WHEN: Today, Thursday, April 22nd
WHERE: CNBC's "Squawk on the Street"
Following is the unofficial transcript of a CNBC exclusive interview with Inclusive Capital Partners Founder and Exxon Mobil Board Member Jeff Ubben for Earth Day on CNBC's "Squawk on the Street" (M-F 9AM – 11AM ET) today, Thursday, April 22nd. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2021/04/22/exxon-board-member-jeff-ubben-on-its-esg-strategy.html.
All references must be sourced to CNBC.
DAVID FABER: President Biden today announcing new plans to cut US greenhouse gas emissions in half by 2030 in the administration's latest push to combat climate change. Who better to join us today on Earth Day than Jeff Ubben, Exxon Mobil's newest board member, of course notable activist investor, founder of Inclusive Capital Partners which Jeff has been engaged in trying to get companies to act responsibility and creatively to address environmental challenges. Good to have you and welcome this morning.
JEFF UBBEN: Great to be here David I can't see you but good to see you, metaphorically.
FABER: Yes metaphorically, you can imagine me in your mind, you know, so just keep that but focus here on your answers which, you know, my first question is simply. You've been on the board for I guess a little over a month at Exxon Mobil, we had Darren Woods join us a couple of weeks ago carbon capture and storage technology, is it for real? Is it really going to become at Exxon Mobil as he would have us believe a potential profit center for the company at some point?
UBBEN: Can I do a kind of the energy transition 101 and this is a lot of learn, learnings from, from my work with Exxon, you know, and this week actually. But if you think about, you know the energy system. Two-thirds is coming from non-OECD company countries and so if they are allowed to develop the way we did, the energy consumption is going to grow. If you think about the demand pools, it's, it's power transport, power generation 37%, industrial 30%, transport 20% and then, residential commercial 13%. And if you think about Exxon's role, it's to do the hard stuff and you cannot get to net zero without doing the hard stuff. POWERGEN probably can be decarbonized with renewables and moderation storage like, like hydrogen, over time, but the transport piece and the industrial piece are really hard to electrify and you think about the existing energy system, it does everything really well except the CO2, I mean the CH bond has energy density storability and movability like no other solution. So, to use the existing infrastructure and capture the carbon is probably the least expensive, quickest way to net zero. Now, the announcement that Darren made this week in Houston is essentially to reduce to zero the emissions that probably one of the largest emitting cities in the world and by 2040, 100 million tons, and it probably doesn't need much of a subsidy above 80 bucks to make it quote unquote economic to have a return attached to it. I mean that compares really quickly with the ED today which is being subsidized at $450 a ton and California we're subsidizing renewable diesel at $200 a ton. So, this is a really competitive net zero solution.
FABER: Right. But, you know, Jeff, it's interesting, you're implying and I think Darrin obviously said the same, you put a price on carbon and a lot of these things become a lot more efficient and a lot more profitable quickly. Jim Fitterling, CEO of Dow, was on our air earlier saying the same thing. And yet, politically, it doesn't seem to be sort of where the center of the focus on climate change is right now.
UBBEN: Yeah, that's the thing the politicians aren't talking about. I mean to go, to go two degrees or better 450 parts per million of carbon in the atmosphere today to pretty much enable the green hydrogen economy you need a $200 carbon price to make it economic. That's about $1.85 increase in gasoline in about a 20 cent per kilowatt hour increase in energy which pretty much, you know, 2X in some cases on each. And so that's, you know that this is, this is the thing but, but to get going on subsidies and credits to provide the scale to the supply chain is the key. I mean renewable energy didn't compete with coal 15 years ago but the PTCs provided the, you know, increased economics that allowed the scale and now it beats coal, straight up, and then you need, you need to, you need to you know develop storage better but it, but for, for energy versus capacity it beats coal straight up. This is what we need to do with carbon capture.
FABER: All right. Let's talk a bit about your, you know, you obviously you've only been on this board for a short amount of time, you and I though have talked on air and obviously off as well in terms of some of your long term goals. You know, I would assume you get the question is, is this company for real and is Darren woods for real? In terms of their ambitions here or are they just talking a talk that at least will keep it vague perhaps some of their critics for some period of time, how do you answer that?
UBBEN: They have 20,000 scientists, they've been doing more basic research than anybody else in the industry by multiples. They have this team in New Jersey. They have the capabilities, the competencies and the reach like no other company to address these, you know, this, this massive problem. I mean, it's going to be difficult to do, you know, renewable diesel at scale in the water laden waste around right this is, but Exxon is working on the things that decarbonize at scale and carbon capture is the key technology, the difference between green and blue hydrogen is a lot. I mean, blue hydrogen starts to look economic with carbon capture at these lower, at these lower carbon prices.
FABER: And from your opinion, from your perspective, though, are they spending enough, you know, there have been critics who say well it's still only 5% of your capex or something like that, as an investor in the company and a board member is that the sufficient amount of capital that should be put against this problem?
UBBEN: I mean what you're ignoring is the breakthrough technologies that they're working on that they haven't really, that we haven't really talked about so stay tuned on that, but the basic research in these breakthrough technologies to get that, you know, that carbon price today, well below $200 a ton, you know, this stuff is coming. So, that's that was, that's what the math, you know, what is it what are they spending versus capex doesn't pick up.
FABER: Yeah. Are you going to buy more of the shares? I mean just, just as an investor here given I would assume this is a long term board seat for you I would anticipate and we know your career as a so called activist, at least, obviously ValueAct and now Inclusive, are you going to buy more shares?
UBBEN: I am, I am building this new business and so I need to get some stuff done, but I'm, I really believe that the return, the return dynamics to Exxon from here are spectacular. They are part of the solution, not part of the problem. Carbon capture is a $2 trillion business, they're the leaders that own 40% of it, or, you know, globally in terms of market share. This is the technology that will get us there quickest and net zero doesn't happen without it.
FABER: Alright Jeff, our viewers may have noticed there is a truck behind you. It has nothing to do with Exxon Mobil, it's Nikola. You know, you and I, it's, I remember it well because of course it was my last in person interview you and Trevor Milton, company's founder, former CEO at the New York Stock Exchange. You are talking an awfully big game then man and that thing went to 93 and came right back down. This week it was trading below 10. Are you still positive on the prospects for Nikola I would assume you are given the truck behind you and if so, why?
UBBEN: Well I was, I was here yesterday at the, at the test track with, with the beta, the beta truck and it was going 0 to 60 in 20 seconds with 25,000 pounds. It's going 75 miles an hour around the curve like the chase car couldn't really catch it, it was actually spectacular so this is truck 7 behind me and this is, this is production in 10. So we'll have trial production in Germany in June and we'll be making, we'll have trial production in the third quarter and Coolidge, Arizona, our new plant that we built here. So, we're pretty much right on target. I mean we did the joint venture with IVECO 18 months ago and here we are. Fast system market of the ED truck that's, you know anybody's ever done. We're checking boxes David I mean think about, think about what we've announced the market seems to not care, all of a sudden, but think about the APS deal, we got energy, innovative energy prices I guess makes it's, It's basically nuclear, that enables green hydrogen at a very low price. We've got this deal, in, in Europe, with OGE that pipes that deliver hydrogen to our stations over time. We've got the RIG360 which is a, is a dealer network and is a cat dealer network in, in North America that sets us up for going to market.
FABER: Right.
UBBEN: And then today we announced a hydrogen partner, partnership with TA, so we're brick by brick man we're going to get, get there just like we said.
FABER: Yeah all right well all right but it's become a prove me stock in part because a lot of you are promising or what Mr. Milton was promising didn't seem to pan out at least in the near term. And obviously—
UBBEN: But that's not true though, we're right on target for the truck.
FABER: Well isn't it we all have visions of that truck being rolled down a hill. I mean, you know, your endorsement was an important component overall of many people choosing to invest here Jeff and obviously you're still a believer and you still believe you're going to actually hit many of the targets that were originally put out there by the company.
UBBEN: Yeah, there's tremendous momentum here, I mean the team is head down. That's all I can say.
FABER: Okay, so what's the next milestone we should be focused on then for Nikola?
UBBEN: mean, trucks on the road. The fuel cell truck is going to be built on top of this, so that's, that's 2022, 2023. Some, some unique hydrogen production capabilities, which we'll also be able to talk about in the future, not, not too distant future. Remember the key here really is, is, is to is to have this integrated solution, the hydrogen stations in the fuel cell truck and of course the electric truck is something our customers want in addition, so we're first to market with that. And then, and then we'll, we'll be able to use both the battery and the hydrogen trucks on our infrastructure.
FABER: Jeff, I can't think of a better person to have had on Earth Day and thanks for the conversation this morning I look forward to obviously keeping track of both of these really important stories. Jeff Ubben joining us.
UBBEN: Thanks a lot David. Take care.
FABER: You too.