The push for divestment from fossil fuel assets has moved to a new stage, with a campaign by The Guardian newspaper to pressure the world’s two biggest charitable funds, the Bill and Melinda Gates Foundation and the Wellcome Trust, to move their money out of fossil fuels.
Although several charitable trusts have already made such a move, most of the public discussion has focused on campaigns directed at universities and businesses.
The case for divestment can be presented in two ways, though the argument differs only subtly between them. The core point is that extracting and burning the currently known reserves of coal, oil and gas using current technologies will result in catastrophic climate change. As the Intergovernmental Panel on Climate Change’s Fifth Assessment Report shows, this would include, at a minimum, massive species extinction and the destruction or radical transformation of all natural ecosystems and many vulnerable societies.
This creates a powerful ethical argument for withdrawing investment from corporations engaged in extracting and burning fossil fuels. Unless such corporations change radically, we are all facing a bleak future. So investing in such corporations is not a defensible option for institutions, such as universities, that expect to endure for centuries. An investment strategy for a university must be premised on a sustainable future.
The argument can be rephrased in a way that appeals to investors’ more immediate concerns. Governments around the world have already taken significant steps to reduce greenhouse gas emissions, but much more is needed. Such actions will inevitably involve leaving a great deal of carbon in the ground, and this must imply reducing the profitably of extracting the reduced amount feasible under the limited carbon budget available to us.
So, unless we see a global failure to deal with climate change, the value of fossil fuel resources and the companies that exploit them must fall, ultimately to zero. For many coal mining companies this has already happened, with share prices having plummeted to historic lows. Macquarie Research this week described the outlook for US coal miners as “increasingly bleak”, predicting a wave of bankruptcies. The same will undoubtedly be true of oil if prices remain at their current low levels for the next few years. So even investors and lenders with no concern for the future should be cautious when prices are so weak.
A better future
The whole point of charitable trusts like the Gates Foundation and the Wellcome Trust is to work for a better future. So, as I have previously argued for universities, it is the ethical presentation of the argument that should be most compelling.
Are there any counterarguments? The most plausible argument put forward by opponents of immediate action to mitigate global warming is that some technological change will emerge that will obviate any need for costly changes in our current way of doing things. Common examples include carbon capture and storage, nuclear power, and geoengineering.
I’ve argued in the past that neither carbon capture nor nuclear power is likely to prove cost-effective when stacked up against a combination of energy efficiency, renewable energy and energy storage. Clive Hamilton has made a similar argument (see here and here) with regard to geoengineering.
While the news for nuclear power has been almost uniformly bad (the US plants under construction have just been delayed again), and geoengineering still an option of last resort, there have been some hopeful signs for carbon capture and storage. A notable example is the development of a “calcium looping” technology, partly developed here at the University of Queensland, that promises to reduce the 30% energy penalty now involved in carbon capture.
The Gates factor
Bill Gates will almost certainly be on the side of the technology optimists. He serves on the board of the American Energy Innovation Council, a body that, like the Obama Administration itself, takes an “all of the above” approach to the problem of energy policy, including encouragement of carbon storage and a broadly favourable view of gas as a cleaner fossil fuel.
So if the Gates Foundation does agree to divest environmentally unsound fossil fuel interests, this move is likely to be accompanied by a focus on technological solutions that may enable some continued use of fossil fuels.
This is not necessarily undesirable. The problem of climate change is so difficult and so urgent that all approaches to the solution must be explored, even if some will fail along the way.