Yves here. College students and faculty members have started organizing to press college endowments, cities and states, and religious institutions to divest their holdings in fossil fuel companies. Harvard professor Naomi Oreskes describes below why divestment is a way to put pressure on energy producers to stop funding climate change denialism and start focusing on clean energy initiatives. Bear in mind that divestment may not have much impact on securities prices. But as the example of the South African divestment movement shows, it is a powerful means for galvanizing media attention and political pressure.
By Naomi Oreskes, a geologist, author, and Professor of the History of Science at Harvard University. Her books include Merchants of Doubt, which discusses in accessible terms the origins of climate change denial, and The Collapse of Western Civilization: A View From the Future, just out from Columbia University Press.
With the academic year wrapped up, campus discussions of divestment from fossil fuel corporations are taking a rest. But with Stanford having announced at the end of the year that they would divest from the coal industry, as a step towards addressing climate change, and students around the country planning for new actions in the fall, it’s is a good time to review the case for divestment.
The Argument for Divestment
The central argument for divestment is a moral one: that it is wrong for a university—dedicated to civic good—to rely on profits from an industry that is doing enormous social injury. Enormous quantities of scientific evidence—as well as, increasingly, our own daily experiences—demonstrate that global warming is underway: exacerbating droughts, hurricanes, floods and fires; damaging forests and crops. In California, as former Governor Arnold Schwarzenegger recently noted, we no longer have a fire season; we have fires all year round. Business as usual is catapulting us far past the “two degree” target that scientists have identified as the limit at which truly dangerous impacts are almost certain to kick in. The latest scientific projections show that if things continue as they are, the world is heading towards 4 degrees of warming, or more.
Even if human trafficking were legal, we would recoil from investing in it. Prostitution and gambling are legal in Nevada, but most universities do not invest in those activities, either. Many of the arguments against fossil fuel divestment avoid confronting this issue, and sound like not much more than excuses.
An additional argument, especially pertinent for educational institutions, is how the fossil fuel industry has responded to the scientific evidence of the dangers of continued use of fossil fuels: with denial, deceit, and obfuscation . Both directly and indirectly through “third party allies,” the industry has systematically tried to undermine the evidence of the reality and danger of anthropogenic climate change. These activities continue, in different ways, even today.
But…the World Needs Energy
Given the parallels between how the oil and gas industry has responded to the evidence of dangerous climate change and how the tobacco industry responded to the evidence of the harms of tobacco, it’s tempting to see the oil and gas industry as bad actors. And given the ways in which the American tobacco industry has moved its operations overseas in response to tobacco control at home, it’s hard not to think that the world would be a better place had the industry been driven out of business. But that’s where the analogy breaks down. The world does not need tobacco, and there was never any plausible argument that the tobacco industry could help to solve the problems that it had caused. But we do need energy. In fact, we need more, and there is a plausible argument that the fossil fuel industry can help solve the problem of climate change.
Americans could live well on a good deal less energy, so the argument for needing more is not about the United States; it is about the rest of the world. One point on which the industry and its critics can agree is that two billion people around the globe currently live without much of anything; these people would certainly be better off with more access to energy and the diverse benefits it can bring. The fossil fuel industry has a century of experience finding energy sources and bringing it to people. We should want to harness that experience to good effect. This could be done if the industry changed its business model to transform itself from a (dirty) fossil fuel industry to a (clean) energy industry.
But it has no plans to do that. Industry is sitting on trillions of dollars worth of fossil fuel reserves, and understandably, they don’t want these assets to be stranded. Less understandably, the industry is moving in the wrong direction. Chevron recently announced plans to eliminate its renewables division—not because it was losing money, but because it was not as profitable as its core activities in oil and gas. All the major oil and gas companies are continuing to explore aggressively for new fossil fuel resources, including tar sands, shale gas, and oil in hard-to–reach places. Yet it is well established that even the use of existing reserves of oil, gas, and coal will push the global climate well past the 2-degree target that would protect us from serious harm. Expansion of fossil fuel usage promises to push us past 4 degrees, towards potentially truly awful outcomes.
What could the industry do instead? Two things. First, they could begin to develop serious commitments to renewable energy, either by developing in-house expertise or by purchasing existing companies. Much of the recent development of shale gas in North America has (for better or worse) been driven by majors buying gas plays from small operators. In the mining industry, there’s a long history of big companies buying smaller ones. The industry knows how to do this, at a profit.
Carbon Capture and Storage
There’s a second thing oil and gas companies can do: invest seriously in carbon capture and storage (CCS). Scientists are divided about CCS, but many believe that it could play a significant role in permitting us to continue to use at least some of the world’s available fossil fuels supply. At minimum it could buy us time to transition to renewables, and at maximum it could solve the problem of stranded assets. Carbon capture and storage means putting carbon dioxide back into the ground—and this is something the oil and gas industry already does. It’s called secondary recovery, and it’s a well-established practice. As oil fields become depleted, fluids are pumped into the ground to flush out the remaining resource. The scale on which we would need to store carbon dioxide to prevent further disruptive climate change is vastly greater than what companies do in secondary recovery, but the principle is the same. And because oil and fields have been storing gas for millions of years—and there are natural CO2 gas fields—we know that the Earth has the capacity to store gas for long periods of time.
Why isn’t the industry doing this? Because there’s no incentive. Gas, oil, and coal continue to be extremely profitable commodities. As long as there’s no reason to stop finding, extracting, and selling them, companies will continue to do so. There’s just no reason for them to do something less profitable than what they are already doing, very successfully. So we have to give them a reason. That’s where divestment comes in. It sends the message that individual and institutional investors are no longer willing to invest in business as usual. It says that it is time to change the way we do business.
Conditional Divestment as Social Leverage
Large institutional investors have social leverage, and so, especially, do universities like Stanford and Harvard, which are repositories of intellectual and cultural leadership. So here’s what I believe institutional investors should do: announce a deadline, of say 1-2 years, by which companies should develop, and begin to implement, a serious and credible strategy of energy diversification coupled to major investment in carbon capture and storage capacity. Companies should also call on the government to fund the research, at universities, the National Laboratories, and the U.S. Geological Survey to identify geologically suitable sites around the nation for carbon storage pilot projects. Investors should also call on corporations to stop funding disinformation and misleading advertisements. Since a good deal disinformation is channeled through non-profit organizations, investors should also call on industry to open its books to independent accountants to ensure that its “philanthropic” contributions are not in fact misanthropic.
Climate change began as an economic failure, because the price of energy did not reflect its true cost. It has become a political failure, as our political institutions have been unable to deal effectively with the problem. Let’s not let it become a social failure, too. Investors have leverage. It’s time to use it.