Stanford University will stop investing in coal companies after its Board of Trustees voted in support of eliminating direct investments in publically traded companies that mine coal for electricity generation. In response to yesterday’s vote, Stanford’s President John Hennessy stated “moving away from coal in the investment context is a small but constructive step while work continues at Stanford and elsewhere to develop broadly viable sustainable energy solutions for the future.”
Decisions like Stanford’s are a bad financial decision for most universities. At the same time, in most cases, university holdings of private fossil fuel developers is a small part of the portfolio – so perhaps it doesn’t matter to that bottom line.
The bigger issue is the message that this action, part of a larger Fossil Free campaign, conveys. Campaigns like this one tinker at the margins, have no real impact, often distract from what is important, and can actually make things worse.
What do I mean? Well, first, here’s a bit of background.
Yesterday’s decision follows a student ballot initiative vote last month, where Stanford undergraduates voted in support of fossil fuel divestment. The initiative passed with 78% support. In 2012, Harvard Undergraduate Council passed a similar referendum with 72% support and Yale has also passed one with 83% support. These movements are largely motivated by the Fossil Free organization, and according to their public statements, “Investment in the fossil fuel industry is socially irresponsible.” According to the Fossil Free website, “We want institutions to immediately freeze any new investment in fossil fuel companies, and divest from direct ownership and any commingled funds that include fossil fuel public equities and corporate bonds within 5 years.”
My response to this comes in three parts –
First, investment in fossil fuel companies is not socially irresponsible - what is socially irresponsible is using fossil fuels. It is the use of fossil fuels that results in pollution, not the investment in them. Our actions, our demand for fossil fuels on enormous scales is to blame. Now, Fossil Free does concede that we are partially to blame. But, their caveat makes their statement untrue: “We’re all complicit in fossil fuel consumption, and we should do all that we can to reduce our own use, but the real culprits — the ones who are rigging the system — are the fossil fuel companies.”
This is just not true. Fossil fuel companies are struggling to keep up with an obscenely high demand for fossil fuels and fossil fuel derived products. These businesses are not inherently evil, and it is not their objective to destroy the planet. The real culprit is us, consumers. We are the ones demanding fossil fuels and these companies are just giving us what we demand. The only way to cause meaningful reductions in fossil fuel carbon emissions is for us to stop buying fossil fuels, as I have outlined in my previous post It’s Not About Tar Sands – It’s About Us.
Second, it is clear is that fossil fuels have been great for human development, but their use has resulted in widespread environmental damage. While we need to transition away from fossil fuels, immediate divestment by universities would not really help. In fact, it might hurt. University partnerships with the energy industry are actually a good thing for the environment – I’ll get to that shortly.
But first, why do we need fossil fuels at all?
Fossil Fuels are Great
With the number of miles covered in a car or a plane by the average American these days, perhaps the most salient benefit of fossil fuel use is transportation. However, the thousands of miles we each travel in a given year is a new phenomenon for the human race. If you lived in America 150 years ago, you probably never travelled farther than 50 miles from the place where you were born. You probably worked and lived on a farm, sustaining your existence from what you could harvest and hunt. Work was backbreaking, and you labored from dawn till dusk, every day over your 40 year life expectancy. Then, something big happened that changed the world. We discovered oil.
Because of fossil fuels, we are living longer, travelling farther, working less, and having more fun than at any time in history. The way we live our lives today is literally the stuff of Greek legends. Not long ago, crossing a continent would take 3 months, and there is a good chance you would not survive the journey. Today, we can fly across the continents in just a few hours. Fossil fuels have completely revolutionized the human condition, and have arguably enabled most major advancements in technology since its discovery.
Fossil fuels are so important that we literally need them to survive. Today, for every calorie of food that you eat, about 10 hydrocarbon calories went into producing that food. Additionally, without petroleum derived fixated nitrogen (fertilizer) enabled by the Haber-Bosch process, and the help of fossil fuels in other ways along the food production pathway, the Earth could only grow enough food to feed about 3 billion people, less than half the current world population.
Fossil Fuels are the Worst
Because the world’s food systems depend on fossil fuels so heavily, you could argue that half the people in the world have food to eat because of them. Unfortunately, the explosion of the human population enabled by fossil fuels has resulted in a catch-22. That is - the burning and use of fossil fuels themselves to support this population has done significant damage to the Earth’s ecosystems. The ocean is more acidic, a large fraction of Earth’s species have gone extinct in the last century, and the climate is changing (mostly for the worse). I could go on, but the point is, to prevent this environmental deterioration, we need to shift away from fossil fuels as quickly as possible.
But how do we do that?
The truth is, the world’s economy deeply relies on fossil fuels, demanding nearly 600 Quadrillion BTUs of energy per year, only a small fraction of which comes from renewables. If the world were to truly ‘divest’ from fossil fuels – meaning we immediately stopped using them – for most people there would be no more driving, no more consumer products, significantly reduced access to electricity, and much, much less food (to the point of starvation for more than half of us).
Clearly this is not a good solution. But, we need to start a transition, supported by fossil fuels initially, and gradually reducing our dependence going forward. This brings me to the third part of my response to groups like Fossil Free...
Fossil fuel money going to universities is the best choice
Those who want universities to divest from fossil fuels want to make a powerful statement, which is good. On one hand, it is productive to send the message that we support sustainability and renewables. But this is a slippery slope. If it is unethical to profit from fossil fuel investments, does that also mean that universities should not receive profits from fossil fuels? Profits that are currently paying for research into sustainable energy? If oil money is dirty, and we can’t take it, then what will pay for this much needed research?
Ultimately, the best possible choice to support an energy transition away from fossil fuels is for profits from fossil-related activities to fund renewable energy research. Fortunately, this is happening already. For instance, BP made a $500 million deal with The University of California – Berkeley and The University of Illinois to fund the Energy Biosciences Institute, which is devoted to biofuels research. Additionally, in 2002 Stanford University received $225 million to fund the Global Climate and Energy Project, much of which came directly from ExxonMobil.
If we divest from fossil fuels, does this mean we also divest from the research that oil money is paying for? If we divest, this means a great deal of research will no longer be funded, leading to the questions:
- Should we continue to fund energy research but cut other research programs instead? Should we fund less research on cancer, autism or depression?
- Should we cut funding for the arts?
- Should we give out fewer scholarships, or accept fewer students and educate fewer young people?
Campaigns like Fossil convey good messages. But, their actions are not productive. They tinker at the margins, have no real impact, often distract from what is important, and can actually make things worse. It would be a mistake to not utilize money made with fossil fuels to develop renewable energy resources. If anything diverting more money from fossil fuel investments to renewables would be better.
I for one, support more renewable energy research. What do you think?
About the author:
Scott McNally is a frequent guest blogger on Plugged In. He is a research assistant at both Stanford University and Harvard University, where he focuses on energy systems optimization and environmental policy. Scott has previously worked at the U.S. Department of Energy (ARPA-E), the White House Council on Environmental Quality, the Shell Oil Company, and Austin Energy. He holds a B.S. in Chemical Engineering from the University of Texas at Austin and is currently completing a Master’s degree in Energy Resources Engineering at Stanford University, and a Master’s degree in Public Policy at Harvard University. You can reach Scott via e-mail at scottmcnally at gmail dot com.
H/T to D.K. for his title comments.