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Should Universities Divest From Fossil-Fuel Companies?

Student and activist groups have been urging universities to take a stand against climate change by divesting from companies that produce oil, natural gas, or coal. In a Yale Environment 360 debate, activist Bob Massie makes the case for divestment as a necessary tool in pushing for action on climate, while economist Robert Stavins argues it would be merely symbolic and have little effect. 

Point: Why American Universities Must Divest from Fossil-Fuel Companies by Bob Massie

With our leaders repeatedly failing to take action on climate, divestment from fossil-fuel companies is one of the few effective strategies remaining. Climate change is an urgent moral crisis, and our universities and institutions must take a stand.

Let’s say that you are sitting in the front passenger seat of a car that is several miles from the Grand Canyon, conversing with the driver and other passengers about the importance of vehicle safety. The conversation might meander from technical questions about automobile design, to a discussion of the role of alcohol in causing accidents, to the need for top-notch driver education.

And let’s assume furthermore that you notice that the amiable driver is barely paying attention to the road and that the car is headed straight for the edge of the canyon. You might suggest taking another road. A mile further on, you might suggest the driver turn around. But what would you do if you only had a few seconds left, and the driver and passengers were still intently discussing technicalities while the car was about to sail off the brink?

Divestment protest

Photo credit: James Ennis/Flickr. Students at Tufts University marched in support of divestment last spring.

The debate about fossil-fuel divestment is, more than anything, about urgency. It is one of the few remaining strategies likely to awaken the leaders of our institutions, businesses, and government to the powerful necessity of massive and immediate action. Those who oppose divestment from fossil-fuel companies embrace arguments that might have been appropriate a generation ago — that tackling climate change is primarily a technical problem, that the most important form of action is research, that reasoned discussion will eventually win over skeptics, and that one should not pursue empty gestures that might upset those who still need to be persuaded. All this might be true if the dangers were approaching us at a languid pace.

Today, however, climate change is approaching at high speed. Every citizen — including the students, faculty, and alumni of major universities — must act decisively to move us from the path of catastrophe. Sadly, many of those who are charged with the long-term well-being of our people, our institutions, and our nation resemble the driver and passengers of that ill-fated car. Though we are headed toward what the United Nations has called "an existential threat to human existence" and what the U.S. Secretary of State recently termed "the world’s most fearsome weapon of mass destruction," our leaders have failed. Our only salvation will come from the bottom up, through massive demonstrations of public discontent represented by such actions as divestment.

Divestment has become the right tool because it is smart, legal, effective, and critically necessary. Some, like Harvard University president Drew Faust, have argued that it would undermine the university’s mission of education and research, which they affirm is the more likely path to change. But given that studies have shown that moving out of fossil fuel would not impose financial costs, why would divestment be a threat to education?

Divestment is smart because fossil fuel companies are on a collision course with reality, which in turn could devastate not only our planet (as if that weren’t enough) but also the companies’ financial value. They are investing hundreds of billions of shareholder dollars in discovering, securing, pumping, and marketing more fossil fuels at the very moment that we can no longer afford to use them. We know from various studies, for example, that there are more than five times the total amount of fossil fuel reserves than the world can safely burn. Either companies will obtain and use these resources and drive the planet toward destruction, or they will finally be restrained, stranding their assets with crippling financial impact on the value of their stocks. Universities that hold on to these stocks are not just risking their assets, but publicly proclaiming — in their capacity as owners — that they endorse this business and welcome its profits.

There is no fiduciary duty for any institution to own what it believes to be a bad stock, and today the shares of a company whose managers are systematically ignoring the avalanche of risks pouring down upon them is a particularly dangerous holding.

We are long past the moment when the impact of climate change can be described as a technicality. We are facing a moral crisis. We know from the history of every social movement in America that governments change direction when the people seize on a matter as one affecting our core beliefs. Such protests are far from symbolic; they affect the core of our identity and values as a nation.

As someone who was deeply involved in the South African divestment movement in the 1980s, and who has been advocating for climate action for nearly 25 years, I believe that only the uninformed can argue that divestment is not needed or does not work. In the case of South Africa, the causal sequence was incontrovertible: The protests led by students and the subsequent sale of stock and barring of purchases by universities, churches, and municipalities played a decisive role in the end of apartheid. Divestment transformed the debate in the U. S. Congress, where in 1986 a Republican majority passed a sanctions bill over the veto of their own president, Ronald Reagan; in corporate boardrooms, when most major firms chose to withdraw; and in the South African government, which released Nelson Mandela and negotiated a new constitution.

Given the record of inaction by the leaders at the top, we now know that fossil-fuel divestment has become urgently necessary. We should be chastened but not surprised that it is the youth of America who are demanding action through organizations like 350.org. In an ideal world, one would expect our leaders to lead wisely, just as we expect drivers to drive safely. But young people have tired of the aimless conversations emanating from the driver and the backseat, while they, with eyes on what lies ahead, can see that we are speeding toward the edge. They are right in seizing the wheel, and they are justified in raising their voices and demanding an abrupt change in direction.

Counterpoint: Divestment Is No Substitute For Real Action on Climate Change by Robert Stavins

Having universities divest from fossil fuels is a feel-good measure that would do nothing to address the problem of global climate change. Instead, we should be focusing on efforts to push for strong government action.

Recently, there has been a groundswell of student activism pressing colleges and universities across the United States to divest their holdings in fossil fuel companies from their investment portfolios. Lively discussions and debates have ensued on campuses regarding the potential wisdom of such divestment of stocks in companies — large and small — that produce coal, petroleum, and natural gas.

It is not for me to recommend what actions other universities’ governing bodies should or should not take. Instead, I will try to explain why I endorse the path taken by my own institution, Harvard University.

Divestment protest

Photo credit: James Ennis/Flickr. Tufts University trustees voted last month not to divest, despite student protests.

On October 3, 2013, after many months of assessment, discussion, and debate, Harvard’s president, 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 Harvard’s governing board did 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 other institutions.

About 10 days later, two leaders of the student movement at Harvard responded to Faust in The Nation, writing in part, "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 therefore be (potentially) of symbolic value only. However, it is precisely because of this that I believe Faust made the right decision. Let me explain.

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

In specific cases, the answer can be yes. But a 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)? Again, the answer, in my view, can sometimes be yes. But 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.

Furthermore, I believe that 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 recent drop in U.S. CO2 emissions is the increased use of natural gas rather than coal to generate electricity, as documented in a 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 lead those companies to cut back on research and development of carbon capture and storage (CCS) technologies, as well as other potential technological breakthroughs; it could also reduce the development of some renewable sources of energy, which the fossil fuel companies are pursuing as part of their financially rational diversification strategies.

But where does this leave the role of a university? A few years ago, I met with students at Harvard who were advocating for a reduced "carbon footprint" for the university. I told them a story from my own experience:

When a major oil company asked me to advise it on the design of an internal, voluntary tradable permit system 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 meaningful climate regulation; they argued that they were already doing their part.


My view of a university’s responsibilities in the environmental realm is similar. Our direct impact on the natural environment — such as CO2 emissions from our heating plants (or holding stock in fossil-fuel companies) — is absolutely trivial compared with the impacts on the environment (including climate change) of our products: knowledge produced through research, informed students produced through 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.

But why not focus equally on reducing the university’s carbon footprint while also working to increase and improve relevant research, teaching, and outreach? The answer brings up a phrase I mentioned earlier — 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.

My bottom line? Try to focus on actions that can make a real difference, such as working through the political world to put in place a meaningful economy-wide carbon price, rather than actions that may feel good or look good but have relatively little real-world impact. That’s particularly important when those feel-good/look-good actions 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.

The real contributions of universities to fighting climate change and promoting sound climate policies will be through our products: research, teaching, and outreach. That is how great universities have made a difference on other societal challenges for decades and centuries, and — in my view — it is how they will make a real difference on this one.

What do you think? Leave a comment below.

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