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Is demonizing “big carbon” a strategy or a copout?

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.

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Severin Borenstein View All

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 and a member of the Board of Governors of the California Independent System Operator.

20 thoughts on “Is demonizing “big carbon” a strategy or a copout? Leave a comment

  1. It is an important and I believe entirely conservative economic position to demand that businesses and especially manufacturers bear the entire social cost of their products, and build these costs into the prices they charge. Displacing costs to be borne by community or the commons is a form of subsidy for that business by the commons, and inhibits the proper market choice buyers make regarding products. Markets cannot properly operate with significant costs of products being latent.

  2. In Thomas Kuhn’s book “The Structure of Scientific Revolutions” he makes the point that paradigms frame scientific knowledge. Borenstein’s paradigm doesn’t seem to meet the empirical test. It isn’t whether fossil fuels are consumed or not consumed, taxed or not taxed, divested or not divested. It is where fossil fuel use is located. Consider the following.

    California has nine out of the worst 25 cities for air pollution in the U.S.: Los Angeles, Bakersfield, Visalia, Fresno, Sacramento, El Centro, San Diego, Hanford and Merced. Texas only has two cities on the list: Dallas and Houston.

    The major causes of smog in Dallas and Houston are cars and plastics, oil and gas production. Most other Texans live in plains and plateaus where any potential toxic substances are dissipated quickly into the atmosphere. Texas is topographically greener than California despite its greater energy usage, but 12 million less population.

    Texas relies on coal fuel for 32 percent of its energy use, while California only depends on coal for 3.7 percent of its total energy usage (but 15.5 percent of its electricity usage). Texas imports coal fuel from Wyoming to run TXU power plants in Dallas, while California imports coal powered electricity from Utah to light up Los Angeles and about a dozen other cities in Southern California. Texas imports its pollution; California exports it. With a much higher usage percentage of so-called “dirty” coal-generated power than California, one would think that Texas would suffer from greater air pollution, incidence of asthma and lung cancer. But it doesn’t. Why?

    The answer is most Californians live in nine topographic basins along the coastline that serve as traps for smog. The major cause of smog in California cities is an inversion layer of warm air above cooler air that makes a toxic trap. Natural smog traps cause smog, not only man-made airborne substances. The solution to pollution is dilution.

    How many California environmentalists want to move to, say, San Antonio to “save the planet?” My guess is none. It is easier to continue to live in the self-righteous cocoon of the Anti-Carbon Paradigm in California. And what makes up that cocoon is partly sociological, not scientific. In fact, most environmentalists have left the environment (the traps) out of environmental science. For example, sick buildings were created after energy tight-building codes were adopted which trapped toxic substances in buildings (asbestos, formaldehyde, radon, ricin, etc.), raising the issue of green iatrogenic disease.

    The same environmental trap phenomenon applies to water quality. Perchlorate is nearly everywhere. In Chile it occurs naturally in what California would call a toxic dose, but there are no measurable worse health from it. In West Texas perchlorate occurs naturally at low levels. In Southern California, with its many underground water basins, it occurs in what is considered toxic levels because it becomes concentrated in subsurface perc traps.

    Historically, California has been a post-modern (post-industrial) culture ever since it pushed the railroads out of controlling the state legislature. It has not merely demonized big railroads, big oil and big banks, it has also demonized the hard social processes of rationalization, mechanization, quantification, commodification, and industrialization (re: Max Weber). California’s cognitive elites want bucolic industrialization and with it green power at any price. It is important to understand the paradigms we live by and base policies on as well as the socio-cultural environment that support it.

  3. I believe your approach and that of UCS set the boundaries of the carbon dialogue. In fact, what UCS did was a service in that it focuses the debate on how we deal with 90 entities based on carbon. They are not “the evil empire” but rather evolutionary industries who scaled-up and developed global distribution networks for concentrated energy resources (coal, natural gas, petroleum). The coal and petroleum industries have spent hundreds of millions of dollars to discredit groups and and advocates to address reducing carbon for climate change and faulty claims against the potential of renewable energy and high value energy efficiency as a rational energy alternative. The carbon divestiture approach is rationale in that our institutions shouldn’t be promoting carbon intensity in a world already showing signs of rapid climate change. One rule seems true – there are no silver bullets in addressing carbon intensity, rather silver buckshot. There will need to be lots of parallel approaches — some harsh, some friendly, to move the 7 billion+ people on this planet more rapidly to a more environmentally and socially benign energy path. Scott Sklar, Adjuct Professor, The George Washington University, and Chairman, Steering Committe, the Sustainable Energy Coalition (Washington, DC)

  4. Leaving aside *all* of the inflammatory talk, a divestment campaign can do these things:
    1) Bypass the enormous political power of big carbon, particularly coal companies, who through their political contributions have kept *legislation* from dealing with the carbon issue.
    2) Serve as a spotlight to draw more attention to the issue (and no, it’s not getting enough media attention)
    3) Make a moral stand that can come, in time, to exert pressure on everyone including consumers to take steps to “divest” by saving energy where we can.
    Don’t forget that divestment didn’t make Apartheid end- but it helped. So soon after the death of Nelson Mandela, we shouldn’t need to be reminded of that.

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