Fossil Fuel Divestment: Our Path to a Livable Future

As the climate crisis worsens, it is becoming clear that action must be taken to prevent further deterioration of our environment. As a society, sustainable living needs to become a priority to preserve the Earth and save resources for future generations. One of the major problems we are currently facing is our reliance on fossil fuels. Atmospheric levels of greenhouse gases, which contribute to the greenhouse effect by absorbing and emitting infrared radiation, continue to rise exponentially. This is causing irreversible effects on the climate. 97% of climate scientists agree that climate change is anthropogenic and dangerous to humanity and the entire ecosystem of the Earth.[1] Unfortunately, modern industrial society is dependent on fossil fuels that burn carbon and release these harmful gases into the atmosphere. From transportation to growing our food to heating our homes, fossil fuels are everywhere. The technology and resources are available to begin a transition to renewables and a green future. However, the fossil fuel industry and its incredible political and economic power stand in the way of that transition. Coal, oil, and gas produce billions of dollars in revenue every year and these companies will not voluntarily give up those profits. Fossil fuel companies currently have $27 trillion worth of assets in their known oil reserves.[2] However, according to a study by Impax Asset Management, “80% of the world’s proven fossil fuel reserves cannot be consumed without exceeding the international target to keep global warming to within 2°C above pre-industrial levels.”[3]  The challenge our society faces is how to stop fossil fuel companies from digging up and burning these resources, which would force them to forfeit these assets. One possible tool to combat this problem is the fossil fuel divestment campaign.

Fossil fuel divestment consists of selling investments in fossil fuel companies and reinvesting in other industries, creating ‘fossil free’ investment portfolios. This campaign has three main goals. The first is to pressure governments to enact legislation requiring resource extraction companies to leave fossil fuels in the ground. This means creating laws that would not allow these companies companies to extract all of the fossil fuels they have discovered. The next aim of divestment is to pressure fossil fuel companies to switch to lower carbon forms of energy. This means transitioning the products offered by these companies from traditional fossil fuels into other forms of energy. Finally, divestment attempts to pressure governments to create bans on drilling.[4] This would put governments in control of carbon and use legislation to mandate reductions in fossil fuel production and consumption. While divestment will not solve the climate change crisis on its own, it will likely prove to be a useful tool to weaken the power of fossil fuel companies, thereby making it possible for governments to enact legislation that protects against their business interests.

One of the major reasons that fossil fuels — and the companies which extract, refine, and sell them — are so entrenched in our society is the wealth they create for producers. Fossil fuel companies use their profits to influence politicians and lobby for subsidies and legislation favorable to their business. In fact, according to a study in Oil Change International, “for every $1 the industry spends on campaign contributions and lobbying in DC, it gets back $59 in subsidies.”[5] Politicians use fossil fuel companies for campaign contributions and in return give these companies huge tax breaks and subsidies, in addition to blocking progressive climate change legislation. During the 111th congress (2009 and 2010), the oil and gas lobby spent $350 million. Oil and gas subsidies for the same period totaled over $20 billion. In contrast, the environmental movement spent $48 million on lobbying in the same time frame.[6] The fossil fuel industry spent more than seven times as much money on lobbying than the entire environmental movement, illustrating this industry’s immense influence in the US government. Our democratic process has been corrupted by these corporations demonstrated by the continuing monetary benefits these companies receive, while ignoring the detrimental impacts of fossil fuels on the environment. Oil companies save $4.4 billion a year in tax breaks through loopholes, such as domestic manufacturing tax breaks and foreign tax credits (oil companies often claim royalties as foreign taxes to get a deduction).[7] In 2013, the top five oil companies earned $93 billion in revenue, yet still received $2.4 billion in tax breaks.[8] Rather than aiding these destructive industries, government regulations should be protecting citizens and the environment and preventing further harm.

Another major challenge facing the climate movement is the confusion around climate change, caused by deliberate dissemination of false facts about climate change. Fossil fuel companies fund interest groups and foundations to discredit climate science and the climate justice movement in order to dissuade the public from taking a stand against their operations. Robert Brulle, a researcher at Drexel University, explains that there is a “deliberate and organized effort to misdirect the public discussion and distort the public’s understanding of climate change,” which is a major obstacle to legislative action.[9] Fossil fuel companies do not want the public to realize the extent of the damage their products and operations are causing to the environment. In order to counteract climate scientists, and reports such as those published by the Intergovernmental Panel on Climate Change, fossil fuel companies have funded research centers, nonprofit organizations, think tanks, foundations, and policy institutes focused on undermining and discrediting the environmental movement.[10] A recent example is the Heartland Foundation, which financed a billboard campaign associating climate change with murderers, tyrants, and madmen.[11] The fossil fuel divestment campaign aims to balance this misdirection by showing the public a unified, fact-based campaign. Bringing together universities, cities, towns, churches, and other independent organizations attempts to show the general public that respectable institutions want to divest and will not support fossil fuels.

The goal of fossil fuel divestment is to create a social stigmatization of the industry, not to financially ruin these companies. As activist Bill McKibben explains, “pure self-interest probably won’t spark a transformative challenge to fossil fuels. But moral outrage just might.”[12] The goal of the divestment movement is to use social pressure to force change. By revealing the truth about the harm that fossil fuels are causing to the environment and gaining publicity for the climate movement, divestment could play a key role in influencing public opinion. Similar campaigns have proven successful at accomplishing these same goals in the past, such as the tobacco divestment movement and the South African Apartheid divestment movement. The latter started on college campuses in the 1980s and spread to municipal and state governments. By the end of the decade, 155 campuses, 80 cities, 25 states, and 19 countries had agreed to divest from companies associated with the Apartheid regime.[13] Although this campaign did not have a significant economic effect on the companies associated with Apartheid, the social stigmatization had a huge influence in ending the regime. In the words of Nelson Mandela, “In South Africa, we could not have achieved our freedom and just peace without the help of people around the world, who through the use of non-violent means, such as boycotts and divestment, encouraged their governments and other corporate actors to reverse decades-long support for the Apartheid regime.”[14] A study by the Smith School of Enterprise and the Environment reviewing the successes of this campaign reveals that, “in almost every divestment campaign we reviewed from adult services to Darfur, from tobacco to South Africa, divestment campaigns were successful in lobbying for restrictive legislation affecting stigmatized firms.”[15] If the fossil fuel divestment campaign successfully exposes the need to reduce fossil fuel consumption, politicians might listen to their constituents calls for environmental policy reform. The reform for new laws and enforceable regulations to lower carbon emissions would also accelerate the transition to renewable energy sources.

One of the main arguments against the fossil fuel divestment movement is that divested portfolios will financially underperform. Some students oppose their own universities divesting on these grounds, believing it will reduce funding for financial aid, faculty training, and new campus buildings. However, studies analyzing the past five years of data have shown that “removing the fossil fuel sector in its entirety and replacing it with ‘fossil free’ portfolios of energy efficiency, renewable energy, and other alternative energy stocks, either on a passively managed or actively managed basis would have improved returns with limited tracking error.”[16] In fact, a portfolio that replaces fossil fuel stocks with diverse environmental technologies would have performed better and yielded higher returns.[17] Fossil fuel companies currently have billions of dollars in profits and therefore appear to be sound investment options. However, projections for future profits do not account for any future reductions in fossil fuel production and consumption. International consensus by climate scientists remains that raising the global temperature by more than 2°C will have extremely negative effects on the climate. To avoid this increase, most of the declared fossil fuel reserves cannot be burned. At some point in the future, carbon regulations will get stricter, restricting the burning and digging of these resources and forcing price changes. Companies will be left with assets that were once profitable and now are worthless, having a catastrophic effect on both the companies and its investors. Although some investors believe they will be able to retract their carbon investments before the carbon bubble bursts, “recent history of financial markets suggests that few investors will be able to successfully anticipate any sudden re-pricing and/or stranding of fossil fuel assets.”[18] Thus, current profit projections are not accurate and overvalue fossil fuel investments. By divesting now, investors can avoid a bursting ‘carbon bubble’ and, enjoy similar or even greater returns on their investments. It is in the best interests of investors to be proactive lead the divestment movement.

In addition to the negative impacts of the carbon bubble, many investors also fail to consider the economic costs of climate change. Fossil fuel companies are not currently held responsible for the damages done to the environment or the costs that result from these damages. A White House report on the costs of climate change reveal that if the temperature warms 3° Celsius above preindustrial levels, instead of 2°, economic output could decrease by about 0.9 percent. To put that in perspective, 0.9 percent of the 2014 U.S. GDP equates to approximately  $150 billion. Any temperature rise greater than 3° Celsius would cost even more.[19] While fossil fuel companies are not the only cause of these damages, they are the primary producers of these emissions, and the future costs of adapting to and addressing climate change should be factored into the product price. If these expenses are considered, the market would adapt to the true costs of fossil fuels and renewable energy sources would become much more competitive .

The fossil fuel divestment movement has taken off around the world. Already over 500 colleges have divested as well as 34 cities including Oxford, Orebro, and Dunedin. Additionally, the Swedish National Pension Fund has divested, and more than 50 foundations and religious institutions have also participated.[20]  Over the last two years, 181 institutions and local governments and 656 individuals representing over $50 billion dollars have pledged to divest.[21] This campaign is gaining momentum, as exemplified by the People’s Climate March in September where over 400,000 people gathered in New York City to demand a livable future. Following this march, the Rockefeller Brothers Fund pledged to divest its $860 million philanthropic organization.[22] The Rockefeller fortune was built through Standard Oil, but in recent years this organization has expressed a willingness to support environmental initiatives and has shifted its investments from fossil fuels to renewables. As more and more universities, cities, organizations, and notable individuals join the movement, public awareness of the need for divestment will increase and encourage more people to take a stand.

On our own campus, student activists have been pushing the administration to divest since the fall of 2013. In 2013, the University of Indonesia’s GreenMetric ranking of world universities ranked Northeastern University the nation’s greenest university.[23] As a founding member of the American College and University Presidents Climate Commitment, Northeastern has claimed to prioritize sustainability and green practices. President Aoun even stated, “I have made it a top priority for our university to assess our options and define assertive and responsible actions to speed our progress towards environmentally friendly policies, systems and facilities.”[24] These interests are reflected in the voice of the student body as well. Last year,75% of the 3,625 students who voted in the Student Government Association’s spring election voted in favor of divesting the Northeastern endowment from fossil fuels.[25] This was the first referendum in nine years that had enough student votes to validate the election. The success of this vote was due to a powerful student campaign using education and outreach. Clearly, this is an issue that Northeastern students care about. A full year after this voting success, DivestNU is still waiting on the administration to make NU’s endowment fossil fuel-free. The longer NU waits, the more likely it is that other universities and institutions will divest before Northeastern. Already, 26 schools around the country have divested and demonstrated stronger leadership on environmental issues than Northeastern.[26] If Northeastern wants to maintain its reputation as a global leader, the administration needs to take action to make divestment ideals a reality.  

Fossil fuel divestment is not a comprehensive solution to the climate crisis. Other steps will need to be taken to reduce emissions, transition to renewable green energies, and decrease overall consumption of energy across the globe. However, divestment is a first step in stimulating the climate change conversation. Climate denial funded by fossil fuel companies has left the public unclear about what actions need to be taken and legislators torn between the money offered by these companies and the threat of climate change. The divestment movement can pressure the public to demand action by publicizing the facts of climate change and the detrimental effects that continued use of fossil fuels will cause. Government regulations and legislation will be needed to prevent fossil fuel companies from burning all of the oil and gas reserves. Although divestment will likely not have a significant impact economically on the fossil fuel industry, it can create a social stigmatization that pressures politicians to act in the interests of citizens and the environment.

Works Cited

1. “Home.” Climate Change: Vital Signs of the Planet. N.p., n.d. Web. 25 Oct. 2014.
2. McKibben, Bill. “The Reckoning.” Rolling Stone 2 Aug. 2012: 52-60. Print. 56
3. “Beyond Fossil Fuels:The Investment Case for Fossil Fuel Divestment.” Impax Asset Management, n.d. Web. 30 Nov. 2014.
4. Ansar, Atif, Ben Caldecott, and James Tilbury. “Stranded Assets and the Fossil Fuel Divestment Campaign: What Does Divestment Mean for the Valuation of Fossil Fuel Assets?” Stranded Assets Programme, n.d. Web. 30 Nov. 2014.
5. “Fossil Fuel Funding to Congress: Industry Influence in the U.S. – Oil Change International.” Oil Change International. N.p., n.d. Web. 02 Dec. 2014.
6. “Environment.” Opensecrets RSS. N.p., n.d. Web. 02 Dec. 2014. <https://www.opensecrets.org/lobby/indusclient.php?id=Q11&year=2009>.
7. “Breaking It Down: Oil-Industry Tax Breaks.” Www.nationaljournal.com. N.p., n.d. Web. 02 Dec. 2014. <http://www.nationaljournal.com/energy/breaking-it-down-oil-industry-tax-breaks-20110512>.
8. https://www.americanprogress.org/issues/green/news/2014/02/10/83879/with-only-93-billion-in-profits-the-big-five-oil-companies-demand-to-keep-tax-breaks/
9. Brulle, R.J. 2013. Institutionalizing delay: foundation funding and the creation of U.S. climate change counter-movement organizations, Climatic Change, doi: 10.1007/s10584-013-1018-7 http://www.drexel.edu/~/media/Files/now/pdfs/Institutionalizing%20Delay%20-%20Climatic%20Change.ashx Accessed 16 April 2014
10. Faber, Capitalizing on Environmental Injustice, 15
11. “Meet The Climate Denial Machine.” Media Matters for America. N.p., 28 Nov. 2012. Web. 09 Apr. 2015. http://mediamatters.org/blog/2012/11/28/meet-the-climate-denial-machine/191545
12. McKibben. The Reckoning. 59
13. McKibben. The Reckoning. 59
14. Murphy, Sara. “Nelson Mandela, Divestment, and the End of Apartheid.” N.p., n.d. Web. 09 Apr. 2015. http://www.fool.com/investing/general/2013/12/07/nelson-mandela-divestment-the-end-of-apartheid.aspx
15. Ansar, Atif, Ben Caldecott, and James Tilbury. “Stranded Assets and the Fossil Fuel Divestment Campaign: What Does Divestment Mean for the Valuation of Fossil Fuel Assets?” Stranded Assets Programme, n.d. Web. 30 Nov. 2014.
16. “Beyond Fossil Fuels:The Investment Case for Fossil Fuel Divestment.” Impax Asset Management, n.d. Web. 30 Nov. 2014. 5
17. Ansar, Atif, Ben Caldecott, and James Tilbury. “Stranded Assets and the Fossil Fuel Divestment Campaign: What Does Divestment Mean for the Valuation of Fossil Fuel Assets?” Stranded Assets Programme, n.d. Web. 30 Nov. 2014.
18. “Beyond Fossil Fuels:The Investment Case for Fossil Fuel Divestment.” Impax Asset Management, n.d. Web. 30 Nov. 2014. 8
19. “The Cost of Delaying Action to Stem Climate Change.” White House, n.d. Web. http://www.whitehouse.gov/sites/default/files/docs/the_cost_of_delaying_action_to_stem_climate_change.pdf2
20. “Divestment Commitments.” Fossil Free. N.p., n.d. Web. 02 Dec. 2014. <http://gofossilfree.org/commitments/>
21. “People’s Climate March, Fossil Fuel Divestment, and Flood Wall Street.”350.org. N.p., n.d. Web. 02 Dec. 2014. <http://350.org/press-release/peoples-climate-march-fossil-fuel-divestment-and-flood-wall-street/>.
22. Schwartz, John. “Rockefellers, Heirs to an Oil Fortune, Will Divest Charity of Fossil Fuels.” The New York Times. The New York Times, 21 Sept. 2014. Web. 02 Dec. 2014. <http://www.nytimes.com/2014/09/22/us/heirs-to-an-oil-fortune-join-the-divestment-drive.html?_r=0>.
23. “Northeastern Ranked America’s Greenest University.” News Northeastern. N.p., n.d. Web. 02 Dec. 2014. <http://www.northeastern.edu/news/2014/01/greenuniversity/>.
24. “Our Commitment to Environmental Sustainability.” Our Commitment to Environmental Sustainability. N.p., n.d. Web. 02 Dec. 2014. <http://www.northeastern.edu/president/messages-writings/2007/statements/041207.html>.
25. “HOME PAGE TEXT.” DivestNU. N.p., n.d. Web. 09 Apr. 2015.  http://divestnu.org/
26. “Divestment Commitments.” Fossil Free. N.p., n.d. Web. 09 Apr. 2015. http://gofossilfree.org/commitments/

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“Beyond Fossil Fuels: The Investment Case for Fossil Fuel Divestment.” Impax Asset Management, n.d. Web. 30 Nov. 2014.

“Breaking It Down: Oil-Industry Tax Breaks.” Www.nationaljournal.com. N.p., n.d. Web. 02 Dec. 2014. <http://www.nationaljournal.com/energy/breaking-it-down-oil-industry-tax-breaks-20110512>.

Brulle, R.J. 2013. Institutionalizing delay: foundation funding and the creation of U.S. climate change counter-movement organizations, Climatic Change, doi: 10.1007/s10584-013-1018-7 http://www.drexel.edu/~/media/Files/now/pdfs/Institutionalizing%20Delay%20-%20Climatic%20Change.ashx Accessed 16 April 2014

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“Our Commitment to Environmental Sustainability.” Our Commitment to Environmental Sustainability. N.p., n.d. Web. 02 Dec. 2014. <http://www.northeastern.edu/president/messages-writings/2007/statements/041207.html>.

“People’s Climate March, Fossil Fuel Divestment, and Flood Wall Street.”350.org. N.p., n.d. Web. 02 Dec. 2014. <http://350.org/press-release/peoples-climate-march-fossil-fuel-divestment-and-flood-wall-street/>.

Schwartz, John. “Rockefellers, Heirs to an Oil Fortune, Will Divest Charity of Fossil Fuels.” The New York Times. The New York Times, 21 Sept. 2014. Web. 02 Dec. 2014. <http://www.nytimes.com/2014/09/22/us/heirs-to-an-oil-fortune-join-the-divestment-drive.html?_r=0>.

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