The recent passing of Nelson Mandela reminds us of the political power of moral argument. Moral arguments often seem weak or impotent by themselves, but they can stir the soul and inspire revolution through the power of shame and guilt.
In the 1980s, anti-apartheid groups urged companies and universities to divest from South African investments and companies as a means to apply both economic and moral pressure on the apartheid regime. Today, climate change activists have adopted the tactics of the divestment movement to urge universities and institutional investors to sell their stock in energy companies. In addition to student voices on campus, concerned alumni need to urge their alma maters to reject unambiguously the divestment movement both on the merits of the cause and on principle.
The Politics of Divestment
To understand the motivation behind the fossil fuel divestment movement, it’s important to recognize the political setbacks climate change activists have faced since 2008. President Obama set high expectations with the claim that his presidency would be the time when “the rise of the oceans began to slow and our planet began to heal,” but cap-and-trade legislation foundered in Congress and the much-anticipated 2009 United Nations climate summit in Copenhagen only produced a non-binding accord.
Bill McKibben’s Rolling Stone article, “Global Warming’s Terrifying New Math,” is the divestment movement’s current manifesto. McKibben not only put forward the principles of the current divestment movement, but also honestly outlined its politics. In the light of legislative and international setbacks, McKibben faulted his fellow-travelers for not arousing a sense of moral outrage over climate change. Works such as Al Gore’s An Inconvenient Truth had successfully evoked unease and worry but lacked a plausible political agenda. The policy ideas of the global warming movement seemed too demanding or too utopian: international treaties confronted steep resistance from developing countries, domestic consumers were unwilling to bear the cost of higher energy prices, and radical changes in lifestyle would not extend beyond a devoted few. Without a message of hope, the global warming movement would risk only counseling despair.
McKibben argued that the movement needed a new narrative, and, in particular, a narrative with a villain—energy companies, or as he calls them “fossil fuel companies.” In particular, the movement needed to reshape public opinion toward energy companies by presenting them as “rogue companies” threatening the planet. Activists needed to stoke latent discontent into righteous anger that would shame energy industry, forcing it to capitulate to a political deal. As he wrote:
The paths we have tried to tackle global warming have so far produced only gradual, halting shifts. A rapid, transformative change would require building a movement, and movements require enemies. As John F. Kennedy put it, “The civil rights movement should thank God for Bull Connor. He’s helped it as much as Abraham Lincoln.” And enemies are what climate change has lacked.
But what all these climate numbers make painfully, usefully clear is that the planet does indeed have an enemy – one far more committed to action than governments or individuals. Given this hard math, we need to view the fossil-fuel industry in a new light. It has become a rogue industry, reckless like no other force on Earth. It is Public Enemy Number One to the survival of our planetary civilization.
A shame campaign against the energy industry would threaten its political standing, opening a window for policy change:
Any campaign that weakens the fossil-fuel industry’s political standing clearly increases the chances of retiring its special breaks…. If people come to understand the cold, mathematical truth – that the fossil-fuel industry is systematically undermining the planet’s physical systems – it might weaken it enough to matter politically. Exxon and their ilk might drop their opposition to a fee-and-dividend solution; they might even decide to become true energy companies, this time for real.
Divestment, then, is not primarily an economic issue. Rather, it aims to revoke the public legitimacy of energy companies, which would induce them to regain their political status by supporting reform. And what reforms? The “cold, mathematical truth” to which McKibben refers is a claim that the amount of carbon in proven reserves of the world’s energy companies is five times the amount of carbon it is possible to emit to keep global temperatures from rising less than 2° C over the next century. His political solution, then, involves a set of policies to sequester that carbon—in other words, top-down federal limits on and rationing of carbon-emitting energy.
Divestment represents only one piece of a plan to keep 80 percent of the world’s most affordable, abundant sources of energy away from future human use. Unlike market-failure arguments, which argue for consumption taxes or other market regulations to factor the “social cost” of carbon into its price, the divestment movement does not really aim to create a more efficient energy market. Rather, its goal is to take energy resources off the market, at whatever cost to the millions in poor and developing countries hungry for the life-saving benefits of cheap energy.
The notion that the case for locking away these fuels can rest on arithmetic alone is simply ludicrous. Rather than a single-step mathematical deduction, there are in fact three discrete steps in moving from emission levels to public policy. The first is the relationship between carbon emissions and atmospheric CO2 levels, which the divestment movement emphasizes and is well-known. The second step involves the relationship between atmospheric CO2 and global temperatures—the so-called “carbon sensitivity” of Earth’s atmosphere. The third step involves the economic impact of higher temperatures and the kinds of tradeoffs we’d be willing to make. Unsurprisingly, the second and third steps in the process involve much more uncertainty than the first. For example, measured atmospheric temperatures have not kept pace with projected increases in models over the last 15 years of data, which may reflect lower carbon sensitivity of our atmosphere. Lower carbon sensitivity means less warming, and, thus, less cause for alarm.
The third step creates even more headaches for the divestment movement. Even if global warming will make us worse off, the question remains—compared to what? Climate change and climate policy both have costs and benefits; it may be the case that we’d be better off spending money on climate policy elsewhere. As MIT’s Robert Pindyck has recently observed, conclusions about how much we should sacrifice now to avoid future losses from climate change heavily depend on assumptions about how much we’d be willing to spend now to avoid costs for our grandchildren. Furthermore, replacing carbon-based energy with “green” alternatives has obvious opportunity costs—every dollar spent to fight global warming is one less dollar available to fight infectious disease, reduce infant mortality, or save for future consumption.
Focusing on energy companies, moreover, mistakenly shifts responsibility onto law-abiding industries. The divestment movement, after all, does not dispute the fact that energy companies have a legal right to bring their reserves to market. By vilifying energy companies, the divestment movement leans heavily on a mistaken theory of corporate social responsibility. The argument that energy companies have a responsibility to sequester carbon treats energy companies as possessing indeterminate obligations above and beyond their fiduciary and legal responsibilities. To multiply the number of groups to which energy companies are accountable, such as environmental activists and NGOs, generates confusion and diverts companies away from creating products to benefit their customers. An effective, profitable energy industry requires a clear division of moral responsibility between those responsible for designing and enforcing the rules of a competitive market and those acting within the rules. The divestment movement would not only subject us to draconian restrictions on future energy use, but also subject the corporation itself to the whims of political factions and democratic control.
The Role of the University
Universities should reject divestment not just on the merits of the cause, but also on principle as well.
Consider why the divestment movement has focused so much of its effort on higher education in the first place—they possess the moral authority necessary to inspire political change and instigate a regime change in energy use. Here the divestment movement betrays a feature that should be most offensive to alumni—a deeply troubling conception of what the university is for, and the role of the endowment in the university’s mission.
In particular, the divestment movement runs deeply against a core value of higher education, the idea of academic freedom. The movement’s goal, after all, is to lend an environmental movement the institutional support and the moral imprimatur of universities across the country. Through divestment, the university would officially endorse a narrow and extreme vision of how the world’s governments should address climate change by accepting the arguments of the divestment movement. While such an official action might not suppress discussion of climate change or limit academic freedom in obvious ways, it would no doubt exercise a chilling effect on robust intellectual debate. The act of taking sides in a debate over the political response to global warming, moreover, would contravene the spirit of open inquiry and discussion that academic freedom exists to protect. As Harvard University’s president, Drew Faust, wrote in her letter to the Harvard community explaining the decision to reject divestment:
We should, moreover, be very wary of steps intended to instrumentalize our endowment in ways that would appear to position the University as a political actor rather than an academic institution. Conceiving of the endowment not as an economic resource, but as a tool to inject the University into the political process or as a lever to exert economic pressure for social purposes, can entail serious risks to the independence of the academic enterprise. The endowment is a resource, not an instrument to impel social or political change.
Divestment activists are quick to argue that the university has already “taken sides” on their issue by investing in energy companies, rendering a “neutral” position on the question of divestment impossible. Here the divestment activists reveal their second great misconception about the university. The divestment movement is correct that, at times, universities become entangled with unsavory enterprises through their investments. But what they ignore is the importance of a strong endowment to the university’s long-term academic independence. By investing to create long-term value, universities actually maintain their independence better than if they invested and divested on a case-by-case basis.
A university’s endowment is a resource held in trust for future generations of students and faculty. Much as we owe it to future generations not to curtail economic growth through restrictions on carbon-based energy, universities should not risk their endowments on a divestment campaign of unprecedented scale and scope. The recklessness of the divestment movement evidences itself in the fact that divestment activists are themselves unwilling to cease driving carbon-powered cars, using carbon-based plastics, light, heat, and cool their environments with carbon-based electricity, or personally “divest” from fossil fuels themselves. But they are willing and eager to ask future generations to divest of the benefits of a world of cheap and abundant energy made possible by those same fuels, and to deprive future students of the wealth and academic freedom made possible by a growth-focused endowment.
A Misguided Campaign
Divestment is a pernicious idea that reflects a deep misunderstanding of the relationship between science and public policy, the role of the corporation, and the idea of the university. Concerned alumni should unambiguously reject the movement’s attempts to de-legitimate an industry that literally keeps your lights on and which makes possible a standard of living that tens of millions around the world still yearn to achieve.
Nicholas Geiser is an intern with the Center for Advancing Capitalism at the Competitive Enterprise Institute. Go Green image courtesy of Big Stock Photo.