Are you ready for the summer? Ready for the hot temperatures? And ready to take the climate movement to the next level?
It’s SUMMER HEAT! 350.org just announced their summer initiative, and it’s going to be exciting.
Exciting news!
Harvard Law School students voted 67% in favor of fossil fuel divestment, and 40% of the student body voted. That’s HUGE!
Now the HLS student government is sending a letter to President Faust asking her to work with student leaders to divest from the top 200 fossil fuel companies.
Click the link below for the full article and some fantastic quotes from HLS student leaders.
Onwards!
These issues are becoming serious considerations for investors. They should be highest priority for higher education institutions whose purpose is to invest in the futures of its students. Fossil fuels are not working for our future. So it’s time to divest!
MARKETS can misprice risk, as investors in subprime mortgages discovered in 2008. Several recent reports suggest that markets are now overlooking the risk of “unburnable carbon”. The share prices of oil, gas and coal companies depend in part on their reserves. The more fossil fuels a firm has underground, the more valuable its shares. But what if some of those reserves can never be dug up and burned?
If governments were determined to implement their climate policies, a lot of that carbon would have to be left in the ground, says Carbon Tracker, a non-profit organisation, and the Grantham Research Institute on Climate Change, part of the London School of Economics. Their analysis starts by estimating the amount of carbon dioxide that could be put into the atmosphere if global temperatures are not to rise by more than 2°C, the most that climate scientists deem prudent. The maximum, says the report, is about 1,000 gigatons (GTCO2) between now and 2050. The report calls this the world’s “carbon budget”.
Existing fossil-fuel reserves already contain far more carbon than that. According to the International Energy Agency (IEA), in its “World Energy Outlook”, total proven international reserves contain 2,860GTCO2—almost three times the carbon budget. The report refers to the excess as “unburnable carbon”.
Most of the reserves are owned by governments or state energy firms; they could be left in the ground by public-policy choice (ie, if governments took the 2°C target seriously). But the reserves of listed oil companies are different. These are assets developed using money raised from investors who expect a return. Proven reserves of listed firms contain 762GTCO2—most of what can prudently be burned before 2050. Listed potential reserves have 1,541GTCO2 embedded in them.
So companies and governments already have far more oil, gas and coal than they need (again, assuming temperatures are not to rise by more than 2°C). Logically, the response to this would be for governments to leave their reserves untouched and for companies to run theirs slowly down, returning more of what they earn to shareholders. Neither of these things is happening. State-owned companies are taking an increasing share of total energy output. And in 2012, says Carbon Tracker, the 200 largest listed oil, gas and coal companies spent five times as much—$674 billion—on developing new reserves as they did returning money to shareholders ($126 billion). ExxonMobil alone plans to spend $37 billion a year on exploration in each of the next three years.
Such behaviour, on the face of it, makes no sense. One possible explanation is that companies are betting that government climate policies will fail; they will be able to burn all their reserves, including new ones, after all. This implies that global temperatures would either soar past the 2°C mark, or be restrained by a technological fix, such as carbon capture and storage, or geo-engineering.
Recent events make such a bet seem rational. On April 16th the European Parliament voted against attempts to shore up Europe’s emissions trading system against collapse. The system is the EU’s flagship environmental policy and the world’s largest carbon market.
Putting it at risk suggests that Europeans have lost their will to endure short-term pain for long-term environmental gain. Nor is this the only such sign. Several cash-strapped EU countries are cutting subsidies for renewable energy. And governments around the world have failed to make progress towards a new global climate-change treaty. Betting against tough climate policies seems almost prudent.
But that is not what companies say they are doing. All the big energy firms claim to be green. They say they use high implicit carbon prices to guide investment decisions. Nearly all claim to support climate policies. None predicts their failure.
Of course this could just be corporate hypocrisy. But might something else be going on? The answer, argues the report, is that markets are mispricing risk by valuing companies as if all their reserves will be burned. Investors treat reserves as an indicator of future revenues. They therefore require companies to replace reserves depleted by production, even though this runs foul of emission-reduction policies. Fossil-fuel firms live and die by a measure called the reserve replacement ratio, which must remain above 100%. Companies see their shares marked down if the ratio falls, even when they pull the plug on dodgy, expensive projects. This happened to Shell, for example, when it suspended drilling in the Arctic in February.
Worries about mispricing are cropping up in the markets themselves. In April Citi Research looked at Australian mining companies and concluded that “investors who strongly believe in ‘unburnable carbon’ would find it more productive to actively tilt their portfolios” (ie, sell fossil-fuel firms). In January, HSBC Global Research argued that “if lower demand led to lower oil and gas prices…the potential value at risk could rise to 40-60% of market cap.” The 200 largest listed companies had a market capitalisation of $4 trillion at the end of 2012, so this is a huge amount. HSBC added: “We doubt the market is pricing in the risk of a loss of value from this issue.”
Carbon Tracker says regulators should require firms to disclose the amount of carbon in their fuel reserves. Credit-rating agencies should address climate change as part of their efforts to tackle systemic risk. And firms ought to explain how their activities are compatible with government emissions targets. But so long as governments are ambivalent about those targets, it seems fruitless to demand more of companies and markets. At the moment neither public policies nor markets reflect the risks of a warmer world.
Brought to you courtesy of the Responsible Endowments Coalition and the Energy Action Coalition. This is a fantastic resource for divestment activists. We are not only making the case for fossil fuel divestment but also pushing for more socially responsible investing within higher education endowments.
Huge news out of San Francisco today!
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In case you haven’t seen this!
I wrote a little about the carbon bubble in a previous post. But here’s a recap:
The “carbon bubble” (also known as “stranded carbon assets”) is based on the idea that the price of fossil fuel stocks are artificially inflated because fossil fuel corporations are planning to extract all of their carbon reserves. However, those reserves amount to five times more than what the planet can handle if the world is stay under 2 degrees Celsius of warming. When the world comes to this realization and begins the transition to renewable energy, the values of these fossil fuel stocks will decrease, and all of that carbon will be “stranded” underground. Since 20-30% of the average portfolio is comprised of fossil fuel stocks, this devaluation could cause a major hit to returns.
This is one of the most compelling economic arguments for fossil fuel divestment.
That is why The Guardian yesterday ran a story entitled “Carbon bubble will plunge the world into another financial crisis” on their front page. You should definitely read this story. It verifies the validity of the fossil fuel divestment campaign. For example, this sentence specifically cites the top 200 companies that we are targeting with divestment campaigns:
“HSBC warned that 40-60% of the market capitalisation of oil and gas companies was at risk from the carbon bubble, with the top 200 fossil fuel companies alone having a current value of $4tn, along with $1.5tn debt.”
It also shows that this is a serious discussion. The movement is about broad inclusion and making these issues mainstream.
From the 350 Massachusetts website. This is important and meaningful and effective.
Visit this page: http://350ma.org/reject-kxl/
Here’s why:
The State Department has released their revised report on the Keystone XL tar sands pipeline. Shockingly, the report still downplays the overall effect of the tar sands on our climate. But while the report may be outrageous malpractice, science is on our side. We have several weeks during this comment period, the biggest one yet, to speak out and show the president that there is a national movement demanding he keep his climate promises.
With stakes this high, there is no excuse for the White House to approve the pipeline — and it’s up to people like you to make sure the president gets the message: that it’s impossible to fight climate change while simultaneously investing in one of the dirtiest, most carbon-intensive fossil fuels on the planet.
This is a few days old…and I’ve been meaning to post this for a while. But better late than never!
There have been some exciting updates with college divestment campaigns around the country.
What an incredible movement! More updates here: http://www.wearepowershift.org/blogs/photo-round-national-victories-build-power-divestnow
Today, around 200 Harvard community members–students, faculty, staff, alumni, and other Harvard affiliates–rallied for fossil fuel divestment.
The excitement started when a huge contingent of Harvard Law School students came marching into Harvard Yard yelling “DIVEST!” (See below.)
We heard from student speakers: my friend, Hannah Borowsky, gave an incredible and inspiring introduction speech, explaining why we need to divest and the power that we have as students. The excitement was palpable.
See all the people!
Then a Harvard alum and local reverend, Fred Small, spoke.
Then the President of the Undergraduate Council (aka student body president), Tara Raghuveer, spoke about student voice and how the divestment movement has been received on campus.
We heard from Professor David Keith (a professor of applied physics) on why we need a social movement to mitigate global warming.
Then everyone rallied together and chanted as another Divest Harvard member, Krishna Dasaratha, and I delivered ~1300 signatures. At first, we were told that we would not be able to enter Massachusetts Hall (where the President’s and VP’s office are). Then we found out that two members could go in. So we did.
When we got inside we requested to see a VP to deliver the signatures. Marc Goodheart came out. We asked him to come outside so that we could deliver the petitions publicly. He said that he would only accept them inside. We declined and went to walk outside, and he then said that we would accept them standing on the steps right outside Massachusetts Hall. We agreed.
Moral of the story: the administration listened to student voice today. Our power was displayed with beautiful force and inspiration. We are a generation of hope and optimism, and we believe that we can change our world for the better. Harvard listened to OUR message today.
After we delivered the petitions, 200 people marched, chanting for divestment.
ABOVE: You can see Divest Harvard’s very own Ben Franta as he closes out the rally. Behind him is the door to Mass. Hall…where the university police were on close guard.
AND BELOW: As I blogged about on Tuesday, a member of the Harvard Corporation suggested that we “thank BP” for all of their work in developing renewable energy. We turned this into a satire, wrote them a “thank you” card, and had people sign!
This was one of the most powerful experiences of my life. I burst into tears after I handed our petition signatures to the VP because Harvard listened to our voices. And then we had 200 people march around Mass Hall. 200! When we started this campaign, there were three people in our group. Now we just had one of the most momentous rallies in recent Harvard history.
Change the world.
