Category: Economics

Matters of money

Shareholder activism and fossil fuel corporations

One argument routinely used against divestment from fossil fuels is that, as investors, institutions like universities and pension funds might be able to discourage the most wasteful and damaging new fossil fuel investments and encourage fossil fuel corporations to use their resources and expertise to advance decarbonization.

In the U of T divestment brief we explained our doubts about this justification. Nonetheless, it remains an approach that some are trying:

Bruce Duguid of Hermes Investment Management, who worked with bp on behalf of Climate Action 100+, says that disclosure will help investors understand if the billions which bp continues to spend on oil and gas creates too much risk. bp will describe how big new capital projects stack up against the Paris goal of keeping warming “well below” 2°C relative to preindustrial times. Equinor, Norway’s state behemoth, agreed to something similar in April. As with Shell, bp’s resolution does not require it to cut oil and gas output. Greenpeace, a combative ngo, blocked entrances to bp’s headquarters in London ahead of its annual meeting on May 21st.

…

For the time being, though, Shell, bp and ExxonMobil remain members of the American Petroleum Institute, which has sought to ease rules on emissions of methane, a potent greenhouse gas. They also maintain links with the Western States Petroleum Association, which last year fought a carbon tax in Washington state. bp spent over $13m directly to help defeat a ballot initiative in favour of the levy.

…

Others are beginning to question the value of shareholder engagement. The Church of England has said it will divest by 2023 if no advances are made. “Investors’ patience is not limitless,” says Mr Logan. “It’s going to be measured in years, not decades.”

There are many reasons to doubt how meaningful shareholder activism can be, and to ask whether it’s a “shadow solution” that creates the impression that action on climate change will happen, while really justifying the continuation of the status quo. These firms have an enormous financial interest in keeping the fossil fuel reserves they own usable, which in turn means blocking climate change action. Furthermore, neither executives nor shareholders can be expected to meaningfully support a transition to decarbonization which would make these firms irrelevant.

Delaying climate action is the most expensive thing we will ever do

Figure from my 2009 blog post, showing why delaying the global peak year for greenhouse gas pollution emissions means having to cut emissions much faster in the 2020s and 2030s to achieve the same temperature target:

Emissions pathways to give 75% chance of limiting global warming to 2ºC

Tweeted by Greta Thunberg today:

All this delay mutually reinforces the risks of catastrophes. People keep investing in fossil fuels, so they have more to lose from decarbonization. We keep putting off emission cuts, meaning that their eventual rate will need to be much more draconian than if we had started promptly when the risk of catastrophic climate change became well-recognized in the 1990s. We’re committing ourselves to more severe climate change effects, meaning more forced relocation, severe droughts, extreme weather events, and adaptation costs in general measured in both wealth and lives. We’re missing the chance to build global cooperation and overcome the parochial one-country-mindset mentality that makes global environmental problems into collective action problems.

Self-denial as a virtue

Perhaps a central virtue for the world of the future will be self-denial, and specifically channeling covetous feelings toward sustainable ends: not collecting 10,000 Barbie dolls or flying into low Earth orbit, but doing instead things that will enrich and distinguish you in the community without heavy ecological effects, like writing, making art, and theatre.

The importance of self-denial extends beyond avoiding the appetites which John Borrows described in “Seven Generations, Seven Teachings: Ending the Indian Act”: “Our windigo stories strongly teach the consequences of self-destructive cannibalistic consumption. Individuals and entire communities can be eaten up by those possessed by unrestrained appetites”

For instance, self-denial is central to data and network security: splitting up information into compartments, designing trust systems that don’t rely on the assumption that people will act well or that one person should have all the control, even choosing passwords too complex to remember yourself.

We may need to deny impulses of all sorts: the desire to travel, the desire to maintain close personal relations through in-person contact, the spendour and variety of what our erosive capitalist society provides. I considered “corrosive” to take advantage of the consonance, but “erosive” is really the right word: we have a global system of production and consumption that eats away at the material adjacent to it, breaking it apart and moving it like a riverbank getting eroded.

We need to learn to live so that erosive process comes into balance with what the planet can survive, and crucially do so through a global project of decarbonization with the necessary scope and ambition to keep warning anywhere near 2 ˚C above pre-industrial levels.

Quebec floods

This Montreal Gazette story opens with a line which I expect will become increasingly commonly heard as climate change impacts worsen: “Premier François Legault said Sunday it might be necessary to force people in flood zones to move away to avoid taxpayers having to constantly pay to repair their homes.”

That seems sure to be one of the big sources of disruption: people living in especially vulnerable places, getting hit over and over by extreme weather, and facing pressure to relocate, all while feeling put out and entitled to keep living as they did before.

People who currently profit from fossil fuels want compensation if they are forced to stop, and people suffering the consequences of fossil fuels want compensation for their losses. The anonomyzing gulf between emissions in one place and impacts in another threaten to leave everyone unsatisfied. Meanwhile, more and more places whose habitability we have taken for granted may become unlivable as storms worsen, sea levels rise, and water scarcity gets harsher.

Greta Thunberg to the British Parliament

I was fortunate to be born in a time and place where everyone told us to dream big; I could become whatever I wanted to. I could live wherever I wanted to. People like me had everything we needed and more. Things our grandparents could not even dream of. We had everything we could ever wish for and yet now we may have nothing.

Now we probably don’t even have a future any more.

Because that future was sold so that a small number of people could make unimaginable amounts of money. It was stolen from us every time you said that the sky was the limit, and that you only live once.

You lied to us. You gave us false hope. You told us that the future was something to look forward to. And the saddest thing is that most children are not even aware of the fate that awaits us. We will not understand it until it’s too late. And yet we are the lucky ones. Those who will be affected the hardest are already suffering the consequences. But their voices are not heard.

Is my microphone on? Can you hear me?

Around the year 2030, 10 years 252 days and 10 hours away from now, we will be in a position where we set off an irreversible chain reaction beyond human control, that will most likely lead to the end of our civilisation as we know it. That is unless in that time, permanent and unprecedented changes in all aspects of society have taken place, including a reduction of CO2 emissions by at least 50%.

And please note that these calculations are depending on inventions that have not yet been invented at scale, inventions that are supposed to clear the atmosphere of astronomical amounts of carbon dioxide.

Furthermore, these calculations do not include unforeseen tipping points and feedback loops like the extremely powerful methane gas escaping from rapidly thawing arctic permafrost.

Nor do these scientific calculations include already locked-in warming hidden by toxic air pollution. Nor the aspect of equity – or climate justice – clearly stated throughout the Paris agreement, which is absolutely necessary to make it work on a global scale.

We must also bear in mind that these are just calculations. Estimations. That means that these “points of no return” may occur a bit sooner or later than 2030. No one can know for sure. We can, however, be certain that they will occur approximately in these timeframes, because these calculations are not opinions or wild guesses.

These projections are backed up by scientific facts, concluded by all nations through the IPCC. Nearly every single major national scientific body around the world unreservedly supports the work and findings of the IPCC.

Did you hear what I just said? Is my English OK? Is the microphone on? Because I’m beginning to wonder.

She’s right. Even among advocates of climate action there has been a deep and long-running unwillingness to be honest about what controlling climate change requires and the suffering that will arise if it isn’t done.

I think all the political leaders from this time (the carbon tax advocates and the clueless climate deniers) will be remembered as failures who had all the necessary information and technology but who still plunged humanity into the abyss because they were too controlled by the status quo to do otherwise.

Whether that abyss will just be a great amplification of the climate change effects we have already seen or something that challenges or destroys human civilization will depend on how quickly we can disempower the leaders holding us back and listen to people like Greta.

Alberta’s 2019 election

The election playing out in Alberta seems to have a lot in common with what has been happening with the federal Liberals, at least for those who see the urgency of decarbonizing to control climate change. There is a semi-progressive government that thinks that it has strong climate credentials because it has a long term plan. At the same time, neither the Alberta NDP nor the federal Liberals properly appreciate the scale and seriousness of climate change, which is why they are willing to keep backing new fossil fuel projects.

One Calgary Herald article today had an interesting comment:

Kenney says that if he takes office after next week’s vote, he’ll abolish the carbon tax and scrap the NDP’s 100 megatonne cap on oilsands emissions.

Federal sources note that the loss of the provincial carbon tax isn’t a big problem to them because Ottawa would simply impose its own tax.

But the emissions cap is a huge deal for the Trudeau Liberals.

They say removal of that cap could take Canada out of compliance with the Paris Agreement on climate change.

This is a reminder for the other perennial Liberal/NDP line on climate change: whatever the faults of our approach, the Conservatives will be worse. There is truth to that, and it provides the second prong of the dilemma for voters in Canada who think rapid decarbonization is urgent and essential.

2050 Post-Carbon conference, McKibben, and conservatives on climate

Today I was at a conference on “Building a Post-Carbon Future” by 2050. It was certainly not bad, but I felt there was a huge disjoint between the Paris Agreement targets frequently referenced (to keep global warming to less than 1.5–2.0 ˚C above pre-industrial levels) and the scale and ambition of the policies and actions actually proposed to get us there. Say what you like about the people who argue that climate change is fundamentally a symptom of capitalism, and that we need to get rid of the latter to solve the former, but at least they have a plan.

One frequent line of discussion in my one-on-one talks with today’s attendees was about what we need to say to get the general public to act in the right way and solve the problem. I’m very skeptical about this kind of approach. In everyday life, I think presenting selective or misleading information to try to manipulate behaviour is generally a bad plan, primarily because of the overconfidence it demonstrates about what explains a person’s current behaviour and how to alter it. Think of the arrogance of deciding based on the observable behaviours a person has shown you that you understand the deep workings of their mind (workings it would probably take them a considerable effort to think through and explain) so well that you can craft a tailored intervention that will shift that whole cognitive machine onto the track you want. Also, taking this approach throws away the opportunity to use that person’s judgment and knowledge to try to solve your problem: you’re taking it all on yourself because you’re assuming you’re smarter, or you know what ought to be done, or that the other person will never act in the right way based on complete and accurate information.

Anyhow, I am skeptical about political arguments like: “You need to give people hope or they won’t act” or: “If you tell people the true seriousness of climate change they will become apathetic”. We have never solved a problem like this before, so nobody can be really confident about the long-term consequences of any approach.

This evening’s keynote address was by Bill McKibben. To me it was passionate and well spoken and also all quite familiar: summaries of where 350.org came from, their pipeline resistance campaign, and their involvement with divestment. It was certainly well-delivered and got a solid response from the sold-out audience.

After the talk I spoke with McKibben briefly. He recognized the t-shirt I wore from the summer 2011 Keystone XL arrests in Washington D.C. Prompted by my concern about risks in trying the fight against climate change so closely to a collection of other left-progressive causes, I asked him how we can enact climate change policies that can survive changes of government, and how we can get conservatives on board.

He said that in the short term he thinks we can’t get conservatives on board, and that the priority task needs to be breaking the power of the fossil fuel industry. Without that, policies like the Green New Deal can’t succeed. He told me: “This is why we need movements”. He also pointed out that there have been climate policies which have been helpful and which have survived changes of government, like the B.C. carbon tax.

I don’t know how satisfying an answer I find that. The fossil fuel industry certainly hasn’t only sought to influence or bribe the politicians of the right. I feel like the problem is more ideological — related to some of what I discussed in my paper on resource inequality and have discussed in the ‘why is this important’ sections of many justifications of my PhD work. Humanity’s new ability to dramatically affect all life on the planet is a sort of shock that all political philosophies need to incorporate. Those like liberalism and socialism which from the beginning have incorporated some conception of interdependence among people who aren’t kin are perhaps more straightforwardly equipped to start incorporating a species-level or an Earth-level ethic. By contrast, individualistic conservatism founded in a (false) notion that people can somehow go it on their own is profoundly undermined by a problem where the unintended consequences of one person’s actions anywhere in the world are felt by everyone else for centuries. Resolving that contradiction in a genuine way seems to require jettisoning a lot of the emphasis on personal autonomy which is dear to conservatives, which perhaps helps explain why so many have been willing to just deny that the problem exists.

I would love to see a longer account from McKibben about how reducing the power of the fossil fuel industry solves the problem of each new government facing the temptation to scrap unpopular taxes and restrictions meant to protect the climate, or to tap any fossil fuel reserves which we have left unused for the greater good. Likewise, it would be good to see a theory for winning conservative support for climate stabilization policies, over any kind of plausible timescale. There are too many people who hold such views and support such parties for us to reject the need to appeal to them, even if activists are more comfortable dealing with people who they broadly agree with on other issues, and even if they have crafted their movement to be progressive and diverse in the ways they value.