Major investors are beginning to sense danger from the fossil fuel bubble we're in and are demanding corporations divest their fossil fuel investments. This spells trouble ahead, particularly for the most carbon-intensive fossil fuels and, yes, I mean the Athabasca Tar Sands.
The president of the business advocacy, Ceres, Mindy Lubber, outlines the powerful case for fossil fuel divestment.
We cannot simply accept Wall Street refrains that divesting is hard
because fossil fuels are embedded in our economy, and are profitable to
boot. Such thinking denies the ‘true’ negative costs of fossil fuels.
Many fossil fuel stocks have been profitable in recent years, but
because neither the producers nor consumers pay to emit climate-warming
carbon pollution into the atmosphere, those profits are grossly
distorted. The consequences of a free license to pollute – including
super storms, droughts and rising seas, for example – are borne by
taxpayers, insurers and anyone in harm’s way. The economic costs of
Hurricane Sandy and this summer’s historic drought eclipsed $100
billion, an amount equal to the combined annual profits of just three
big oil companies, Exxon, Chevron and Royal Dutch Shell.
Until there is a price on carbon, along with other clean energy
policies, these profits will likely continue, fossil fuel consumption
will keep rising and clean energy will struggle to compete on an uneven
...Investors should also address the inherent risks in any fossil fuel
investment. An estimated 50-80 percent of the current market value of
oil, gas and coal companies is based on unburned reserves;
that is, resources that are still in the ground but which, if burned,
would lead to catastrophic climate change and economic disaster. With a
strong price on carbon, how much of those reserves will be left in the
ground, in essence, creating liabilities that could take a big toll on
Given such profound concerns, it is clear investors cannot stand by
idly. Many of them are already doing more to exert their influence to
achieve a low-carbon world. Investors are filing dozens of shareholder
resolutions with U.S. companies every year calling for action on
strategies that lower their carbon emissions and boost their clean
energy efforts. Many of these resolutions are focused directly on fossil
fuel companies like Exxon, coal-fired electric utilities and hydraulic
fracturing operators whose practices need cleaning up.
These investors are beginning to rebalance their portfolios by
tilting their strategies toward clean energy and away from the riskiest
high-carbon companies, especially coal. There are a growing number of
funds and indexes focusing on clean energy and lower carbon companies.
But, most important of all, global investors are clamoring for strong
low-carbon policies – in other words, a carbon price – that will
catalyze the necessary massive shift of capital to clean energy. Global
investor groups, including INCR, requested exactly this in a recent letter
to major governments whose climate negotiators met this month in Doha,
Qatar. They are looking for clear, concise and honest market signals.
The bottom line is this: There will be a day of reckoning when it
comes to fossil fuels, and investors need to take far stronger steps to
avoid the climate cliff. Fundamental shifts in investment are
warranted, and investors must begin diverting capital away from fossil
fuels and toward clean energy at a much faster clip. The societal costs
of inaction on the climate are immense, and the risks are rising just
as surely as the seas.
The reality is obvious. We are living in a huge fossil fuel bubble but, within that fossil fuel bubble, lurks an even more volatile and potentially catastrophic, high-carbon fossil fuel bubble and Canada is caught within it. As investors move capital to low-carbon energy alternatives, and there are plenty of them, the first to go down will be the high-carbon fossil fuels. That puts Canada's Tar Sands squarely in the crosshairs. We are tying Canada's economy and the future of our people to something that could blow up in our faces.