Are we really being tricked, bullied or seduced into burning fossil fuels? That seems to be the message behind two arguments made recently by prominent advocates for climate action: we should blame the producers of fossil fuels for the failure to make progress on reducing greenhouse gas emissions.
The Union of Concerned Scientists made a splash last week publicizing new research that traces at least 63% of the GHG released since 1751 back to 90 companies. In case you missed what you are to make of this finding, the UCS article says “And I bet you already know who’s most responsible—Chevron, ExxonMobil, and Peabody Coal are all among the top producers, along with state-owned organizations such as Saudi Aramco. This new research can be a game changer in our efforts to reduce global warming emissions…”
Really? If those evil fossil fuel companies would just stop producing their energy poison, the problem would be solved? Of course, if they did greatly reduce their production, the cost of gasoline, heating oil, electricity and natural gas would soar. How would consumers respond? I bet it wouldn’t be with a collective “thank you.” In fact, consumers (and government agencies) seem a lot more concerned that energy prices are too high already than that companies are producing abundant fossil fuels and keeping prices too low.
The UCS media push is just feel-good advocacy that obscures the fundamental problem: fossil fuels are cheap. Individually we each like to have cheap energy, but collectively the impact of burning all those fossil fuels may be devastating to the earth’s climate and its inhabitants.
Even if UCS doesn’t get this, it appears from the comments on their Facebook page that readers do. Many of the contributors identify themselves as supporters of UCS, but say that the real problem is us, the people who buy all those products that big carbon produces. They’re right. It’s just a copout to blame the producers of products that we have demanded, and benefitted from, for more than a century. We haven’t been misled or forced into buying those carbon-rich goods. [Late Addition: The Onion made this point nicely a couple weeks ago in their own story.]
I am sympathetic to the concern that some of those big carbon companies have financed and touted the junk science that has been used to undermine climate change policies. But that’s not all of them and that’s an issue quite apart from their role in producing fossil fuels. Any supporter of junk climate science deserves our scorn, whether they are producers or consumers of fossil fuels.
At first glance, the UCS approach may not seem that different from the movement for divestment of financial interest in fossil fuel companies. Divestment has gotten some traction at Berkeley where there is an online petition for members of the community to demand UC end its investments in big carbon businesses. My Berkeley colleague, Professor Dan Kammen, last week championed it in an op-ed in the campus paper.
Kammen doesn’t present this as shaming, but as a moral imperative not to have a financial stake in burning more fossil fuels. I get that, though there is an obvious inconsistency when we refuse to be investors in these companies, but steadfastly remain their customers by driving, flying, heating and electrifying our lives with fossil fuels, and consuming products that do the same. Using less fossil fuel energy is what will actually reduce greenhouse gases.
What will divestment do? Probably nothing at all. There is a big financial world out there that will seamlessly substitute for our capital if we refuse to invest in these companies. The South Africa divestment movement had impact in the 1980s only when a large share of the financial world bought into the cause. That seems very unlikely to happen in the case of fossil fuel companies, especially when we continue to be their best customers.
But what if divestment spread enough to make it harder for the dirty-200 (the companies that the petition targets) to access funds, effectively raising their cost of capital. That would lead them to invest less in finding and producing fossil fuels. Less investment means lower supply, which would cause energy prices to increase. And that would reduce the quantity of fossil fuels burned.
But wait! If that’s where we’re going, there is a much more direct and satisfying route: a tax on greenhouse gases. The tax would make it less profitable to sell dirty energy and less attractive to buy it. And here’s another big advantage: if divestment were to lower supply and raise prices, the extra money would go to energy company shareholders. When a carbon tax reduces supply and increases price, the extra money goes to the government coffers, where it can be used to invest in alternative energy or to lower regressive levies like the payroll tax.
Some may say that there just isn’t sufficient support for a tax on GHGs. Maybe, but it seems more likely than divestment to have a real impact on the production of fossil fuels. Perhaps a divestment petition has greater symbolic value than fighting for a GHG tax – it certainly identifies tangible “enemies” in the fight — but a GHG tax would do more to actually address climate change.
Symbolic actions have their place, I suppose. At this point, I’m not opposed to divestment, but indifferent. (See Rob Stavins’ blog post a couple months ago for a slightly different take on divestment at Harvard.) Still, to the extent that it takes organizational energy away from the real changes we need to make in order to reduce GHG emissions – on both the demand and the supply side — it could do more harm than good.
So, to fellow members of the UC community, I say sign the petition or don’t, but then quickly return to the important matters of creating science and policy changes that can make a real difference to the climate.
Severin Borenstein is E.T. Grether Professor of Business Administration and Public Policy at the Haas School of Business and Faculty Director of the Energy Institute at Haas. He has published extensively on the oil and gasoline industries, electricity markets and pricing greenhouse gases. His current research projects include the economics of renewable energy, economic policies for reducing greenhouse gases, and alternative models of retail electricity pricing. In 2012-13, he served on the Emissions Market Assessment Committee that advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. He chaired the California Energy Commission's Petroleum Market Advisory Committee from 2015 until its completion in 2017. Currently, he is a member of the Bay Area Air Quality Management District's Advisory Council.