Fossil Free Stanford linked hands in a demonstration to protest Stanford’s alleged support of oil and gas companies. Source: Stanford DailyOn Monday, November 16, over 200 students in Fossil Free Stanford gathered outside President Hennessy’s office again in an effort to compel the Board of Trustees to divest from Stanford’s holdings in fossil fuel companies. Denied entrance by two police officers, the crowd linked hands in a demonstration to protest Stanford’s alleged support of oil and gas companies.
This time, their protests were more urgent; Fossil Free Stanford hopes to compel our endowment to divest prior to the upcoming United Nations climate talks in Paris, in an effort to send a message to the representatives at the U.N. that Stanford, a world-class educational and research institution, condemns the moral failure of fossil fuel industries.
Fossil Free Stanford has a more coherent narrative this time around. The sustainability of our future and our environment rests on the actions of the world’s leaders, and targeting the talks in Paris is a step in the right direction. But it is not enough, and it lacks a holistic understanding of the world.
In an expertly crafted call-to-action video, Fossil Free Stanford summarizes a number of its claims and, in an admirable appeal to ethics, calls upon Stanford to listen to its demands. I cannot disagree with the scientific claims that Fossil Free Stanford presents. Climate change poses a clear and increasingly present danger to the world. That much we can all agree upon. But even the maturer Fossil Free Stanford doesn’t seem to recognize a few basic economic realities that pose a fortiori challenges to what is a relatively uncontroversial cause. To address some of the main claims made in its call-to-action video:
1. 0:41. “It is morally reprehensible to profit from the destruction of the earth.”
Taken in isolation, this is not a controversial statement. However, most of the emerging market economies – the nations that are home to the “people of color” that Fossil Free Stanford have appropriated for its message – still rely on fossil fuels as their primary source of energy. In fact, the fate of many of the less developed countries that Fossil Free Stanford likes to claim that they are protecting are, for better or for worse (probably for the worse), tied to the availability of fossil fuels to power their economies. For strictly rhetorical purposes, isn’t it morally reprehensible to deny these countries a chance at economic development by throttling their supply to fossil fuels? When faced with trade-off between the very existence of our planet as we know it and the economic future of less-developed nations, we can categorically choose the former. But those nations might not be as happy or as understanding with this choice: why, if America was given the chance to industrialize through “dirty” fuels, do they not have the same chance at economic prosperity?
2. 1:03. “Why divestment? Because investment in fossil fuel companies means encouraging them to extract and sell more coal, oil, and natural gas.”
Investment does not compel fossil fuel companies to extract and sell fossil fuels. Prospective earnings do. Investment simply enables them to continue their operations. For better or worse – again, I agree that it’s probably for the worse – there will always be less socially-minded investors that will seek to make a short-term profit from this sort of enterprise. Whether or not universities are part of the invisible hand to fund new ventures is moot; socially indifferent investors and high-frequency traders make divestment a purely symbolic gesture.
3. 1:27. “Fossil Fuel companies have blocked climate legislation and funded climate denial for decades… Stanford’s investments in those companies is supporting their work – is supporting their world.”
It’s certainly concerning that large economic entities can manipulate legislation to fit their interests. But to claim that Stanford’s investments in those companies are supporting them is not completely true. A more technical discussion of public equity investing would include the fact that investing in the stock of public companies does not affect the success or failure of their businesses. Stocks are more speculative investment vehicles that are lagging indicators of a business’s strength: generally speaking, a stock goes up if the business does well. By contrast, a business does not do well if more buyers drive the stock up. To read more about the refutation of this point, please refer to my article from the spring.
Aside from the points in the video, Fossil Free Stanford may be misattributing the nature of some of their claimed “successes.” Yes, the university’s recent divestment from coal may have been because of Fossil Free Stanford’s efforts. Or was it because the coal industry has been suffering due to the rise of natural gas fracking? Was it an economic decision on Stanford’s part to divest from coal, or was it a moral success for Fossil Free?
To this end, Fossil Free Stanford’s demands ignore the geopolitics of natural resource production. OPEC produces somewhere in the ballpark of 40 percent of the world’s crude oil. For geopolitical reasons beyond the scope of this article, OPEC has recently been raising production targets. OPEC doesn’t seem to operate on the same ethical mores that Fossil Free Stanford does: their production schedule will probably remain unchanged whether or not Stanford — or all of the universities in the United States — decide to divest from fossil fuels. One of the reasons that economic and financial pundits speculate is causing OPEC to overproduce so much crude oil is that natural gas is forcing the OPEC countries into economic irrelevance. They are losing leverage because of the emergence of natural gas, so they are creating an oversupply of oil to undercut natural gas prices. You can bet that if and when solar energy becomes a viable enough energy source to replace oil, they will take more aggressive pricing and production strategies to undercut solar energy prices. But aggressively pushing for the development of renewable technologies may be the only constructive way forward, one that addresses each of the points above in the most satisfactory manner. Why can’t Fossil Free Stanford spend its time advocating for that instead?
At best, Fossil Free Stanford is leading an economically unfruitful and politically marginal campaign. At worst, they are diverting attention, resources, and human capital away from more valuable endeavors. Politically, they are diverting attention from those fighting large economic interests that control legislation; scientifically, they are not encouraging the development of renewable technologies; and economically, they are not advocating for investment in clean-energy ventures.