With universities at the heart of the fossil fuel divestment movement, academics could decide the financial fate of the world’s energy companies.
Climate change is a numbers game in which the figure with the smallest value has the largest significance – 2°C – the temperature rise we must stay below to avoid potential catastrophe. Other larger numbers revolve around this small figure like fat planets around a tiny dying star: 565 gigatonnes (the maximum amount of carbon dioxide we can release to stay below the 2°C limit); 2795 gigatonnes (the amount of CO2 currently stored in known fossil fuel reserves); 82% (the amount of coal reserves that must remain unburned).
If that hasn’t made your head spin, there are also the financial numbers: US$670 billion (the amount of money spent by energy companies searching for new fossil fuel reserves in 2013); US$30 billion/ year (the reduction in fossil fuel investment required to stay under the 2°C target, according to the Intergovernmental Panel on Climate Change); £147 billion a year (the required increase in low-carbon energy investment); £100 billion a year (the boost needed in energy efficiency).
In an arena where numbers are so critical, particularly ones with dollar signs attached to them, it is perhaps unsurprising that finance is becoming a key player in the fight against the use of fossil fuels and that divestment in particular is the growing weapon of choice. The fossil fuel divestment campaign started on US campuses in 2011 and has become the fastest-growing campaign of its type in history with over 800 institutions and individuals pulling more than US$50 billion worth of funds from oil, coal and gas, according to campaign group Fossil Free. In September last year, the Rockefeller Foundation pulled its investments from fossil fuel and in July the World Council of Churches, which represents over half a billion Christians, also divested. Big names like Archbishop Desmond Tutu and Ban Ki-moon have got on board with the campaign and, most recently, Oslo became the world’s first capital city to divest from coal.
But it is in universities where the movement first started and where the battle is now playing out in earnest for the fate of the world’s energy consumption. More than a dozen universities and colleges in the US have divested and in January a letter from 300 Stanford university academics called for the institution to divest from all fossil fuels following its withdrawal from coal the previous year. Last October, Glasgow became the first European university to pull out of fossil fuels, pledging to divest its £18 million investments over 10 years. And, in March 2015, 50 academics from Edinburgh University signed a letter asking the institution to divest its £230 million endowment fund – the third largest in the UK – from fossil fuels and the arms trade.
But for every divestment success story it seems there is a setback. The Glasgow University decision is not final and depends on the results of a financial review. And the letter from the Stanford professors was quickly followed by news that Harvard, the world’s richest university, had not only refused to withdraw its US$32.7 billion endowment from fossil fuels, but actually increased its holdings in oil and gas companies by a factor of seven in the third financial quarter of 2014.
In a letter, Harvard’s president, Professor Drew Gilpin Faust, had already voiced her concerns that divesting from fossil fuels was not “warranted or wise” and stated that while divestment would have negligible financial impact on the affected companies, the risk of divesting would “come at a substantial economic cost”. The letter went on to argue that the endowment fund is a financial not a political tool and that using it as such could “entail serious risks to the independence of the academic enterprise”. Professor Faust concluded that the university should use its investments “not to ostracise such companies but to encourage them to be a positive force both in meeting society’s long-term energy needs while addressing pressing environmental imperatives”.
“My personal view is: alienate the fossil fuel companies. They’re going to have to go. If we’re going to solve these problems, we’re going to need another revolution on the same scale, culturally, as the agricultural revolution.”
Professor Paul R. Ehrlich
Harvard’s intransigence has heated up the divestment debate among academics in the US. Professor Paul R. Ehrlich, one of the signatories of the Stanford letter and a world-renowned expert on population growth, was dismissive of Professor Faust’s arguments calling them “excuses” and “gibbering nonsense”. According to Professor Ehrlich: “The Harvard statement basically said that the people with money don’t want us to divest and we do whatever they tell us.” He went on to say: “What’s wrong with using the endowment fund as a political tool? If your civilisation’s going down the drain, what possible excuse is there not to try and do something about it?” Professor Ehrlich was equally scathing about claims that universities shouldn’t alienate fossil fuel companies but seek to work with them, saying: “My personal view is to alienate them. They’re going to have to go. If we’re going to solve these problems, we’re going to need another revolution on the same scale, culturally, as the agricultural revolution.”
Dr Aaron Thierry is an ecologist studying the impact of climate change in the Arctic and a signatory of the Edinburgh University letter. He points out the flaws in the financial arguments against divestment, drawing attention to numerous studies, including one by the UN’s Environment Programme Finance Initiative, which show that there is virtually no difference in performance between funds that include fossil fuel companies and funds that exclude them. He also indicates the potential risk to fossil fuel investments in the so-called ‘stranded assets’ argument: “If we continue to cut carbon emissions in line with 2°C targets it will mean they are overvalued considerably. If that is the case it means our money invested in these institutions is at risk. That’s a risk that’s being acknowledged by financial experts from global institutions.”
But not all academics agree. Paul Younger is a professor of energy engineering at Glasgow University and one of the faculty members who raised concerns when the institution first announced its plans to divest. “The stranded asset argument is based on a really naive piece of wishful thinking,” he said, “that somehow the world, in a fit of conscience that it’s never yet shown in any financial market I’m aware of, is going to decide not to invest in things that will bring it a large and quick return.”
For Professor Younger, divestment is based on a series of naive assumptions, the first being that, as with apartheid or tobacco, there is a clear-cut moral divide. “Fossil fuels are more complicated,” he said. “There’s no denying that fossil fuels have been a huge factor in reducing poverty. In the last 10 to 15 years there’s been something like 750 million people in China taken out of poverty on the back of accelerated fossil fuel use. Try going to them and telling them it’s an intrinsic evil.”
Allied to the moral oversimplification, according toYounger, is a wilful ignorance of the scale of our fossil fuel dependency which extends far beyond just energy for electricity, heating and transport. Most of the feed stocks for modern industry, including all plastic and synthetic products, as well as production of fertilisers, steel, cement and many pharmaceuticals are dependent on hydrocarbons from fossil fuels. Apart from the production shortfall, Professor Younger believes there is another mistaken assumption – that renewables can meet all our energy needs. “Because I work on renewables,” he said, “I’m in a position to tell you that the claims being made for them are far beyond what we can actually deliver yet. Renewables are very bad at providing, for instance, transport fuels and heating which between them account for 80% of energy use.”
“There are two choices: one is that we keep going the way we are now; we sell a lot of oil and coal and so on and civilisation collapses, probably some time this century or early next, and stanford university will no longer exist. The other possibility is that somehow society will wake up to its existential threat.”
Professor Paul R. Ehrlich
However, not everyone believes that divestment can’t go hand in hand with cooperation to develop greener technologies. Peter Aitchison, a spokesman for Glasgow University, said: “All our work with energy companies is on how we can reduce the impact of fossil fuels in the environment. I don’t think there’s any disconnect between saying we don’t want to invest in the fossil fuel industry and that we will research into our need for making fossil fuels more environmentally friendly.”
While the academic debate continues, the fight to divest will push on, propelled mostly by the students who began it. In April, Glasgow University’s financial review will be presented to the university court, where it will be debated by a number of faculty members including Professor Younger. In Stanford a similar financial review is taking place, the results of which are expected in June. At Harvard a lawsuit brought by students compelling the university to divest is currently being contested in court.
Meanwhile, the planet moves inexorably closer to that innocent-looking 2°C, a stark figure standing untouched above all arguments and protests. Climate change is increasingly a game of numbers and it is from this uncompromising arithmetical world that Professor Ehrlich believes we should take our cue. As he says: “There are two choices: one is that we keep going the way we are now; we sell a lot of oil and coal and so on and civilisation collapses, probably sometime this century or early next, and Stanford University will no longer exist. The other possibility is that somehow society will wake up to its existential threat.”
It is a binary choice, as clear and stark as that unforgiving number: 2.
PLEASE SHARE YOUR EXPERIENCES AND VIEWS IN THE COMMENT SECTION
PHOTO CREDIT: CGP Grey from flickr