Tuesday saw a rally and State House hearing for of S. 1225, a bill for the state to divest its pension funds from fossil fuels. Sen. Ben Downing has introduced this bill on the model of previous Iran and Sudan divestment bills.
In Massachusetts we are on the front lines of climate change in more ways than one: We have a lot to lose from rising sea levels and radicalized weather. On the other hand, we are at the forefront of creating a clean energy economy, in both the public and private sectors. The effect of our divestment from fossil fuels would be a symbolic rejection of fossil fuel economics, a grand statement of our political culture of “goodbye to all that”.
Will it do any good? Will it cost retirees in investment returns? This PunditReview tweet brings up an important point of pushback:
Oh yes, let’s divest from evil energy companies. Let’s invest in politically correct things that feel good. Sorry retirees! #mapoli
— Pundit Review (@PunditReview) September 10, 2013.
Well, glad you asked that. First of all, you would expect Downing to be sensitive to the effect on those pensions: His widowed mother is a recipient of a state pension. Downing says he is simply bearish on the long-term viability of the market for fossil fuels.
This makes sense. As an economy, we are going to have to ditch fossil fuels sooner or later anyway, as a matter of absolute necessity: If we are to stay below a 2-degree Celsius temperature rise, it’s estimated we’ll need to start cutting CO2 emissions by 2-3% per year. And 2 degrees is not magic; it does not forestall all manner of probable disastrous effects.
Start around 27 minutes for the nutshell.
As for divestment as a political strategy: The South Africa divestment campaign started out as a series of “symbolic” gestures — which by the 1980’s had become a crippling capital flight. No single action was determinative — together, they mattered.
In a nutshell: Continuing to invest in a product that is killing us is simply not a viable long-term strategy.
I’ve been pleased that the Boston mayoral candidates seem to be taking this issue so seriously, from disaster preparation/mitigation to transportation planning to building codes and development. We should understand these things not as a hodge-podge of “green” alterna-cultural campaign bonbons, intended to bring Portlandia to Boston — but simply as looking forward to the economic necessities of the future.
The clean-energy economy is coming — out of climate necessity, but also due to the plummeting prices of solar and wind power, the increased pervasiveness of conservation efforts, electric vehicles, and so on. There is now a sufficient feedback loop of development/deployment/investment to keep the price boulder rolling downhill.
Fossil fuel divestment should also be an opportunity for #MA5 candidates to burnish their climate credentials. I was happy to see Katherine Clark talking with sign-holders at the rally outside the State House; Karen Spilka was there, and her supporters were well-represented; Will Brownsberger chaired the hearing, and was interested and respectful. I would have to guess that Carl Sciortino would be supportive; I don’t know about Koutoujian.
This is an opportunity for Treasurer and gubernatorial candidate Steve Grossman as well: Grossman made local investment of our pension resources a big issue in his winning campaign. He could show leadership in supporting a move to divest from climate-destroying fossil fuels.
stomv says
What do we do about energy companies who both (a) are involved heavily with fossil fuels, but (b) are banging out wind and solar too?
Exxon makes the lubricants used on something like 40,000 wind turbines.
BP owns shares of 16 wind farms in 9 states.
NRG owns about 10,000 MW of coal plants — but also one of the largest solar farms in the country.
It turns out that the companies who know lots about fossil fuels also know lots about installing renewable energy. In light of this, why not worry about the product and not the producer? Why not put even more (legislative) emphasis on the Renewable Portfolio Standard, on energy efficiency, on public transit, on ped and bike upgrades, on oil-to-gas or even oil-to-electric-heat-pump home conversions. Hell, why hasn’t the state just put solar panels on every single municipal, county, and state government building in the Commonwealth?
I’d love to be convinced that the divestment idea is a good one. I haven’t been yet. Can’t a BMGer convince me please?
Charley on the MTA says
I think Exxon would be an easy one: They’ve funded climate denial research for so long, I think morally they’re far gone. How much of their business is in turbine lubricants? Oil cos have so much capital, and they’ve had the chance to diversify their portfolios — this is one more incentive.
BP is out of the wind business, to the best of my knowledge. “Beyond Petroleum” became “Back to Petroleum.” This is part of my point.
In response to Mark’s question: Check out some of the “socially responsible” mutual funds, and you’ll see that many match the S&P 500 (or their peer group, depending on asset mix). You don’t *need* fossil fuels for an adequate retirement. In fact, I dare say we’re likely to have a nicer retirement when fossil fuels are retired entirely.
stomv says
My point is: there isn’t a very clear bright line. Lots of companies span the spectrum. At some point, you’re going to have to either (a) define rubric, or (b) task somebodies with making a judgment call.
If you want it to be “any business in the fossil fuel game” fine — but I’m not so sure that’s so clever. After all, don’t we want to encourage Exxon and BP to invest in renewable energy?
At the state level, there are far more efficient ways to reduce our fossil fuel use — the problem is, they don’t feel as good when regular folks feel the impact. Thing is, guess what: regular folks are the ones consuming most of the fossil fuel. Want to burn less coal and gas? Increase electricity rates and use the revenue to fund more wind and solar. Want to burn less gasoline? Tax gasoline more and use the revenue to fund mass transit, ped/bike, smart growth, etc. Want people to use less home heating oil? Tax it and use it to fund insulation upgrades.
I just don’t see the impact of this. Exxon isn’t going to convert to a renewable company even if all gov’t funds (US, 50 states, etc) divest.
P.S. BP still claims to own those wind farms.
Mark L. Bail says
my pension would be affected, but this seems more like a symbolic action masquerading as a practical one.
Why not invest in renewable energy, as Stomv asks? The state doesn’t want to spend the money. The protesters, I’m sure, would love to spend the money, but this is a semingly no-cost alternative that only affects pensioners in theory. If there’s damage, those involved in divestment will be long gone.
Charley on the MTA says
As I said in the post, it’s kind of like any collection-action problem: Your action is “only symbolic” … until it’s not. There’s a big university divestment movement going on — only little colleges now, but this is growing. Divestment had a profound effect on apartheid South Africa — but only after 20-30 years.
You can be at the head of that train, or behind. In this case, I say ahead.
kbusch says
Someone is investing in every share we’re divesting. So it’s not as if divestiture leads to no one owning Exxon-Mobile stock. I suppose if everyone treated it as a sort of hot potato, then the demand for it would fall and with it the price. The other argument for divestiture generally has been that it makes the Commonwealth freer to condemn Exxon-Mobile. There’s no danger to the pensions of our retired workers then. I suppose another possibility is that cashing in one’s Exxon-Mobile stock could communicate moral disparagement.
ryepower12 says
Well, funny you say that…
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Mark L. Bail says
I don’t know what investment strategies our state pension manages use, but in time, it might be possible to eliminate such investment. I don’t know the answer to this. I do know that public pensions are under fire, and I have serious reservations about messing with them.
On the other hand, I understand the motivation. The question remains whether it will work. Economically, it’s going to bother oil companies much. There’s too much demand for their product. Politically, I suppose it could harm them if divestment caught fire. That’s what GoFossilFree suggests.
I’m skeptical, but not adamantly opposed to the idea.
daves says
I’m not a fan of this, for several reasons.
First, the duty of the investment managers of the pension fund is to maintain and grow the assets of the fund in order to pay its debts–pension benefits. While I believe that it might be possible to maintain the return by avoiding investments in energy companies, I think it is exceptionally unwise to inject politics into investment management. The next “logical” step is to require pension managers to invest in money losing alternative energy companies. No thanks.
Second, I think this tactic will have no impact on global warming. Is it your theory that the consumption of oil, coal, and natural gas is driven by the stock market? Do you really think that this action will make it materially more difficult for oil companies to refine and sell oil? Do you have evidence to back this up? South Africa is a flawed analogy.
If the demand for carbon fuel could be reduced, then then emissions of CO2 will decline. This “strategy” is irrelevant. If you want to make a symbolic objection to the consumption of fossil fuel, picket a local gas station. Just be careful you don’t get run over.
bostonshepherd says
Apartheid = cutting CO2 emissions?
Your comparing divestment in South Africa to pension fund carbon divestment is an insult to sentient mankind. The mechanics are the same, sure, but the moral imperatives are not. Carbon divestment has none, IMO.
But set aside the moral argument. And try not to blurt out “denier!” like you have Tourette’s.
Your economic presumption that we are forced to ditch a carbon-based economy is false. Have you been in a coma since fracking added to the estimated US natural gas reserves? It’s orders of magnitude more. I’ve seen some estimates (no cite, sorry) of 100’s of years. The mere knowledge of these domestic resources is sufficient to nullify, generally, any economic justification to install more renewable energy. It’s that significant a discovery.
Economics is like gravity; certain principals are known and verifiable. Here’s the impt one: the supply curve of very cheap natural gas has shifted dramatically, and the price of natural-gas-generated energy has fallen, is falling, and will continue to fall, as have prices of products and materials which use nat-gas in their manufacture.
The only way the MARKET will “ditch” fossil fuels is by government fiat (which the administration has been trying hard to do.) Good luck getting political support to do that legislatively.
kbusch says
The Syrian civil war was, in large degree, caused by a massive exodus of people from the countryside. Drought had rendered agriculture unsustainable. The climate changes we’re already seeing — never mind what happens when the global temperature rises another couple degrees centigrade — have had catastrophic effects on the lives of many human beings. Sure, there isn’t a Mr Botha to blame, but I don’t understand what could be a larger moral reason? We’re rapidly coming on a time where it is almost immoral to have children given the diminished lives our planet will soon offer them.
Given that this is really the moral issue of our time, it seems over-sensitive, to say the least, to be all in a twist about people “rudely” calling others deniers.
bostonshepherd says
Ending apartheid = cutting CO2 emissions is a totally distorted equivalence.
Apartheid is a 100% man-made construction. CO2 emissions are a result of positive human endeavor, not some by-product of evil intent. This is true no matter where and why one thinks temps are going.
The morality of ending apartheid is universal. Reduction of CO2 emissions by forcing upon people renewable energy has massive negative economic effects on jobs and the economy.
As data from the new IPCC trickles out, I’ve noticed less climate alarmism. Apparently, the data are NOT what the models have predicted so the models are wrong, and they have been wrong for a while. This suggests that those who advocate for CO2 reduction need to consider more carefully the economic damage their advocacy will inflict.
None of this calculus was needed to advocate an end to apartheid.
And your analysis of the Syria civil war is wrong. I don’t know about past droughts, but how do you not see events there as predominately an Alawite-Shia-Sunni donnybrook with some al Qaeda thrown in? Do you think that Stalin simply had bad luck with the weather, too?
SomervilleTom says
I fear you seriously misjudge how future generations will view the morality of our casual destruction of the delicate natural balance that preserves human life and society. After several billion people are dead and several trillion dollars have been lost to war, famine, flood, and drought, there is a high likelihood that the survivors will adamantly disagree with the arguments you present.
When human action, whether individual or collective, results in such catastrophe, and when such results were widely known and predicted for decades before they came to pass, then ignorance is absolutely NO excuse whatsoever. When major players intentionally and explicitly use their wealth and power to lie to the public, then at least some moral fault must be laid on their doorstep — and on ours for enabling and encouraging them.
Your paragraph about the “data from the new IPCC” is pure denialist horse manure — absolute bunk. The Arctic ice cap is melting much faster than expected. The net energy imbalance of the Earth remains distressingly positive, and that added heat MUST go somewhere — whether or not you or the Wall Street Journal are willing to admit it.
Apartheid was ended only after the blood of an enormous number of innocent people was shed. It was advocated by a tiny minority of people who ran a totally insignificant nation on a far-away continent. The most significant difference between Apartheid and CO2 emissions is that the target of the former was somebody else.
I think you fail to realize the extent to which future generations absolutely WILL hold you, me, and the rest of us morally responsible for the clear evil of global warming. Some of us are accustomed to asking the fair — even if rather accusatory — question of “What moral responsibility did the German public have for the immorality of the Holocaust?”.
Our progeny will almost certainly ask the same question of us regarding global warming. Commentary such as yours will not help our defense.
kbusch says
You might, before stating things with extreme certainty, like use the Google.
I won’t quote the whole article which then goes on to connect this with the Assad regime.
Your style of certainty when you don’t exactly seem to know what you’re talking about would seem to undermine your other excessively certain statements.
If certainty were proof, which it isn’t, you’d win every argument.
kbusch says
This is remarkably ahistorical. There were lots of lividly anti-communist Republicans who were quite against boycotts to end apartheid.
Why are you so certain?
SomervilleTom says
Five will get you ten that bostonshepherd opposed the divestiture movement while apartheid was still active.
kbusch says
You arrive at this certainty at the basis of trickles. Trickles?
On the one hand, we have the jet stream wobbling all over the place producing extreme weather events at a heightened rate. We have had 341 consecutive months of above average temperature. We have increased desertification. We have stark decreases in Arctic ice — especially if don’t measure just against 2012 which had the least ice of any year ever. We learn that Greenland has water under much of it making the ice there that much more susceptible to melting. We have the unknown effects of permafrost melts and changes to ocean currents.
And you’re saying with Extreme Certainty Because You Know Exactly What’s What Unlike Liberals Because Your Are Like Supersmart and on the basis of trickles, that well we should worry more about the short term economic effects of carbon mitigation than about carbon mitigation.
Well, gee, if you’re so certain, I’m completely convinced!