Harvard Divestment Fossil Fuels

Over the past year or more, across the United States, there has been a groundswell of student activism pressing colleges and universities to divest their holdings in fossil fuel companies from their investment portfolios.  On October 3, 2013, after many months of assessment, discussion, and debate, the President of Harvard University, Drew Faust, issued a long, well-reasoned, and – in my view – ultimately sensible statement on “fossil fuel divestment,” in which she explained why she and the Corporation (Harvard’s governing board) do not believe that “university divestment from the fossil fuel industry is warranted or wise.”  I urge you to read her statement, and decide for yourself how compelling you find it, and whether and how it may apply to your institution, as well.

About 10 days later, two leaders of the student movement at Harvard responded to President Faust in The NationAndrew Revkin, writing at the New York Times Dot Earth blog, highlighted the fact that the students responded in part by saying, “We do not expect divestment to have a financial impact on fossil fuel companies …  Divestment is a moral and political strategy to expose the reckless business model of the fossil fuel industry that puts our world at risk.”

I agree with these students that fossil-fuel divestment by the University would not have financial impacts on the industry, and I also agree with their implication that it would be (potentially) of symbolic value only.  However, it is precisely because of this that I believe President Faust made the right decision.  Let me explain.

The Value of Symbolic Action

If divestment would at best be a symbolic action, without meritorious direct financial impacts, can it not nevertheless be important and of great value?  More broadly, can’t symbolic actions be valuable?

One major problem is that symbolic actions often substitute for truly effective actions by allowing us to fool ourselves into thinking we are doing something meaningful about a problem when we are not.

But even if there are such opportunity costs of symbolic actions, can they not still be merited as part of moral crusades (as the students would presumably argue)?  The answer is, in my view, yes.  The problem, however, is that climate change is fundamentally a scientific, economic, and political challenge.  Viewing it as a moral crusade, I fear, will only play into and exacerbate the terrible political polarization that is already paralyzing Washington, a topic about which I have written previously at this blog.

The Climate Impacts of Divestment

Divestment of fossil fuel stocks would hurt, not help efforts to address global climate change.  First, natural gas is the crucial transition fuel to address climate change.  A major reason for the drop in U.S. CO2 emissions is the increased use of natural gas to generate electricity, as documented in this recent report from the U.S. Energy Information Administration.

Second, even if divestment were to reduce the financial resources of coal, oil, and gas companies (which it would not do), this would only serve to reduce research and development at those same companies of carbon capture and storage (CCS) technologies, as well as other potential technological breakthroughs; and could reduce the development of some renewable sources of energy (which the fossil fuel companies are carrying out as part of their financially rational diversification strategies).

The University’s Comparative Advantage

Most important, as I have argued for years, Harvard’s real contributions to fight climate change and promote sound climate change policies will be through our products:  research, teaching, and outreach.  That is how this great university has made a difference on other societal challenges for decades and centuries, and it is how we will make a real difference on this one.

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Three and a half years ago, I posted an essay at this blog about what I saw to be the proper role of individuals and institutions in addressing climate change.  Frequently I refer to my previous blog posts, but today I’m going a step further, and reproducing that one from March, 2010, because it applies so directly to the topic at hand (including its Epilogue at the very end):

What’s the Proper Role of Individuals and Institutions in Addressing Climate Change?

Posted on March 8, 2010 by Robert Stavins

This may seem like a trivial question with an obvious answer.  But what really is the proper role for individuals and institutions in addressing climate change?  An immediate and natural response may be that everyone should do their part.  Let’s see what that really means.

Decisions affecting carbon dioxide (CO2) emissions, for example, are made primarily by companies and consumers.  This includes decisions by companiesabout how to produce electricity, as well as thousands of other goods and services; and decisions by consumers regarding what to buy, how to transport themselves, and how to keep their homes warm, cool, and light.

However, despite the fact that these decisions are made by firms and individuals, government action is clearly key, because climate change is an externality, and it is rarely, if ever, in the self-interest of firms or individuals to take unilateral actions.  That’s why the climate problem exists, in the first place.  Voluntary initiatives – no matter how well-intended – will not only be insufficient, but insignificant relative to the magnitude of the problem.

So, the question becomes how to shift decisions by firms and individuals in a climate-friendly direction, such as toward emissions reductions.  Whether conventional standards or market-based instruments are used, meaningful government regulation will be required.

But where does this leave the role and responsibility of individuals and institutions?  Let me use as an example my employer, a university.  A couple of years ago, I met with students advocating for a reduced “carbon foot-print” for the school.  Here is what I told them.

“I was asked by a major oil company to advise on the design of an internal, voluntary tradable permit systems for CO2 emissions.  My response to the company was ‘fine, but the emissions from your production processes — largely refineries — are trivial compared with the emissions from the use of your products (combustion of fossil fuels).  If you really want to do something meaningful about climate change, the focus should be on the use of your products, not your internal production process.’  (My response would have been different had they been a cement producer.)  The oil company proceeded with its internal measures, which – as I anticipated – had trivial, if any impacts on the environment (and they subsequently used the existence of their voluntary program as an argument against government attempts to put in place a meaningful climate policy).”

My view of a university’s responsibilities in the environmental realm is similar.  Our direct impact on the natural environment — such as in terms of CO2 emissions from our heating plants — is absolutely trivial compared with the impacts on the environment (including climate change) of our products:  knowledge produced through research, informed students produced through our teaching, and outreach to the policy world carried out by faculty.

So, I suggested to the students that if they were really concerned with how the university affects climate change, then their greatest attention should be given to priorities and performance in the realms of teaching, research, and outreach.

Of course, it is also true that work on the “greening of the university” can in some cases play a relevant role in research and teaching.  And, more broadly — and more importantly — the university’s actions in regard to its “carbon footprint” can have symbolic value.  And symbolic actions — even when they mean little in terms of real, direct impacts — can have effects in the larger political world.  This is particularly true in the case of a prominent university, such as my own.

But, overall, my institution’s greatest opportunity — indeed, its greatest responsibility — with regard to addressing global climate change is and will be through its research, teaching, and outreach to the policy community.

Why not focus equally on reducing the university’s carbon foot-print while also working to increase and improve relevant research, teaching, and outreach?  The answer brings up a phrase that will be familiar to readers of this blog – opportunity cost.  Faculty, staff, and students all have limited time; indeed, as in many other professional settings, time is the scarcest of scarce resources.  Giving more attention to one issue inevitably means – for some people – giving less time to another.

So my advice to the students was to advocate for more faculty appointments in the environmental realm and to press for more and better courses.  After all, it was student demand at my institution that resulted in the creation of the college’s highly successful concentration (major) in environmental science and public policy.

My bottom line?  Try to focus on actions that can make a real difference, as opposed to actions that may feel good or look good but have relatively little real-world impact, particularly when those feel-good/look-good actions have opportunity costs, that is, divert us from focusing on actions that would make a significant difference.  Climate change is a real and pressing problem.  Strong government actions will be required, as well as enlightened political leadership at the national and international levels.

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Epilogue:  After I posted the above essay, I was reminded of an incident that took place many years ago (before I came to Harvard for graduate school, in fact) when I was working full-time for the Environmental Defense Fund in Berkeley, California, under the inspired leadership of the late (and truly great) Tom Graff, the long-time guru of progressive California water policy.  EDF was very engaged at the time in promoting better water policies in California, including the use of trading mechanisms and appropriate pricing schemes for scarce water supplies.  A prominent national newspaper which was not friendly to EDF’s work sent a reporter to EDF’s Berkeley office to profile the group’s efforts on water policy in the State.  A staff member found the reporter in the office bathroom examining whether EDF had voluntarily installed various kinds of water conservation devices in its plumbing.  Our reaction at the time was that whether or not EDF had voluntarily installed water conservation devices was simply and purely an (intentional) distraction from the important work the group was carrying out.   After several decades, my view of that incident has not changed.

Photo Credit: Divestment and Fossil Fuels/shutterstock