Monday, December 31, 2012

The Case for Fossil Fuel Divestment

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 playing field.

 ...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 shareholder value?

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.


Beijing York said...

Thank you for your stellar research and commentary on these important issues. I have learned so much.

Best wishes for the New Year to you and yours, MoS.

The Mound of Sound said...

OMG, B.Y., I think I'm blushing. Like you, I really believe we're going down the wrong path at an increasing rate of knots. I just cannot see how this ends at all well and that makes me worry for my kids and their generation and those to follow.

At times I feel so much like an utter Cassandra and it is in those moments that I find strength in your support and encouragement. Thank you so much for that.

And may the New Year exceed all your expectations.

Cheers to you, Beijing York.

Wabano said...

You fucking commie need to relocate to NorK and choke on your own vomit, ASSHOLE!

The Mound of Sound said...

Do you kiss your mom with that mouth, Wabano? Let me guess, she likes it.