Chevron Is Going Low-Carbon. Investors Are Skeptical.

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Chevron’s stock has trailed its peers this year.

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Investors and environmentalists have both been skeptical of plans by big energy companies to go green in the past couple of years.

Investors often doubt that low-carbon businesses can make money, and environmentalists don’t trust that Big Oil can quit its dirty past.

The pattern played out on Tuesday after Chevron (ticker: CVX) announced that it would triple its investment in its low-carbon business. The stock fell, and some environmentalists said the company was still falling short of true change.

In late afternoon trading on Tuesday, Chevron shares were down 1.8%, at $96.18. Chevron’s stock has lagged behind its peers this year. It is up 16% in 2021, while the Energy Select Sector SPDR exchange-traded fund has gained 30%.

Environmentalists argued that Chevron had not yet dealt with so-called Scope 3 emissions, which are the emissions created by the use of its product.

“While the company did announce a number of new sustainability initiatives, none of them addressed this crucial concern,” said a group called Follow This, which is made up of investors in energy companies who engage in climate issues. Chevron intends to address Scope 3 later this year.

Still, it is worth watching Chevron’s experiment because it is significantly different from the plans put out by competitors.

Chevron plans to put $10 billion into low-carbon projects by 2028, representing 10% or less of its total capital budget at current spending rates. The dollar value of Chevron’s investments is less than what European oil companies have committed. French oil giant TotalEnergies (TTE), for example, is spending 25% of its capital budget on “renewables and electricity.” 

Yet Chevron is targeting areas that its peers have mostly bypassed. In particular, the company is betting big on renewable natural gas and other renewable fuels often made from plants or animal waste. It says those fuels, along with hydrogen, can power larger vehicles and support industrial uses. Large European oil companies have plowed most of their money into wind and solar projects, areas that Chevron has mostly avoided. Chevron, like Exxon Mobil (XOM), is also betting on carbon capture and storage, a technique that takes carbon that’s already been produced and pumps it into the ground or reuses it.

In an interview with Barron’s, Chevron CEO Michael Wirth said the company was investing in “lower-carbon businesses where we think we can build competitive advantage, because they address the sectors of the economy that are not easily electrified, and they require more complex solutions than battery powered cars.”

Hydrogen may end up being a crucial fuel to power high-intensity industrial uses. Chevron is even trying to solve one of the thorniest issues in climate science — producing renewable fuel that can power airplanes, which produce high emissions but aren’t as easy to electrify. It is investing in one method using corn.

Asked why the company doesn’t invest more than 10% of its budget in low-carbon fuels given the financial opportunity and societal implications, Wirth said that Chevron is building these businesses from small bases, and could invest more later.  

“These are small, or in some cases, almost nonexistent businesses today,” he said. “And so there’s a reality of scaling these things up that you have to confront. Throwing more money at some of these things doesn’t necessarily mean it creates more opportunities for good investments. It may just create more money chasing the same opportunities. In a lot of this space there’s been a lot more capital than there have been promising business models or technology models.”

Write to Avi Salzman at and Ben Levisohn at