place on our planet.  My contemporaneous education in this regard primarily originates from my participation in the Chartered Financial Analysts (CFA) Institute’s Climate Risk, Valuation, and Investing Certificate Program.  Dr. Thomas E L Smith served as a climate science curriculum contributor to the program.  I both summarize and “quote” from transcripts from two of Dr. Smith’s video presentations (Earth’s Energy Balance and The Carbon Cycle) in the following narrative.  My commentary does not suggest or imply the endorsement of the CFA Institute or of Dr. Smith as to any of my interpretations or opinions.  Indeed any citation of any author’s work, in the context of this article, does not suggest or imply that author’s endorsement of my statements.

As it relates to global warming, we presently contend with two interactive budgetary issues.  Note that any budgeting process represents a resource allocation endeavor – initiated in the spirit of attaining some goal.  This is true whether one considers the perspective of a young couple saving for the down payment toward their first home, an aspiring entrepreneur conserving income for starting a new business, or the executive team of some large international enterprise allocating capital to its various businesses and emerging opportunities.  In each of these contexts, resources (capacities) are finite.

Budgeting also implies maintenance of some meaningful level of discipline toward achievement of the objective.  Budgets prove meaningful in the context of comparing actual performance to plan – to thereafter revise plans and / or adjust performance.  Our collective climate transition planning, execution discipline, ongoing performance measurement, and hopeful goal attainment  therefore underscore my characterization of our future, the ensuing 75 years, as The Great Accounting.

The first of the climate “budgets”, the earth’s energy budget, is depicted in the following NASA illustration.  Note that the unit associated with quantities in this illustration represents watts of energy per square meter.

Earth’s energy budget describes the balance between the radiant energy that reaches Earth from the sun and the energy that flows from Earth back out to space. Credits: NASA

As depicted within the illustration, this energy transfer process works, in large part, as follows:

Solar energy arrives from the sun (typically in the span of 8 1/2 minutes) – portions of which energy are either reflected or absorbed within the atmosphere.  The extent of absorption depends upon the composition of molecules and particles present within the atmosphere.  Absorption of energy warms the atmosphere.

Approximately one-half of incoming sunlight strikes earth’s surface.  The incoming sunlight is, in parts, reflected by or absorbed into the earth’s surface – depending upon the structure of that surface (ocean, forest, ice sheet, desert).  The surface-absorbed solar energy heats the planet’s surface.  Most of the surface-reflected energy is passed back into space.

The solar energy absorbed at Earth’s surface is converted to heat – increasing the temperature of the land, oceans and lower atmosphere.  Some of this heat directly warms (via conduction) adjacent surfaces – soil, water or ice below, and atmosphere above.  A portion of the heat passed to the atmosphere is transported (via convection) to higher altitudes in the atmosphere – driving atmospheric circulation.  Atmospheric heat is also used to evaporate water from oceans and wetland surfaces forming clouds.

Energy not used for conduction, convection and evaporating water is radiated into the atmosphere as long wave infrared radiation. Certain of this infrared radiation emanating from the planet’s surface is absorbed in the atmosphere by gases such as water vapor, carbon dioxide and methane – creating Earth’s greenhouse effect.  Some of the energy absorbed by the greenhouse gas molecules is redirected back to Earth’s surface to further warm the surface alongside solar energy received during the day.

The burning of fossil fuels, deforestation, and industrial processes, in the course of a few hundred years, have increased the concentration of greenhouse gases, particularly carbon dioxide in the atmosphere to levels not seen for millions of years.  This rapidly enhanced greenhouse effect has amplified the re-radiation of heat, leading to a warming effect as more infrared radiation is received at the Earth’s surface and less infrared radiation is escaping into space.

The second budgetary constraint pertaining to our climate crisis relates to the carbon cycle – the exchange and storage of carbon “between the atmosphere, oceans, land and biosphere (plant life)” – see following depiction:

Fast carbon cycle showing the movement of carbon between land, atmosphere, and oceans in billions of tons (gigatons) per year. Yellow numbers are natural fluxes, red are human contributions, and white are stored carbon. The effects of the slow (or deep) carbon cycle, such as volcanic and tectonic activity are not included.

Diagram adapted from U.S. DOE, Biological and Environmental Research Information System. –

The carbon storage / exchange cycle is amazing is so many ways – as to its componentry, sheer scale, intricacies, and collaboration.  The system has functioned very well over the course of geographic time, even gradually accommodating the impacts of various extinction events.  The following points present multiple salient comments from Dr. Smith’s carbon cycle film:

“Carbon maintains a significant influence on the balance of energy that enters and leaves Earth’s atmosphere.  Carbon has profoundly influenced our planet’s temperature and served as the main control determining vastly different climates experienced in Earth’s geological history.”

“Earth’s interior’s vast carbon reservoirs, in the form of minerals, rocks, and fossil fuels, accumulated over millions of years or were laid down when our planet formed.”

“The carbon stored in Earth’s crust plays a role in the carbon cycle when it’s released into the atmosphere.  Before modern human agricultural industrial influences, this would only usually take place through tectonic processes and associated volcanic activity – varying slowly over millions of years.”

“Oceans absorb and store large quantities of carbon as carbon dioxide from the atmosphere dissolves into the water at the ocean surface – serving as a buffer against rapid atmospheric changes.  Carbon in the surface waters can be buried in the deep ocean by ocean currents.  A consequence of the rapidly increasing concentrations of carbon dioxide in the atmosphere since the industrial era has been a corresponding increase in the concentration of dissolved carbon in our oceans.  The dissolved carbon forms a weak carbonic acid and with rising concentrations of carbon in the oceans, the ocean water is becoming more acidic.  This is having an effect on ocean ecosystems, as various aquatic species are unable to adapt or evolve quickly enough to the increasing acidic conditions.”

“The biosphere (forests, grasslands, agricultural plantations, and all living organisms) actively participates in the carbon cycle.  Through photosynthesis, plants and phytoplankton take in carbon dioxide from the atmosphere and convert it into organic matter. Dead organic matter may then be stored in soils or a sediment on the floor, but the biosphere is also responsible for releasing CO2 through decomposition and respiration.”

“The atmosphere holds a relatively small, but highly influential, amount of carbon in the form of carbon dioxide, methane, and some other rare gases. The amount of carbon containing molecules in the atmosphere determines the amount of infrared energy that is absorbed before it escapes into space, heating our atmosphere and impacting our climate.”

“Long before the recent dominance of human activities in the carbon cycle and the associated rapid changes to carbon reservoirs, several natural processes have been responsible for far slower exchanges of carbon at a geological pace, with gradual shifts between carbon stores taking place over millions of years. Volcanoes have been a source of carbon to the atmosphere for eons, releasing carbon dioxide and other gases. This is part of the natural carbon cycle and has been the main source of carbon into the atmosphere for history.”

“Changes to the rate of volcanic activity caused by very slow changes in the movement of our planet’s continents had determined the rate of input of carbon to the atmosphere.  Today, emissions of carbon dioxide from burning fossil fuels amounts to around 120 times as much carbon dioxide emitted by all of the world’s volcanoes, highlighting the significance of this monumental shift of carbon from the solid earth to the atmosphere.”

“Weathering is a process whereby rocks break down and is the main mechanism for removing carbon from the atmosphere.  Carbon dioxide will dissolve in liquid water droplets in the clouds of our atmosphere.  When these water droplets fall as rain, the carbon in the form of a weak acid reacts with minerals at the earth’s surface to create carbon rich sediments.  Through long periods of time, these sediments wash off the land into the oceans where they can sit on the ocean bed for millions of years.  Changes to the rate of weathering caused by changes to the amount of land exposed to rainfall is the main mechanism for determining the rate of removal of carbon from our atmosphere.”

“The biosphere, through photosynthesis, actively removes carbon dioxide from the atmosphere.  Under water logged conditions, typical of upland bogs and tropical swamps, the carbon in dead organic matter may be stored as peat, which over millions of years (emphasis added) becomes compressed to form deposits like coal and oil.  While some of the photosynthesized carbon is locked away, most carbon in the biosphere is temporarily stored and is returned to the atmosphere through plant respiration or decomposition.  The balance between the rate of input of carbon to the atmosphere, mostly determined by volcanic activity, and the rate of removal of carbon from the atmosphere, mostly from weathering, has been the control knob of earth’s thermostat for billions of years, at least until humans appeared (emphasis added).  When volcanic emissions exceeded the rate of weathering, carbon accumulated in our atmosphere driving a gradual increase in global temperatures, and during periods when the rate of volcanic activity was lower than that for weathering, carbon concentrations in our atmosphere gradually reduced, leading to cooling.”

“The burning of fossil fuels, such as coal, oil, and natural gas, releases vast quantities of carbon dioxide into the atmosphere.  This is a huge transfer from geological storage to the atmospheric reservoir.  Carbon in the form of fossil fuels that took millions of years to be removed from the atmosphere, mostly through photosynthesis by plant life is being released in a relative blink of the eye (emphasis added).  As a result, and without any major removal mechanisms of a similar magnitude, the consequences have been a significantly increased concentration of carbon dioxide in the atmosphere, acting as a major driver of recent climate change.”

“Evidence does show that the extra carbon dioxide in our atmosphere is driving the faster growth of vegetation, increasing rates of photosynthetic removal.  This process helps to dampen the rise in atmospheric carbon dioxide somewhat, due to the emissions from fossil fuels, but it is outweighed by the emissions of carbon from deforestation.  That brings us to the role of deforestation in large scale agriculture, which, of course, is essential for human livelihoods, but it also contributes to changes in the amount of carbon stored in the biosphere. Trees that once removed CO2 from the atmosphere are cut down and soils storing carbon are disturbed, with both processes removing carbon from the biosphere and releasing that carbon into the atmosphere, further impacting CO2 levels and driving more climate change.”

According to International Energy Agency (IEA) disclosures, worldwide energy (fossil fuel) related carbon dioxide equivalent emissions totaled approximately 37.4 billion metric tons (37.4 gigatons) in 2023.  This total represented an increase of 1.1% in energy-related emissions relative to 2022.  The Stanford University Doerr School of Sustainability asserts that world emissions from all sources likely exceeded 40 gigatons in 2023. Note that it is the seven continents’ and their inhabitants’ cumulative level of carbon emissions that impact global warming.  Pursuant to data representations reported by Our World in Data, utilizing Global Carbon Budget (2023), total cumulative worldwide carbon emission from 1750 – 2022 were 1,772,867,600,000 metric tons (1.772 trillion tons) – that is, over 3.9 quadrillion pounds of CO2e from 1750 to 2022 – see immediately following table.  Appearing directly thereafter is a graph of cumulative emissions by continent.

Worldwide EmissionsMetric Tons CO2ePounds CO2e
Conversion Factor2,204.60
  Growth Rate1.30%
  Growth Rate1.10%
Cumulative Worldwide Emissions 1750-20221,772,867,600,0003,908,463,910,960,000
2022 Worldwide Emissions / Cumulative Emissions to 20222.10%

Keep in mind, in pondering the planet’s capacity to accommodate 3.9 quadrillion pounds of CO2e, that whatever volume of emissions remains in our atmospheric reservoir, we are talking about a relatively scant 60-mile-thick envelope of gases.

Such is the historical “performance” data on carbon dioxide equivalent emissions.  What of our forward-looking ambitions and plans?  Our current and future climate policies, commitments and actions must essentially allocate some magnitude of future carbon emissions across all economic sectors and participants according to some goal of limiting future temperature increases.  What presently constitutes suitable, reasonable budget objectives?

A deep dive into carbon budget / emissions performance is available in the following Copernicus Publications article.  For ease and importance of reference, I am below presenting excerpts from the executive summary of the report.  Note, once again, that Gt represents gigatons (a billion tons), 2.2 trillion pounds, or 1 trillion kilograms.  Note also that C is the elemental chart symbol for carbon and CO2  the compound carbon dioxide.

“Global fossil CO2 emissions (including cement carbonation) are expected to further increase in 2023, to 1.4 % above their pre-COVID-19 pandemic 2019 level.  The 2022 emission increase was 0.09 Gt C yr−1 (0.33 Gt CO2 yr−1) relative to 2021, bringing 2022 fossil CO2 emissions to 9.9±0.5 Gt C yr−1 (36.4±1.8 Gt CO2 yr−1), virtually equal to the emission level of 2019. Preliminary estimates based on data available suggest fossil CO2 emissions will increase further in 2023, by 1.1 % relative to 2022 (0.0 % to 2.1 %), bringing emissions to 10.0 Gt C yr−1 (36.8 Gt CO2 yr−1), 1.4 % above the 2019 level.”

“Emissions from coal, oil, and gas in 2023 are all expected to be slightly above their 2022 levels (by 1.1 %, 1.5 %, and 0.5 %, respectively).  Regionally, fossil emissions in 2023 are expected to decrease by 7.4 % in the European Union (0.7 Gt C, 2.6 Gt CO2) and by 3.0 % in the United States (1.3 Gt C, 4.9 Gt CO2), but they are expected to increase by 4.0 % in China (3.2 Gt C, 11.9 Gt CO2), 8.2 % in India (0.8 Gt C, 3.1 Gt CO2), and −0.4 % for the rest of the world (3.8 Gt C, 14.0 Gt CO2).  International aviation and shipping (IAS) are expected to increase by 11.9 % (0.3 Gt C, 1.2 Gt CO2).”

“Fossil CO2 emissions decreased in 18 countries during the decade 2013–2022.  Altogether, these 18 countries have contributed about 1.9 Gt C yr−1 (7.1 Gt CO2) to fossil fuel CO2 emissions over the last decade, representing about 20 % of world CO2 fossil emissions.”

“Global CO2 emissions from land use, land-use change, and forestry (LULUCF) averaged 1.3±0.7 Gt C yr−1(4.7±2.6 Gt CO2 yr−1) for the 2013–2022 period with a preliminary projection for 2023 of 1.1±0.7 Gt C yr−1(4.0±2.6 Gt CO2 yr−1).  A small decrease over the past 2 decades is not robust given the large model uncertainty.  Emissions from deforestation, the main driver of global gross sources, remain high at around 1.9 Gt C yr−1 over the 2013–2022 period, highlighting the strong potential of halting deforestation for emissions reductions. Sequestration of 1.3 Gt C yr−1 through re-/afforestation and forestry offsets two-thirds of the deforestation emissions.  Emissions from other land-use transitions and from peat drainage and peat fire add further smaller contributions.  The highest emitters during 2013–2022 in descending order were Brazil, Indonesia, and the Democratic Republic of the Congo, with these three countries contributing more than half of global land-use CO2 emissions.”

“Total anthropogenic emissions were 11.1 Gt C yr−1 (40.7 Gt CO2 yr−1) in 2022, with a similar preliminary estimate of 11.1 Gt C yr−1 (40.9 Gt CO2 yr−1) for 2023.”

“The remaining carbon budget for a 50% likelihood to limit global warming to 1.5, 1.7, and 2 C has reduced to 75 Gt C (275 Gt CO2), 175 Gt C (625 Gt CO2), and 315 Gt C (1150 Gt CO2), respectively, from the beginning of 2024, equivalent to around 7, 15, and 28 years, assuming 2023 emission levels (emphasis added).”

“The concentration of CO2 in the atmosphere is set to reach 419.3 parts per million (ppm) in 2023, 51 % above pre-industrial levels. The atmospheric CO2 growth was 5.2±0.02 Gt C yr−1 during the decade 2013–2022 (47 % of total CO2 emissions) with a preliminary 2023 growth rate estimate of around 5.1 Gt C (2.4 ppm).”

“The ocean CO2 sink resumed a more rapid growth in the past 2 decades after low or no growth during the 1991–2002 period, overlaid with imprints of climate variability. The estimates based on fCO2 products and models diverge with the growth of the ocean CO2 sink in the past decade being larger by a factor of 2.5 compared to in the models. This discrepancy in the trend originates from all latitudes but is largest in the Southern Ocean. The ocean CO2 sink was 2.9±0.4 Gt C yr−1 during the decade 2013–2022 (26 % of total CO2 emissions) and did not grow after 2019 due to a triple La Niña event. A similar value of 2.9 Gt C yr−1 is preliminarily estimated for 2023, which marks an increase in the sink compared to the last 2 years due to the transition from La Niña to El Niño conditions in 2023.”

“The land CO2 sink continued to increase during the 2013–2022 period primarily in response to increased atmospheric CO2, albeit with large interannual variability. The land CO2 sink was 3.3±0.8 Gt C yr−1 during the 2013–2022 decade (31 % of total CO2 emissions), 0.4 Gt C yr−1 larger than during the previous decade (2000–2009), with a preliminary 2023 estimate of around 2.9 Gt C yr−1, significantly lower than in 2022, and this is attributed to the response of the land biosphere to the emerging El Niño in 2023. Year-to-year variability in the land sink is about 1 Gt C yr−1 and dominates the year-to-year changes in the global atmospheric CO2 concentration, implying that small annual changes in anthropogenic emissions (such as the fossil fuel emission decrease in 2020) are hard to detect in the atmospheric CO2 observations.”

The above-bolded Copernicus Publication reference presents the carbon budget in probabilistic terms – necessarily so given uncertainties associated with both climate science projections and potential socioeconomic responses to the crises and transition.  A recent webinar (see approximately 59 minutes into recording) I attended referenced analyses from which pegged a remaining carbon dioxide emissions budget (as of 2023) of 250 gigatons lasting until 2029 assuming a 50% probability of staying within the 1.5 Celsius threshold.  That analysis essentially confirms the Copernicus Publications forecast.  The aforementioned webinar further notes that an eighty-three percent (83%) probability of remaining below 1.5 Celsius translates to a 2023 remaining carbon dioxide emissions budget of 100 gigatons – exhausted by 2025.

The speed with which we assimilate and act upon these facts is, then, critical.  Time and timing therefore maintain every bearing upon the resolution of these existential crises.


“The grand instructor, time.” – Edmund Burke (B1729 D1797)

Problem resolutions are equal parts strategy, execution skill and discipline, and timing.  Windows of opportunity come and go.

Note that I use a convention of indicating time (years) throughout this article as I consider particular peoples’ lives, theories, cited publications, and data important – to emphasize what was perhaps assimilated when.

I have always found retrospection a useful reflection across many contexts.  One of the more powerful retrospections I entered was to explore my ancestral (European) past.  I had completed preliminary phases of this process prior to 2015 when the American 2016 presidential campaign began in earnest – which one party’s candidate led off with immigrant bashing.  I completed further research one year thereafter with some amazing, resonating discoveries.  Eight (8) years post-2016, the “immigration issue” remains front and center – with the prospect of it (again) dramatically impacting U.S. leadership and domestic, foreign and climate policies.  In any event, my locating, reviewing, and / or visiting ancestral homelands, emigrant ship manifests, census documents, real estate records, photos, and birth and death certificates proved powerful and imbued a sense of pride and connection with the past.

I recently read Richard Fisher’s The Long View: Why We Need to Transform How the World Sees Time.  Richard Fisher skillfully and courageously authored a book about a very challenging topic.  Our present world conditions demand we take a long view but at least western culture lives mostly in the moment.  I think one of Richard’s most valuable observations is that his experience of looking to the past, within his own ancestral research, naturally led him to the future – that combined with the birth of his daughter.  Richard Fisher writes on page 176 of his book that “this mental journey to imagine my ancestors is also an exercise that fills me with gratitude.”  Gratitude for ancestral quests and achievements also filled my heart throughout my discovery process.  Gratitude is an especially positive emotion.  Any thoughtful counselor will tell you that gratitude is a great coping mechanism during times of trial – which we now face.

Gratitude’s companion is responsibility.  If we stand upon our ancestors’ shoulders, our descendants and future generations should rightfully stand firmly upon ours.  We have a responsibility to pass along a world that may enable their lives, liberties and happiness.

Another instructional takeaway for me from Richard Fisher’s book is the following page 287 paragraph:

“When I first set out to write this book, many years ago, I confess my interest in cultivating a deeper temporal perspective was heavily shaped by my fears; the threats of tomorrow, and a concern that short-termism was hiding dangers ahead.  I imagined my daughter’s trajectory to the twenty-second century, and saw a future world marred by climate change, environmental degradation, technological missteps or worse.  I still worry deeply about the mistakes our generation is making, and the malignant heirlooms we are leaving behind.  And I have no illusions about the fact that we are living in a difficult and precarious period.  We need the long view to redirect our trajectory and avoid perils that could be far worse.  But I have since realized that a long-term perspective offers so much more: it can also lead to a more hopeful view of the world, where the prospect of positive change feels ever-more possible.”

Richard Fisher then concludes his book (pages 287-292) with a discussion of “the many upsides of the long view” including: “the long view is restorative; it is a way-finder; the long view makes the present more meaningful; the long view can be accessible to everyone; the long view is democratic; it can be politically unifying; the long view leads to a healthier media diet; it provides a clearer picture of progress; and the long view is an engine of hope.”

I greatly appreciate Richard’s message which to me suggests that rumination is useless – set one’s sights forward, well forward, in spite of significant present challenges, keep moving and contribute.  Hence, I analyze and write.

One further comment upon time.  Deep (geologic) time is a very useful perspective utilized within the context of science journalist Peter Brannen’s book The Ends of The World: Volcanic Apocalypses, Lethal Oceans, and Our Quest to Understand Earth’s Past Mass Extinctions (2017).  Prior to reading Peter Brannen’s book, I knew essentially nothing of Earth’s prior cataclysms – the configurations of continents, the presence of unique land and sea inhabiting animal and plant life, the locations, transmissions and molecular bases of the precipitating events.  Peter Brannen’s book left me with another sense of awe as to what life on this planet has endured to date – an incredible gauntlet of trials and survivals.

His book also clarified my foreboding sense of the present crises – permit me to temporarily return to the subject of carbon:

“Today … tens of thousands of years of cultural evolution have given us a world where we have gained such mastery over the physical environment that we hold the knobs of the entire earth system – and are twisting them violently.”

“One innovation in particular has turned us into a truly geological force: our global effort to take as much ancient carbon from the rock record as possible and ignite it all at once in the atmosphere.  This is a superpower normally reserved for continental flood basalts.”

“For hundreds of millions of years, the planet has been burying these huge stores of carbon in jungles of coal, or in blizzards of plankton at the bottom of the ocean.  In just a few centuries, humanity is trying to light a match to all of it.  In many ways this geological bonfire seems grotesque and unnatural, but when viewed in light of earth’s history, it looks like one of those major metabolic innovations that happen every few hundred million, or billion, years.”

“As a result of this innovation (burning of fossil fuels), human civilization is now propped up by a continuous explosion of energy, a global mega-metabolism, with hundreds of millions of years’ worth of sunlight being released all at once in combustion engines and power plants.  Carbon-dioxide is a by-product of this new civilizational metabolism, and we now emit 100 times more COeach year than volcanoes.  This far outstrips the ability of the earth’s thermostat to keep up through rock weathering and ocean circulation, operating as those processes do on 1,000-to-100,000-year timescales.”

ALL economic activity is, in realty, imbedded in nature.  Hence, we need to fundamentally adapt economic models to take very clear measure of our senior partner’s (nature’s) contributions, conditions, capacities and regenerative time horizons.  Carbon emissions have now significantly altered (lengthened) strategic planning time horizons for governments and commercial enterprises while simultaneously presenting these institutions and businesses demands for immediate, material action.  The magnitude of this required perspective shift is unprecedented, considering its occurrence, or at least mankind’s now actionable recognition of its occurrence, in the context of one generation.  Nature has been telling us, for some time, that our actions pose significant consequences for essentially every inhabitant of the planet.  We are now, I believe, earnestly assimilating climate and ecosystem condition information and enhancing our related knowledge (conceptual frameworks) to guide future action.  Earth’s lifeforms have come too far through the ages for us to fail at this endeavor.  We can succeed in addressing these existential threats if:

All of us take ownership of the issues and act – at least commensurate with our resources; and

We compel our public and private sector leaders to (1) honestly assess rapidly evolving circumstances, (2) consistently formulate appropriate solutions, and (3) remain committed, over the long term, to taking requisite, equitable actions.

What essential risks do we confront in this mission – particularly with respect to the immediately preceding leadership point?  Let me first speak to the question of public leadership and then follow with a discussion of risk from a private enterprise perspective.


“Freedom is the last, best hope of earth.”  Abraham Lincoln (B1809  D1865)

My photograph of Donald De Lue’s sculpture American Youth Rising from the Waves at Normandy American Cemetery, Colleville-sur-Mer, France

My focus upon climate change admittedly began in earnest in 2015 with the signing of the Paris Accords.  Since that time, I have attended many conferences and webinars and read extensively about this particular existential issue.  Across this span of training and reading, I have uniformly encountered assertions as to the importance of government policy in promoting climate adaptation and mitigation.  U.S. climate policy has varied dramatically, however, across just the past two administrations – see November 4, 2020 Scientific American article and March 3, 2023 Path Partners article as examples of such contrast.

Leaders of the past two U.S. administrations will face one another, again, in November 2024.  Much, much is at stake – beyond even U.S. continuing support of international climate accords and initiatives.  The future of American democracy will be on the ballot in November of 2024 – if past action is prologue and candidate statements can be accepted at face value.  It is regrettable (excruciating) to include, in a narrative regarding climate and biodiversity crises, crises which require mankind’s upmost cooperation, with a fundamental discussion of politics but such is the American circumstance.  Ominous political forces may set a crucial backdrop for viewing ongoing commitments and potential U.S. actions pertaining to our planet’s future health.

Freely-democratic elections will also occur in 2024 within the European Union and United Kingdom.  I can only legitimately speak to, convey my sentiments regarding, what is transpiring within the U.S., my country of citizenship, and offer views as to potential implications associated with choice.

I previously voted in 12 U.S. presidential elections – between 1976 and 2020 – and recognize my good fortune, to mildly describe it, for having enjoyed this right to participate in electoral processes.  This freedom is precious, valuable beyond estimation, from any perspective.  At no time prior to 2024 did I remotely consider a prospect that operation of a democratic form of government within the United States might be in peril.  At no time prior to 2024 did I seriously consider that my next federal election vote may be my last such vote.  As November 2024 approaches, my worry clearly appears justified!

Mounting political tribalism and disfunction increasingly alienates voters within the United States.  I spoke previously in this article about the relationship between knowledge acquisition via assimilation of factual data.  Reality distortion by particular politicians, however, removes a basic building block to problem solving.  Voters are purposefully disenfranchised via conduct of and statements from particular candidates.

An obvious proposition is often necessarily restated by many citizens that democracy fails to function without sufficient voter participation.  That reasoning is painfully logical.  As I say, this U.S. election cycle, however, may well determine whether democracy continues to exist in this country – world and very recent U.S. history confirm this.  Consider this view from Freedom House – an organization founded in 1941, at the height of democracies’ fight against totalitarianism, so founded by Wendell Willkie, the Republican 1940 U.S. presidential candidate, and Eleanor Roosevelt, the wife of the Democratic 1940 candidate and incumbent U.S. president Franklin D. Roosevelt:

“It is essential for all Americans who value democracy, especially elected officials who have sworn an oath to uphold the constitution, to work together to address the polarization, skepticism, and distrust that are fueling the country’s decline, and to ensure that the US democratic system functions for the benefit of the entire population.  Democracy may be resilient, but it is never static or unchallenged, and all societies must make a sustained effort to fortify their public institutions against antidemocratic assaults and the erosion of citizen trust.”

The systemic political risk represented by declining democracy is manmade – as the anthropogenic forces impacting the conditions of our planet’s biosphere, atmosphere and climate are manmade.  Our political circumstances are manmade in the sense that democracy’s decline results from attacks upon, and perceived failures attributed to, its institutions and the associated insufficient voter participation in electoral processes thereby cultivated.

Although one U.S. presidential candidate considers it politically expedient and therefore self-serving to openly laud and court dictators and speaks to furthering a governing style in their image, why would any constituency view this prospect favorably?  Why the appeal?

The background reading I completed on this question included social psychologist Erich Fromm’s (B1900  D1980) book Escape from Freedom (1941).  See Part 1 and Part 2 video presentations regarding Fromm’s Escape from Freedom thesis.  Fromm states the following on pages 171-172 of Escape from Freedom – keep this in mind as you again consider my Cognition section narrative – with respect to processes (assimilation & accommodation) of collective knowledge development, collaboration, and successful climate-change action:

“In authoritarian philosophy, the concept of equality does not exist.  The authoritarian character may sometimes use the word equality either conventionally or because its suits his purposes.  But it has no real meaning or weight for him, since it concerns something outside the reach of his emotional experience.  For him the world is composed of people with power and those without it, of superior ones and inferior ones.  On the basis of his … strivings, he experiences only domination or submission, but never solidarity.  Differences, whether of sex or race, to him are necessarily signs of superiority or inferiority.  A difference which does not have this connotation is unthinkable to him.”

In further regard to prospects for continuing to build climate knowledge and collective action, I note the following Erich Fromm statement from pages xvi – xvii of Forward II to his book – this Forward written in 1966:

“How can mankind save itself …?  As far as I can see there is only one answer: the increasing awareness of the most essential facts of our social existence, an awareness sufficient to prevent us from committing irreparable follies, and to raise … our capacity for objectivity and reason (emphasis added).”

What issues typically impact voter choices, beyond those tantamount to deciding upon the retention of a democracy?  I previously reviewed 1976 – 2016 U.S. presidential exit polling data from the Roper Center for Public Opinion Research soon after the 2016 election.  When asked to identify most important issues, in each of these eleven federal elections, voters consistently selected most important those concerns regarding some aspect of economic performance and / or prospects – over matters social, environmental, government leadership, or foreign policy.  A Pew Research survey in August of 2020 again identified the economy as the top election issue – selected as “very important” to 79% of registered voters participating in the survey.  The same survey identified climate change as eleventh of twelve issues – 42% considering it also very important.  Of twenty possible policy priorities listed in a January 2024 Pew Research survey, strengthening the economy occupied the top position while dealing with climate change was eighteenth.

In the context of the immediately upcoming 2024 U.S. federal election, it is the alienation of young people, some of those with whom I speak anyway, that most worries me.  It is this age group looking most distantly (if yet hopefully) toward participation in economic prosperity.  I therefore looked at some prior U.S. presidential election voting statistics assembled from U.S. Census Bureau data –  regarding voter participation and composition rates.  See following tables.

Voted /  PopVoted / PopVoted / PopVoted / PopVoted / PopVoted / PopVoted / Pop
Election18 to 24 years24 to 44 years45 to 64 years65 yrs & over65 to 74 years75 yrs & overAll Voted    000s


% Total% of Total% of Total% of Total% of Total% of Total
ElectionVote 18-24Vote 24-44Vote 45-64Vote 65+Vote 65-74Vote 75+Total


Much of the data displayed in the preceding tables frankly speaks for itself.  I note, however, that for whatever logistical or political reasons, typically less than one-half (1/2), 43%, of the age group which arguably stands the most to gain from participation, those youngest voters, have in fact historically chosen to participate.

In my conversations with disheartened voters, particularly with respect to the choices and prospects attributed to the 2024 U.S. presidential election, I offer the following reminders.

Significant economic disparities contribute materially to disenfranchisement, and history has aptly demonstrated the cost of associated societal inaction relative to protracted occurrences of such inequity and despair.  Passivity in the face of confronting such material systemic risks rarely generates constructive results.

Related to the first point, young American soldiers, marines, sailors and airmen fought and died, suddenly, violently, and heroically, in / around / over places such as the Hurtgen Forest, Ardennes, Guadalcanal, to preserve freedom and the right to self-government.  I feel passionate in this regard as a direct descendent of a World War II veteran.  If you, an eligible American voter, have forgotten the magnitude of such sacrifice and tragedy suffered in the face of confronting authoritarianism, tour the United States Holocaust Memorial Museum in Washington, D.C. or The U.S. National WWII Museum in New Orleans, LA.  Walk Omaha Beach on France’s Normandy CoastSmell the fuel oil still emanating from the USS Arizona at Pearl Harbor as you walk the ramp to the memorial to read the names of the fallen.  Read a WWII history book – if you welcome a recommendation, try Stephen Ambrose’s Citizen Soldiers.  Dr. Ambrose’s final paragraph in the last chapter of his book reads:

“At the core, the American citizen soldiers knew the difference between right and wrong, and they didn’t want to live in a world in which wrong prevailed.  So, they fought, and won, and we all of us, living and yet born, must be forever profoundly grateful.”

Civilian men and women have also struggled mightily throughout U.S. history for the right to vote.  Honor their memory, demonstrate your gratitude, by voting. Think about right and wrong in casting that vote in November of 2024.

If you were born into democracy and reached 18 years of age, be grateful for your comparative luck and liberty.  Your franchise represents an intangible asset.  If managed and utilized properly, it may (even if it proves eventual) contribute to improving your circumstances and life outcomes.  Treat your franchise like the intellectual property it’s capable of representing by continually informing your views and actions.

Recognize your abstinence from electoral processes is sought by disempowering forces to perpetuate concentration and abuse of political and economic power.  You refuse to use your franchise, you may well lose your franchise – thereby reinforcing the behavior of authoritarians and aspiring authoritarians.

Finally, with respect to climate and electoral franchise, note that Yale’s Program on Climate Change Communication, in its Climate Opinion Map 2023 release, states that 72% of American adults “think global warming is happening” yet, as I previously mentioned, only 42% of voters identified climate change as “very important” in a 2020-post presidential election survey.  My simple supposition regarding such a result is that far too many people have far too many immediately pressing issues with which to contend – such as subsistence.  Their attentive time horizons may well be measured in weeks, days or hours versus years, decades or epochs.  This collective circumstance is also manmade.  We have constructed economic systems that leave many participants with insufficient resources to address their, let alone their planet’s, needs.

I will demonstrate and further discuss this resource issue toward the end of this article.  In lead of that commentary, let me say now, however, that mankind will not successfully address climate and biodiversity crises without simultaneously addressing the trend and magnitude of economic disparity – that is, highly skewed wealth and income distribution.  I clearly do not stand alone with this opinion.  It is just that my more complete investigation and contemplation of the connective tissue between planetary crises and many citizens’ economic circumstances drives this notion further into my mind and heart.  Solutions to existential planetary crises must materially address the connection – particularly if we necessarily rely upon our actions as economic system participants to help solve these planet crises.

Vote!  Consider who will ultimately preserve your freedoms and advance struggling citizens’ economic interests when casting your ballot.  And, in choosing, think also about which candidates will carry Mother Nature’s water.  Should democracy essentially suffer defeat within the United States in November 2024, it will then represent an epic understatement to suggest its citizens will long thereafter be held to a great accounting for that outcome.

Let’s assume, for stake of forthcoming discussion, for sake of the free world, for sake of Mother Nature’ survival, that person-and-planet-favorable election outcomes occur over the balance of 2024 and beyond.  I soon enough turn to a discussion of risk from a private enterprise perspective.  Before doing so, I first wish to generally review the role of capital in our economically-driven society.


“The great game of life is not about money; it is about doing your best to join the battle to build anew ourselves, our communities, our nation, and our world.”   John C. (Jack) Bogle, Enough: True Measures of Money, Business, and Life

From an economic system participant’s perspective, is it money that makes the world go round?  It is actually the force of gravity which formed the planet from swirling rock and gases.  That origination phenomenon, along with gravity exerted by our sun and moon, sustain Earth’s rotation.  The “gravity” of our present existential crises, however, requires further inspection of financial capital’s role – in its leading us into (and hopefully out of) harm’s way.  Three immediate elements of capital are simultaneously considered: structure, source and cost.

Businesses internally-generate and periodically externally-source capital for investment purposes, for continued value creation purposes.  When I use the term “invested capital” in this and forthcoming discussion, I refer to the organization’s combination of funded credit and equity financing – that which constitutes long-term (“permanent”) FINANCIAL capitalization of the firm.  The business optimizes its use of debt and equity funding according to (a) perceived risks inherent to its operations and (b) tradeoffs associated with the various costs of such financing.

From the funders’ perspective, creditors, in the instance of direct lenders, maintain a book of loans extended to multiple borrowers over which the lending institution spreads its credit risk.  Should the borrower business otherwise, or additionally, source credit financing in the way of issuing bonds, these bonds will be held by institutional or individual fixed income investors – the securities quite likely held within portfolios comprised of various other financial assets.

Creditors loan money to companies => the companies repay loans => creditors thereby maintain their asset base => creditors continue extending credit (from repaid loans) to other companies.  Creditors price these loans based upon assessments of default probabilities and anticipated losses given potential default.  The borrower signs a loan and security agreement, a contract, with the creditor – or borrower similarly issues bonds subject to an indenture and oversight of a trustee.  The creditors’ interests, in other words, are perfected legally within the course of these arrangements.

Equity holders provide “risk capital” to companies – their claim-preference to benefits generated by the business is residual.  The cost of such funding is therefore materially greater than debt funding.  (If an equity holder in a business subsequently becomes dissatisfied with the company’s prospects relative to its price, those shares are sold to an alternative owner.)  Financial leaders of businesses accordingly typically seek to judiciously maximize debt funding within an organization’s capital structure.  The proposition is to minimize the company’s overall (weighted) average cost of capital (WACC) while investing at rates of return in excess of that cost of capital.

Since equity holders typically own diversified portfolios of shares, as long-established capital asset pricing theory assumes, these equity investors are compensated (demand expected returns on an investment) only for the investment’s relative systemic risk – that is, the investment’s sensitivity (return variance) relative to the broad equity capital MARKET return variance.  In other words, the shareholder is compensated only for non-diversifiable risk.

Importantly, credit risk and equity capital risk are partially mitigated in this arrangement on the part of lenders and investors – by those sources’ spreading invested capital across multiple borrowers and investments.  I use the term “partially” as these market participants remain, once again, susceptible to systemic risks capable of impacting entire credit and equity markets.  Note also, within this capital formation arrangement, that the company maintains the ability and practice of sourcing invested capital (debt and equity) from multiple sources.  As a result, all sides (issuer, lender and investor) within the financial capital value chain benefit from diversification – as to form, source, and application of funds – this helps ease pain from actual loss.

Commercial enterprises, however, do not typically pay for many services provided by ecosystems.  Further, within most U.S. jurisdictions anyway, companies do not incur costs, in the form of taxes or permit expenses, for carbon emissions.  These market imperfections represent the very nature of negative externalities I describe at the outset of this article.  Since such costs have not been formally, meaningfully, internalized into business accounting systems, the extent of natural capital’s role in sustaining the organization has previously been obscured or ignored.  The pursuit of value creation during The Great Acceleration, in other words, largely failed to sufficiently account for natural capital – its presence, its cost, its maintenance and restoration.  Firms’ failure to explicitly, and therefore adequately, capture and price climate risk and biodiversity risk during The Great Acceleration is readily revealed by natural capital’s absence from identified capital structures.

The world world’s economy, its rewards, risks, financial system intermediation, perfections, and imperfections, however, are imbedded in nature – in any or every conceivable way.  Natural capital comprises a substantial element of any organization’s permanent capital structure.  I repeat an important question: why was this not explicitly, adequately recognized during The Great Acceleration.  I repeat the answer – free goods –  economic externalities – (something consequentially less than) Great Accounting.  If business is not held responsible for acknowledging an expense associated with the use of natural capital, can we expect organizations to responsibly acknowledge its existence and maintenance?  Historically, evidently not.  Prospectively, perhaps.  Cognitively, we know what we see, challenge-wise, before us.  Our minds’ eyes can visualize potential scenarios and pathways ahead.

What is the order of magnitude of this oversight?  Let’s construct a frame of reference.  First, with respect to financial capital, a September 2023 estimate I identified suggested a US$ 109 trillion value for equities at that point in time.  A separate World Economic Forum December 2023 estimate reflected global debt of US$ 307 trillion resulting in an estimated late 2023 total FINANCIAL invested capital of US$ 416 trillion.  This financial capital base helped generate a 2023 world gross domestic product (GDP) of approximately US$ 105 trillion.

I searched long and far for value estimates of worldwide natural capital.  Such exercise is counter to the perspective recommendation of Sir Partha Dasgupta – see Section 1.6 Total vs. Marginal Values (page 47) of The Economics of Biodiversity: The Dasgupta Review:

“Asset management involves comparisons of portfolios – of portfolios across time or of portfolios at a point in time (Section 1.2).  In contrast, the absolute value of a portfolio carries no information.  The value of a marginal change to the biosphere is meaningful because it is presumed that humanity will survive the change to experience it, but the matter is different when it comes to valuing the biosphere as a whole.  It may be that because growth and development economists ignored our place in Nature that environmentalists some years ago were tempted to value the entire biosphere, presumably to show that it is of great economic worth.  In a widely cited publication in Science, the authors estimated that the global flow of the biosphere’s services were, toward the end of the 20th century, worth US$16-54 trillion annually (emphasis added), with an average figure of US$33 trillion (Costanza et al. 1997).  As that figure was larger than global Gross National Product (GNP) in the mid-1990s (estimated by the authors at the time to be approximately US$18 trillion annually) we were meant to appreciate the economic significance of the biosphere.”

“The estimate is a case of misplaced quantification.  If the biosphere was to be destroyed, life would cease to exist.  Who would then be here to receive US$33 trillion of annual benefits if humanity were to exchange its very existence for them?  Economics, when used with care, is meant to serve our ethical values.  The language it provides helps us to choose in accordance with those values.  But the authors of the paper sought to persuade us that the biosphere is valuable because it can be imputed a large monetary value.  That is to get things backward. Formally, we have a case where the value of an entire something has no meaning, and is therefore of no use, even though the value of marginal changes to that same thing – expressed as differences – not only has meaning, but also has use. Examples abound in economics (cardinal utility) and physics (potential field).”

Argument understood.  Yet, I seek relative reference points from which to make goal and process recommendations to those who maintain and manage financial resources perhaps capable of helping materially address the climate and biodiversity crises.  Hence, I proceed – hopefully with due caution.

I reviewed the 1997 Costanza et al. article mentioned in Sir Dasgupta’s volume.  The US$ 33 trillion midpoint of the US$16-54 trillion figure in that report is described as an estimated value for an annual flow of ecosystem services. This flow-related estimate does not represent a value estimate for underlying ecosystem assets. What may be the value of underlying ecosystem assets producing various ecosystem services (flows)?  I reviewed a separate 2021 Costanza et al. article which creatively addresses this question.  Following is the abstract from the 2021 article:

“Discounting the future is essential to inform long-term decisions but the future of humanity is being put in jeopardy by using the same discount rate for all capital types.  Different types of capital assets (built, human, social, natural) have inherently different characteristics and contribute differently to the production of goods and services.  They will behave and depreciate differently and will thus require different discount rates and different approaches to discounting.  Here, we estimate the net present value (NPV) of global ecosystem services (ES) recognizing that ecosystem services are the product of the interaction of the four different types of capital that each have different characteristics.  We combine a range of different discount rates for each of the 4 types of capital according to their relative contributions to the production and value of each of 17 global ecosystem services.  We estimate that the NPV of global ES ranges from $5.7 to $9.1 quadrillion 2011$USD.  For comparison, the NPV of global GDP estimated in the same way would be about $2.9 to $4.8 quadrillion.  This more nuanced approach to discounting can improve information for long-term project appraisal and decision making and help build a more sustainable and desirable future.”  (“Built” capital in the 2021 Costanza article is analogous to financial capital I have referenced in prior narrative.)

The authors’ NPV calculations were prepared assuming 80-year time horizons – thereby representing valuation estimates for the underlying ecosystem assets and future stream of GDP.  If valuation concepts and methodologies interest you, I highly recommend reviewing this article – particularly Figure 2 of the piece.  The caption under said illustration should serve as adequate motivation for your review: “estimated relative contribution of the 17 ecosystem services included in Costanza et al. (1997) and Costanza et al. (2014b), (along with GDP) arranged in decreasing percentage of natural capital contribution.  For example, climate regulation was estimated to involve 70% natural (emphasis added), and 10% each of social, human and built capital, while GDP was estimated to involve 20% natural, 10% social, 40% human, and 30% built capital.”

These relative values and contributions seem intuitively appealing.  Nature has perfected her processes and products over the course of geologic time – her creations maintain the ultimate proprietary (uniqueness) value.  We preserve / improve / expand ecosystems, we greatly advantage our efforts to combat climate change AND, in an appropriately balanced manner, facilitate the continued appreciation (growth) of financial capital.

Two final points for emphasis and consideration.  First, recall the preceding discussion as to the role diversification plays regarding origination and management of (manmade) financial assets.  Our natural capital portfolio, alternatively, in the collective sense, consists of a single asset / supply sourceWe ruin it and it is game over – at least for those most in peril – geographically and generationally speaking.  We have every incentive to fully attend to these crises.

Secondly, the relationship between investment time horizon and risk capacity is well understood within the financial asset management community.  To the extent my time horizon is long, I can better absorb risks associated with year-to-year variations in portfolio returns.  A financial asset allocation for a 30-year old investor would, for example, be more heavily weighted toward equity investment vis-a-via the allocation strategy for a 60-year old investor.  Time, however, is not our ally when it comes to climate risk management.  Time, alternatively, is of great essence.  We make our task more difficult, we impose more risk, by delaying action.  I therefore turn my attention to the construct of risk.


“The future cannot be predicted.  It is uncertain, and no one has ever been successful in forecasting the stock market, interest rates, or exchange rates consistently – or credit, operational, and systemic events with major financial implications.  Yet, the financial risk that arises from uncertainty can be managed.  Indeed, much of what distinguishes modern economies from those of the past is the new ability to identify risk, to measure it, to appreciate its consequences, and then to take action accordingly, such as transferring or mitigating the risk.”   Opening paragraph of Michael Crouhy, Dan Galai and Robert Mark text, The Essentials of Risk Management (2006)

As I mentioned early in this article, Sir Partha Dasgupta’s 2021 seminal report, The Economics of Biodiversity: The Dasgupta Review, characterizes the degradation of our natural world as an asset management problem.  Speak with an asset manager, be your employer’s chief financial officer or your individual retirement planning advisor, and discussions eventually turn from strategy considerations to asset values.  Consult an appraiser, and that professional will tell you value is fundamentally determined by (a) a numerator, i.e. some future benefit stream generated across a time horizon and (b) a denominator, i.e. anticipated risk(s) incurred to generate that benefit stream.  Generally, ceteris paribus, asset values are positively correlated with variable (a) benefit stream, and negatively correlated with variable (b) risk => formulaically, value = return ÷ risk.

A proxy for risk in the above equation is the aforementioned weighted average cost of capital (WACC) from the firm’s perspective; such WACC impacted by interest rate assigned credit risk from the lender’s perspective, and required return on investment from the equity investor’s perspective.  It is, as briefly introduced in the immediately preceding section of this article, useful to think of risk as variance in / dispersion of / probability distribution involving potential outcomes – in this context ranges of outcomes both, and relatedly, in terms of climate and economic scenarios – and both within the important construct of time – which I previously emphasized.

This simple value = return ÷ risk equation describes much with respect to both purpose and organization of a commercial enterprise – at least with respect to its financial objectives and results.  A company identifies mission, plans strategies, employs personnel, purchases materials, operates plants, markets products and services, and capitalizes these activities to generate returns on invested capital.  In the process, the business incurs and imposes various types of risk to generate those returns, risks relating to the character of its chosen markets, how it manages its operations, and, as previously noted, the manner in which it sources and maintains its bases of invested capital.

Economic value propositions and creations obviously involve much greater evaluation complexity and execution skill than is conveyed by a simple equation.  At the time of publishing of The Essentials of Risk Management, credit, market, operational, liquidity, legal and regulatory, and reputational risks, along with modeling risk associated with the identification, analysis, management and mitigation of such functional risks, constituted the primary, recognized sources of risk.  Practitioners also then recognized the presence of systemic risks that maintain the potential to materially impact all areas of functional risk challenges confronting a business.

Times have changed since publication of The Essentials of Risk Management (2006).  The World Economic Forum’s 19th Edition Insight Report: The Global Risk Report 2024, identified via survey the following TOP FOUR global long-term (10-year) risks ranked (in order) of severity: extreme weather events, critical change to earth systems, biodiversity loss and ecosystem collapse, and natural resource shortages.  So, as climate and biodiversity crises demand transition to a low-carbon=>net zero economy, the entire (numerator and denominator of the) long-term value proposition now changes for free enterprise.  It turns out both risk and return are imbedded in nature!

Since attainment of the Paris Accords, frameworks have emerged and evolved around systemic risks associated with climate-change and biodiversity-degradation.  Many of these frameworks emphasize identification and disclosure of climate and biodiversity-associated risks, transition plans, governance organization and processes, and performance metrics.  Frameworks include those set forth by the Task Force on Climate-Related Financial Disclosures (TCFD), Task Force on Nature-Related Financial Disclosures (TNFD), Sustainability Accounting Standards Board (SASB), European Sustainability Reporting Standards (ESRS), International Sustainability Standards Board (ISSB) and International Financial Reporting Standards (IFRS).  Some consolidation within these standards-setting organizations has occurred – TCFD and ISSB, for example, have been integrated into the IFRS.

The disclosure emphasis seeks to recognize the mounting interest within the asset ownership and asset management communities for directing capital to sustainable organizations.  Transparency, then, intends to permit capital market participants to conduct forward-focused, ongoing processes to:

Assess organizations’ overall business models, strategies, and financial resourcing plans within the context of confronting climate risk – risks generally categorized as physical risk and transition risk;

Evaluate resilience and adaptation capacity – associated with increased acute and chronic physical risks – those pertaining to higher rate and severity of climate events;

Comprehend anticipated responses to a significant set of transition risks as the evolution to a low-carbon=>net zero economy continues; and

Engage with organizations when results suggest the composition and / or implementation pace of plans appear lacking.

Importantly, climate-related disclosure standards, for public reporting companies anyway, are being adopted within the regulatory community – most recently by the U.S. Securities and Exchange Commission.  Hence, operation within the frameworks is becoming mandatory.

Planning within this physical risk / transition risk context is very long-term, highly uncertain, and organized around potential carbon emissions reduction and associated projected warming scenarios.  While individual geography assumes an obviously important local role regarding adaptation and mitigation, we essentially decide the levels of warming and physical risk incurrence depending upon the extent and timing of our success moving toward net-zero carbon emissions.  This proposition characterizes somewhat of a tradeoff, therefore, between physical risk and transition risk.  Scenario outcomes, which will depend upon socio-economic responses to unfolding events, are characterized as probability distributions.  Typically referenced scenarios have been prepared by the Intergovernmental Panel on Climate Change (IPCC), International Energy Agency (IEA), and Network for Greening of the Financial System (NGFS).  A familiar pictorial representation of the NGFS scenarios appears in the following:

NGFS Scenarios for Central Banks and Supervisors – Network for Greening the Financial System – Workstream on Scenario Design and Analysis – P8

Further scenario background information can be accessed from this page of the Path Partners website.

The complexity of climate risk navigation is significant – see description of types of transition risks identified in a lesson from the Chartered Financial Analysts (CFA) Institute’s Climate Risk, Valuation, and Investing Certificate Program – that lesson titled Climate and Valuation: Listed Equity and Debt – Climate Data, Metrics and Tools – Impact of Climate Risk on Corporate Performance & Valuation:

“Policy and Regulatory Risks: Changes in government policies and regulations aimed at reducing greenhouse gas emissions and promoting sustainable practices can impact businesses. New regulations may impose costs, affect market dynamics, and influence the competitiveness of industries.

Market Risks: Shifting consumer preferences, investor demands, and market trends toward sustainable products and services can create market risks. Businesses that fail to adapt may face declining demand for traditional products or services.

Technological Risks: Rapid advancements in clean technologies and the development of innovative solutions can render existing technologies obsolete. Businesses relying on outdated technologies may face increased operational costs and reduced competitiveness.

Reputation Risks: Companies that are perceived as not adapting to sustainable practices may face reputation risks. Negative public perception can affect customer loyalty, investor confidence, and relationships with other stakeholders.

Financial Risks: Changes in asset valuations, credit ratings, and investment portfolios can result from the revaluation of assets in response to climate-related risks and the transition to a low-carbon economy. Stranded assets, which lose value due to changes in market conditions or regulations, are a specific type of financial risk.

Legal Risks: Companies may face legal challenges related to environmental liabilities, compliance with sustainability regulations, or legal actions from stakeholders concerned about a lack of climate-related disclosures. These may impact liabilities, provisions, and contingent liabilities within a company’s financial statements.

Operational Risks: Changes in operating conditions, supply chain disruptions, and increased costs associated with transitioning to cleaner technologies or adapting to new regulations can pose operational risks.

Transition Financing Risks: Access to financing and the cost of capital may be influenced by a company’s sustainability practices. Businesses that are perceived as less sustainable may face challenges in securing favorable financing terms or attracting investment.

Supply Chain Risks: Companies may face risks related to the sustainability practices of their suppliers. A transition to a more sustainable supply chain may involve challenges such as finding alternative suppliers, adapting procurement practices, and addressing potential disruptions.

Workforce Transition Risks: The transition to a low-carbon economy may require changes in workforce skills and capabilities. Companies that fail to manage workforce transitions effectively may face challenges in recruitment, retention, and productivity.”

Returning briefly to the simple formula of value = return / risk, climate clearly presents a paradigm shift from return-driven to risk-centered investment decision making – this will necessarily characterize The Great Accounting.  If a dual (risk & return) lens valuation approach was emphasized across The Great Acceleration, the mind’s eye appears to have then focused most intently upon the return element of the process – certainly with regard to the period’s non-integration of climate risk and biodiversity degradation.  It is worth repeating that free enterprise failed to directly recognize (internalize) the platform role of natural capital  during The Great Acceleration.  That practice contributed significantly to the existential crises we presently confront.  This reality has been recognized by some thought leaders promoting the concepts of impact and dependency assessments, dual materiality, and value-to-firm versus value-to-society perspectives.

A sea change is now upon us – literally and figuratively.  The relevant future perspective or driving question regarding any given investment opportunity may therefore become: what represents acceptable investment return expectations given the recognition of heightened risk exposures?  The RAROIC acronym (for risk-adjusted return on invested capital) may well come to describe return-adjusted risk overlaying invested capital – “overlaying” representing the carbon content of that 60-mile-thick envelope of gases surrounding the planet.

I turn then to return expectations – choosing a case demonstration to further relate this investment decision making element to concepts presented in the two preceding (CAPITAL and RISK) discussions in this article.


“The challenge is enormous.”  ExxonMobil Advancing Climate Solutions Executive Summary (January 8, 2024)

At the outset of this article appears an illustration which partially characterizes the enormity of The Great Accounting – within this section’s discussion considered from the perspective of an entity’s data capture and classification – thereby implying a firm’s uptake of responsibility and impacting organizational investment decision making.  That illustration is repeated here for ease of reference.

Greenhouse Gas Protocol: Corporate Value Chain (Scope 3) Accounting and Reporting Standard – Supplement to the GHG Protocol Corporate Accounting and Reporting Standard – Published by World Resources Institute and World Business Council for Sustainable Development – P5

With respect, also at this moment, to Scope 3 emissions, the International Petroleum Industry Environmental Conservation Association (IPIECA) published a report in June of 2016 entitled Estimating petroleum industry value chain (Scope 3) greenhouse gas emissions. Overview of methodologies. Note that this report is referenced on page 81 of ExxonMobil’s (XOM’s) 2024 Advancing Climate Solutions report – which I will subsequently discuss in this section’s narrative.  Page 12 of the IPIECA report presents a Table 1 with brief descriptions of the fifteen (15) categories comprising Scope 3 emissions.

1Purchased goods and servicesAll cradle-to-gate emissions from the extraction, production, and transport of goods and services not included in categories 2–8.
2Capital goodsAll cradle-to-gate emissions from the extraction, production and transport of capital goods purchased during the accounting year.
3Fuel and energyExtraction, production, and transport of purchased fuels and energy, not already accounted for in scope 1 and 2, including extraction, production, and transport emissions of purchased fuels and energy, transmission and distribution losses and generation of purchased energy sold to end users.
4Upstream transportation and distributionIn this case the term ‘upstream’ refers to emissions from the transportation and distribution of products (excluding fuel and energy products) purchased or acquired by the reporting company in the accounting year in vehicles and facilities not owned or operated by the accounting company, as well as other transportation and distribution services purchased by the accounting company in the accounting year (including both inbound and outbound logistics).
5Waste generated in operationsEmissions of waste management suppliers that occur during disposal and treatment of waste generated in the company’s operations.
6Business travelEmissions of transportation carriers that occur during the transportation of employees for business-related activities.
7Employee commutingTransportation of employees between their homes and their worksites.
8Upstream leased assetsIn this case the term ‘upstream’ refers to operations of assets leased by the company (company is the lessee) not included in scope 1 and scope 2.
9Downstream transportation and distributionIn this case the term ‘downstream’ refers to transportation and distribution of products sold by the company between the company’s operations and end consumer (if not paid for by the accounting company) including retail and storage.
10Processing of sold productsProcessing by third parties of intermediate products sold by the accounting company.
11Use of sold productsDirect use-phase emissions of the end use of goods and services sold by the company.
12End-of-life treatment of sold productsEmission of waste management from the waste treatment and disposal of products sold by the company at the end of their life.
13Downstream leased assetsIn this case the term ‘downstream’ refers to emissions from the operations of assets owned by the company and leased to other entities, not included in scope 1 and scope 2.
14FranchisesEmissions from the operations of franchises not included in scope 1 and 2.
15InvestmentsOperations of investments in the accounting year not included in scope 1 and 2.

Table 2 on page 13 of the IPIECA petroleum industry value chain report provides descriptions of upstream and downstream terms

TermScope 3 Use of TermPetroleum Industry Use of Term
UpstreamIndirect GHG emissions related to purchased or acquired goods and services. Refers to Scope 3 categories 1–8. Indirect GHG emissions related to soldActivities and/or operations involving the exploration, development, and production of oil and gas.
DownstreamIndirect GHG emissions related to sold goods and services. Refers to Scope 3 categories 9–15.Operations involving the refining, processing, distribution and marketing of products derived from oil and gas, including service stations.

With these frameworks in hand, I next reference multiple ExxonMobil disclosures to help contextualize the company’s views toward carbon emissions / climate change.  These statements appeared within the 2023 Form 10-K (“XOM 2023 10-K”) filed with the U.S. Securities and Exchange Commission on February 28, 2024.

“Exxon Mobil Corporation was incorporated in the State of New Jersey in 1882.  Divisions and affiliated companies of ExxonMobil operate or market products in the United States and most other countries of the world.  The Company’s principal business involves exploration for, and production of, crude oil and natural gas; manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals, and a wide variety of specialty products; and pursuit of lower-emission business opportunities including carbon capture and storage, hydrogen, lower-emission fuels, and lithium.  Affiliates of ExxonMobil conduct extensive research programs in support of these businesses.”  (Page 1)

“Net-zero scenarios. Driven by concern over the risks of climate change, a number of countries have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions including emissions from the production and use of oil and gas and their products as well as the use or support for different emission-reduction technologies. These actions are being taken both independently by national and regional governments and within the framework of United Nations Conference of the Parties summits under which many countries of the world have endorsed objectives to reduce the atmospheric concentration of carbon dioxide (CO2) over the coming decades, with an ambition ultimately to achieve ‘net zero’. Net zero means that emissions of greenhouse gases from human activities would be balanced by actions that remove such gases from the atmosphere.” (Page 4)

“Expectations for transition of the world’s energy system to lower-emission sources, and ultimately net-zero, derive from hypothetical scenarios that reflect many assumptions about the future and reflect substantial uncertainties. The company’s objective to play a leading role in the energy transition, including the company’s announced ambition ultimately to achieve net zero with respect to Scope 1 and 2 emissions (emphasis added) from operations with continued technology development and policy support where ExxonMobil is the operator, carries risks that the transition, including underlying technologies, policies, and markets as discussed in more detail below, will not be available or develop at the pace or in the manner expected by current net-zero scenarios. The success of our strategy for the energy transition will also depend on our ability to recognize key signposts of changes in the global energy system on a timely basis (emphasis added), and our corresponding ability to direct investment to the technologies and businesses, at the appropriate stage of development, to best capitalize on our competitive strengths.” (Page 4)

“Greenhouse gas restrictions. Government actions intended to reduce greenhouse gas emissions include adoption of cap and trade regimes, carbon taxes, carbon-based import duties or other trade tariffs, minimum renewable usage requirements, restrictive permitting, increased mileage and other efficiency standards, mandates for sales of electric vehicles, mandates for use of specific fuels or technologies, and other incentives or mandates designed to support certain technologies for transitioning to lower-emission energy sources. Political and other actors (emphasis added)and their agents also increasingly seek to advance climate change objectives indirectly, such as by seeking to reduce the availability or increase the cost of financing and investment in the oil and gas sector. These actions include delaying or blocking needed infrastructure, utilizing shareholder governance mechanisms against companies or their shareholders or financial institutions in an effort to deter investment in oil and gas activities, and taking other actions intended to promote changes in business strategy for oil and gas companies. Depending on how policies are formulated and applied, such policies could negatively affect our investment returns (emphasis added), make our hydrocarbon-based products more expensive or less competitive, lengthen project implementation times, and reduce demand for hydrocarbons, as well as shift hydrocarbon demand toward relatively lower-carbon alternatives. Current and pending greenhouse gas regulations or policies may also increase our compliance costs, such as for monitoring or sequestering emissions.” (Page 5)

The following paragraphs present excerpts from XOM’s 2024 Advancing Climate Solutions report (page 74) under the caption Portfolio life-cycle emissions:

“All credible third-party net-zero carbon emissions scenarios reflect the critical role oil and natural gas play in growing modern economies and improving quality of life (emphasis added). While these scenarios may differ in the speed at which these forms of energy will be displaced, all agree that oil and natural gas and the products produced from them will remain essential (emphasis added) for decades to come.”

“It is also clear that the combustion of oil and gas generates CO2 emissions that pose a risk in the form of climate change. These emissions, generated across a global energy system built over the last century for trillions of dollars, must be reduced. At the same time, we must continue to meet society’s critical need for affordable energy by investing trillions of dollars more in capacity (emphasis added) to help more than a billion people escape poverty. Addressing both requires serious thought, an objective assessment of the challenges, and actionable plans, anchored in reality.”

“We need to develop solutions that address the problem – emissions – while continuing to meet societal needs. All solutions should be on the table. Viable solutions must be affordable, reliable, and available at scale – to span the globe. We need a measurement system that objectively evaluates the amount of emission reduced and the associated cost. To do this, society will require sound policy (the U.S. Inflation Reduction Act, with a focus on carbon intensity, was a good start) that supports the growth of efficient emission-reduction solutions. Equally important, but far less discussed, is the imperative for an effective method to account for emissions (emphasis added). This is critical to understand how to affordably meet society’s growing energy needs while efficiently reducing emissions.”

“Regrettably, there is no existing, comprehensive carbon ‘accounting system’ for greenhouse gas emissions. The current, widely used proxy is the GHG Protocol, which divides absolute emissions into different categories (Scope 1, 2 and 3). When applied to a company, the emissions calculated for each category are:

  • Scope 1 emissions, the direct result of a company’s operations.
  • Scope 2 emissions, associated with a company’s third-party purchases of electricity, steam, heat and cooling (e.g., emissions from a power company).
  • Scope 3 emissions, all indirect emissions (not included in Scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.”

“Designed decades ago, the Protocol was intended to draw attention to not just direct emissions but indirect emissions, creating more transparency to the full scope of societal activities that would need to be addressed to tackle climate change. However, it is far less effective at assessing a company’s emissions efficiency or comparing the emission intensity of alternatives. Using the Protocol to understand how societal activities generate emissions at a macro level is appropriate and useful; using anything other than Scope 1 emissions as an assessment tool to measure and manage company or sector-wide emissions is flawed with the potential for significant, unintended consequences (emphasis added).

“The most obvious shortcoming of the GHG Protocol is the double-counting of emissions. ExxonMobil’s Scope 2 emissions are the power company’s Scope 1; our Scope 3 emissions are the consumer’s Scope 1 (emphasis added); our Scope 1 are a factory’s Scope 2; and so on. There is no viable method of quantifying emissions and the impact of reduction steps when the same emissions are counted repeatedly. Making a company responsible for reductions, with targets, outside of Scope 1 emissions, distorts accountability and undermines the incentive for each responsible party to act. When everybody is responsible, nobody is responsible (emphasis added).”

A particularly flawed application of the Protocol is holding suppliers accountable for their customers’ choices and their resulting absolute emissions (Scope 3). It disincentivizes supply but does not change demand. When responsible producers stop supplying product, the remaining demand is met by other producers, potentially less responsibly. Production and emissions are not reduced, just moved (emphasis added).”

The following table presents specific 2022-23 XOM financial disclosures and related metrics:

Sources2022 Form 10-K2023 Form 10-K
& 2023 Form 10-K
Revenues (US$ millions)$398,675$334,697
Earnings after taxes (US$ millions)$55,740$36,010
Average capital employed (US$ millions)$228,404$243,440
Long-term debt (US$ millions)$40,559$37,483
Net cash from operating activities (US$ millions)$76,797$55,369
Capital & exploration expenditures (US$ millions)$22,704$26,325
Environmental expenditures (US$ millions)
  Capital expenditures$1,864$2,799
  Other expenditures$3,835 $4,336
Research & development costs (US$ millions)824879
Common shares outstanding (millions)4,2054,052
Year-end common share price$110.30$99.98
Value of equity (US$ millions)$463,812$405,119
Estimated enterprise value (US$ millions)$504,371$442,602
Net profit margin14.0%10.8%
Return on average capital employed24.9%15.0%
Weighted average cost of capital
Estimate 17.4%
Estimate 29.0%
Environmental expenditures / total capital & exploration expenditures25.1%27.1%
Average production prices
  Crude oil, per barrel$95.88$77.92
  Natural gas liquids, per barrel$43.09$28.66
  Natural gas, per thousand cubic feet$9.85$6.05
  Bitumen, per barrel$64.12$49.64
  Synthetic oil, per barrel$96.08$77.56
Average production cost, oil-equivalent bbl. – total$11.43$10.63
Average production cost, per barrel – bitumen$29.90$23.80
Average production cost, per barrel – synthetic oil$51.52$45.91
Proved reserves (million bbl.)
  Undeveloped6,599 6,252


The following table presents 2022-23 XOM carbon emissions data and related calculations (millions of metric tons):

SourceAdvancing Climate Solutions Progress Report GHG Data Supplement April 20232024 Advancing Climate Solutions
Scope 1 & 2 Net GHG Equity Basis (excludes exported power and heat) (million metric tons)110108
Source page number78 of 2024 Report78
IPIECA Category 11 Scope 3 potential estimates
(Million metric tons CO2-equivalent)
  Source page number681
  Upstream production
    Natural gas production170150
    Crude production370 390
  Refining throughput640640
  Petroleum product sales720730
Scope 1, 2, & 3 (Category 11)650648
  Pounds per dollar revenue3.594.27
Developed reserves (millions) X  (crude oil price per barrel minus production cost)$1,068,391$718,388
  At 10%$106,839$71,839
Book value of crude oil, products & merchandise$20,434$20,528
Assumed price per metric ton carbon$50.00$50.00
Carbon cost of scope 1, 2, & 3 (Category 11) (US$ millions)$36,000$36,500


As a US$ 442 billion enterprise value business, XOM no doubt contributes significantly to many investment portfolio valuations and returns.  During 2023, the company earned a return on capital of 15% relative to a weighted average cost of capital, depending upon cited estimate, of 7.5% to 9.0%.  Some seventy-three percent (73%) of XOM’s 2023 capital expenditures was evidently deployed within the company’s (non-environmental) legacy businesses.  From a historical and immediate economic perspective, one understands XOM’s defense of its core business – particularly in light of the capital market’s collective risk assessment of the company – as reflected in the firm’s present cost of capital.

In terms of scale of XOM’s legacy assets, note the firm maintained total proved fossil fuel reserves equivalent to nearly 17 billion barrels of oil at the end of 2023.  In terms of the future value of these potentially stranded assets, Carbon Tracker suggests that “to limit warming to 1.5 degrees Celsius, 90% of fossil fuel reserves must remain in the ground as unburnable carbon.”  The potential impact upon XOM asset and shareholder values within such context is clear – see analysis near end of immediately preceding table.

ExxonMobil can also be described as an enormous enterprise from the standpoint of the company’s Scope 1, 2 and 3 carbon emissions of 648 million metric tons in 2023 – even if XOM’s “estimated Scope 3 emissions from the use of crude and natural gas production for the year ending December 31, 2023, as provided under IPIECA’s Category 11 (emphasis added), were 540 million metric tons”.  If a $50 per metric ton carbon price was internalized in XOM cost structure, some 60 percent (60%) of the company’s 2023 pre-tax profit would have been eliminated.  This estimate is calculated as follows:

  • US$ 36 billion after-tax profit / (1 – 33% effective tax rate) = US$ 53.7 billion pre-tax profit;
  • US$ 50 per metric ton X 648 million metric tons emissions = US$ 32.4 billion carbon charge;
  • Resulting in 2023 pre-tax and after-tax profit of US$ 21.3 billion and US$ 14.3 billion, respectively.

The carbon-adjusted 2023 earnings after taxes of US$ 14.3 billion reduces XOM’s return on invested capital from 15% to approximately 6%, materially below the firm’s weighted average cost of capital of 7.4% to 9.0%.  Note that I did not see any reported carbon emissions tax or emission permit expenses specifically identified in ExxonMobil’s 2023 income statement. (The company reported “other taxes and duties” of approximately US$ 29 billion for 2023; approximately US$ 25 billion of which was identified “non-U.S”.  A “carbon tax” search of the document resulted in a single mention – within the previously quoted “greenhouse gas restriction” risk discussion section of this article.)  This circumstance (assessment of a carbon tax upon Scopes 1-3 emissions) would theoretically result in pending consequential reduction of shareholder value via continued investment in XOM’s fossil fuel-related activities.

As a reference in regard to a current carbon price assumption, and with respect to carbon price trajectories across NGFS potential emission levels / associated warming scenarios, please see the following graphic (page 10 of NGFS Scenarios report):

A July 2, 2021 statement from Darren W. Woods, ExxonMobil’s Chairmen and Chief Executive Officer, included the following:

“We believe a price on carbon emissions is essential to achieving net zero emissions. Carbon pricing would send a clear signal through the market, creating incentives to reduce emissions, fostering investment in R&D to advance solutions and providing consumers with transparency to make the best choices.”

What is clear as to XOM present corporate policy, however, is company leadership considers the firm responsible for Scope 1 and 2 emissions – owing to what it considers (a) a flawed greenhouse gas accounting framework and (b) consumer responsibility for end-use emissions. The statement from the 2024 Advancing Climate Solutions report that “when everybody is responsible, nobody is responsible” is especially provocative.  I would alternatively assert that “when everybody is responsible (for the problem), everybody is responsible (for delivering solutions)”.

Everybody is indeed responsible to address climate change and that responsibility should be assigned proportionately to those organizations and individuals that have most benefited from excess carbon emissions and biosphere degradation.  With further respect to proportionate responsibility, at least as it pertains to carbon emissions, please review the following ClimateWorks sectoral mitigation by geography graphic (page 14 of report).

Everybody is responsible – producers across various sectors, investors, asset managers, consumers and regulators – for identifying solutions and pursuing requisite goals.  ExxonMobil’s seeming abdication of responsibility for Scope 3 emissions, however, strikes me as blaming the victim – in a context where XOM states that its intents include “improving the quality of life” for people.  Strive, earnestly, to improve the accounting system for greenhouse gas emissions if found lacking.  Based upon my carbon budget status discussion earlier in this article, we obviously face an immediate urgency about addressing our circumstances – such that perfect accounting cannot become the enemy of good accounting.

The capital markets are not assigning adequate risk to XOM’s prospective benefit stream.  This insufficient risk assignment results principally from an inadequate time horizon consideration.  If capital market participants were, on balance, viewing ExxonMobil’s consequential transition risks over a 25 + year time frame, relative to the company’s climate strategies, capital expenditure allocations, and governance orientation, the firm’s cost of capital would reflect such risk.  It’s just, well, XOM owns this extraordinary 17-billion-barrel equivalent of fossil fuel reserves to feed a hungry energy market – currently generating a 15% unadjusted return on invested capital.  Should I, alternatively, accept the capital markets’ view of XOM’s value (return ÷ risk) proposition, I would conclude we are most likely heading toward the southeast quadrant of NGFS’ scenario framework – a concession I currently refuse to make.

Everybody is responsible, but any dramatic crises-addressing achievements will be inspired by public and private sector leadership.  Suitable leadership (governance) perhaps represents the most significant risk confronting our paths forward – as I suggested in an earlier (TIME) section of this report.  This entire matter, successfully confronting the climate and biodiversity crises, extends well beyond temporarily creating the most valuable businesses generating the highest returns on invested capital.  Leaders of sustainable enterprises should now balance such pursuits to simultaneously improve returns to human capital and natural capital.

A final important comment with regard to financial returns on financial capital.  There is justifiably much discussion within the asset management community regarding opportunities associated with the climate crisis.  Substantial, valuable companies will be created during the transition to a low carbon=>net zero economy within renewable energy, energy efficiency and smart grid solutions, green buildings and infrastructure, electric vehicles, sustainable agriculture systems, efficient water and waste management, and other sectors.  Concurrent with the emergence of such opportunities, however, as demonstrated within the preceding ExxonMobil discussion, is this fact: investment returns for many legacy business models will likely decline if not perish during The Great Accounting – raising the following questions:

  • What forms may alternative return prospects and realities take from a sectoral performance perspective?
  • What sectors and participants will (indeed can) commit to / foster sustainable business models?
  • What long-term capital preservation and return implications may alternative, climate risk-imposed investment strategies hold for asset owners?
  • How may the entire dynamic (climate-driven lower returns to financial capital) impact capacities to enhance returns to natural capital and human capital?

We’ll have to successfully address such questions in the evolving context of crises management.


“In order to achieve the long-term temperature goal set out in Article 2 (pertaining to ‘strengthening the global response to the threat of climate change’), Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty.”

Article 4 Section 1 of The Paris Agreement adopted on 12 December 2015 at the twenty-first session of the Conference of the Parties to the United Nations Framework on Climate Change held in Paris from 30 November to 13 December 2015.

Economic framework.  Economic system participants.  Economic resources.  Economic realities.

As the entirety of this article’s preceding discussion suggests, we will likely win or lose our fight to deal with the twin existential crises of climate change and biodiversity loss by working through the world’s economic infrastructure.  This represents a tenuous proposition as it is the manner of operation of our economic institutions that brought us to the doorstep of the crises.  Albert Einstein once stated that “we cannot solve our problems with the same thinking we used when we created them.”  What, then, must happen?

The days of all-out unfettered pursuit of financial capital-driven value creation, one impetus for The Great Acceleration, are over.  If forced to use our existing economic frameworks, representing our integral knowledge foundation, we must maintain a better metacognition as to its effective, future use.  These considerations manifest in risk, return, and capital allocation issues.  The planet, its atmosphere and biosphere, can no longer absorb disproportionate risks for the purpose of providing disproportionate benefits to commercial enterprises and financial asset owners.  During The Great Accounting, significant reallocations of financial capital will necessarily be made to activities which benefit Earth’s various planetary systems – particularly the health of our atmosphere and condition and extent of our ecosystems.  How should this responsibility be shared?  Who maintains such capacities?  Who possesses the resources?

I’ll begin my response by again referencing and expanding upon information from Sir Partha Dasgupta’s 2021 seminal report, The Economics of Biodiversity: The Dasgupta Review.  The following table tracks per capita income levels across the world from 1 CE to 2016 in constant 2011 international dollars:

Table 0.1 Deep History, 1 – GDP Per Capita (2011 International Dollars)
Western Europe9146761,2321,6302,3134,9046,07832,95640,364
Western Offshoots6366366367552,0708,02714,86744,33151,342
Latin America6366366608439991,8223,0488,72813,470
World Bank (World)15,080
Period-to-period CAGR
Western Europe-0.030%0.120%0.140%0.292%0.944%0.430%3.439%1.275%
Western Offshoots0.000%0.000%0.086%0.844%1.709%1.240%2.209%0.922%
Latin America0.000%0.007%0.122%0.142%0.754%1.034%2.126%2.749%


Source: Maddison (2018), Bolt et al. (2018). Note: ‘Western Offshoots’ include what are today US, Canada, New Zealand and Australia.  Note: The Maddison Project Database (MPD) provides long-run data on GDP per capita for comparisons of relative income levels across countries. The measure of real GDP per capita is based on multiple benchmark comparisons of prices and incomes across countries and over time. The figures between the dates 1 CE to 1950 are updated from a combination of the 2010 and 2013 MPD releases, which were in 1990 prices. To account for the change in price level, a simple GDP deflator is used to adjust all regions for 2011 prices. The differences between the rebased regions’ GDP and the newly calculated GDP do not significantly change the overall trends at the regional and global level, relative to the 1990 price level estimates. The figures between 1950 to 2016 are taken from the most recent release from the Maddison Project Database, in 2011 prices, apart from the regions denoted with a star where 1913 data was also available in their updated database. For comparison, the World Bank’s estimate of GDP per capita PPP (2011 prices) for 2000 and 2016 are given, which are both within 10% of the latest Maddison Project data.

The following excerpts (pages 23 – 24) from the Dasgupta Report provide an excellent touchstone with regard to the destination and associated timing of wealth creation for world citizens:

“The first thing to note about the figures in Table 0.1 is that the average person in the world was very poor in terms of income right up to the beginning of the modern period (approximately 1700 CE).  In Late Antiquity and the Middle Ages, average income in most regions everywhere was not much above 1.90 dollars a day (a few even below it) – the figure that was taken by the World Bank in 2015 to be the line below which spells extreme poverty.  Regional variations became prominent in the beginning of the Early Modern period (roughly, 1500), by which time Western Europe had begun to diverge from the rest of the world.  But Maddison’s estimates suggest that even in 1700 the average person in Asia languished in near-extreme poverty, at around 2.5 dollars a day.  As tourists we are dazzled by the art, architecture and technology of past eras.  We refer to them as great civilisations and imagine that those must have been prosperous times as well. Table 0.1 says we should imagine otherwise.”

“Great art, great architecture, great literature, and even great scientific and technological discoveries can coexist with general squalor and widespread deprivation of the means available for a reasonable existence.  And they have coexisted for nearly all of history.  Average world income in 1820 CE, which in many economic historians’ reckoning was about the time of the Industrial Revolution, was only about 50% higher than in 1 CE.  That means the growth rate of world income per capita over the 1,820-year period, when averaged, was indistinguishable from zero.  Table 0.1 confirms that significant increases in the standard of living took place only in the 20th century, mostly in the West and what Maddison called Western Offshoots (US, Canada, Australia and New Zealand).  In a matter of a little under 70 years (1950 to 2016), GDP per capita increased nearly seven times in Western Europe.  It is true that in 1945 those nations were in a devastated condition, meaning that the potentials for growth were large.  But as Table 0.1 tells it, we should not imagine that the poorer a nation, the greater its potential for advancement.  Western Europe had institutions in place, an educated population, and a social coherence that enabled them to take advantage of their potentials. In contrast Africa, which at the end of the Second World War was a lot poorer than the West, continues to languish in poverty.  Average income in Africa in 2016 was barely over 11% of that in Western Europe.”

For some of us lucky ones anyway, contemplate what 1,800 years of collective ancestry endured to establish a foundation for our prosperity.  How should our behavior manifest itself in the form of gratitude toward their sacrifice? And note to whom economic prosperity has largely accrued since the industrial revolution?  Western society.

What of the potential connection between pursuit and achievement of economic prosperity and natural resource exploitation?  The following table presents an information sample regarding correlation and impact magnitude – at least with respect to per capita carbon emissions.

Information SourceTransition Pathway Initiative Country Emission PathwayInternational Monetary Fund
Intensity Per Capita; Production Excluding LULUCFPurchasing Power Parity
Tons CO2eGDP Per Capita
Per Capita EmissionsCurrent Prices US$
United Kingdom6.44$51,070.0


Next, the following illustration, sourced from an International Monetary Fund (IMF) article Global Inequalities, again highlights the correlation between financial wealth concentration and carbon emissions.

The following graphic represents a most sobering product of our economic framework.  For the past 125 years anyway, the lower half of Earth’s humanity has garnered 7% or less of world income.  The general trend during the early portion (first 25 years) of The Great Acceleration witnessed improving or steady shares for the lower 50% – at least for the four countries represented – two democracies and two authoritarian states.  Thereafter, participation in economic prosperity, on the part of those most in need, has materially declined within all four nations.

As a frame of reference with respect to the above graphic, note that world income (GDP) in 2022 was US$ 101,325,686,720,000.  The approximately 4 billion people constituting 50% of world population therefore garnered some US$ 7,092,798,070,400 in income, approximately US$ 1,774 annually, or US$ 0.85 per hour.  The Great Acceleration, therefore, represented nothing either great or accelerating for at least ½ of the planet’s people.

This issue (poverty) appears intractable from a historical perspective.  The issue must be confronted coincident with climate and biodiversity crises resolutions, however, as emphasized within the portfolio of UN sustainable development goals.  This fact is also noted in the Chartered Financial Analysts (CFA) Institute’s