Fossil fuel dinosaurs need to adapt to the new energy climate or go extinct
The three-year-old fossil-fuel divestment movement, initiated by Bill McKibben and other climate activists, has been fairly successful at getting institutions—foundations, municipalities, universities and pension funds—to divest fossil fuels from their stock portfolios.
In fact, 509 divesters have shed fossil-fuel investments worth an estimated $3.4 trillion. The latest example is the Rockefeller Brothers Fund. Although the fund noted in 2014 that it would go through a phased process of divestment, it announced this week that it would “eliminate holdings” of ExxonMobil right away and fossil fuels in general as quickly as possible.
Activist divesting is a lengthy and arduous process driven mostly until now by politics. Divesting based on economics is a whole other matter.
This week, the Securities and Exchange Commission has ruled to force ExxonMobil to lets its shareholders vote on a climate share resolution that, if passed at the company’s annual meeting in May, would require the oil giant to calculate specific risks to it from climate change and climate change-related legislation. That’s something the company has not wanted to do, claiming it already provides enough carbon-related information to its shareholders.
If such rules can be imposed on ExxonMobil, it might not be long before the same thing happens to other fossil-fuel companies who resist such moves. And that could mean that private investors could soon be the biggest fossil-fuel divesters of all.
Oil and gas is still a lucrative business. Exxon made $59.81 billion in the last quarter of 2015 — and that was considered underperforming. Low oil prices have cut into revenues, and the idea of a global carbon tax would certainly help change the economics of fossil fuels even further. But for the moment, investor actions are also one of the more powerful tools to change how the industry operates. At least, that’s the hope behind this week’s events—pushing and pulling a major polluter into a low-carbon future.
“Moving forward, they need to take a different approach, and denial is certainly not a viable business plan,” Natasha Lamb, Arjuna Capital’s director of equity research and shareholder engagement told ThinkProgress. Arjuna has been one of Exxon’s investors pushing for the company to address climate change risk — which, for an oil and gas company, includes the specter of stranded investments as the world transitions to renewable energy.
The combination of political and economic divesting with increasingly heavy investing in renewable sources of energy—mostly wind, solar, geothermal—are essential to meet the goals of the Paris agreement.
The good news in that regard? In the United States, according to the Energy Information Administration, wind, natural gas, and solar were the three main components of new electric generation capacity installed in 2015, accounting for 41 percent, 30 percent, and 26 percent respectively. Including hydroelectric, total renewable electrical generation from utility-scale plants was 14 percent for the year, with approximately another 3 percent from rooftop solar. We can expect 2016 to be another record-breaking year for renewable installations.
But if we are going to jump to 20 percent, 30 percent, 50 percent, and 70 percent of electricity coming from renewables “soon,” then we need to stop installing natural-gas power plants. That can only be done with effective storage for when the wind doesn’t blow and sun doesn’t shine and by keeping 80 percent or more of existing reserves of fossil fuels in the ground.
Democratic politicians and their allies should push government policies—state and federal alike— to accelerate driving already nervous investors away from investments in coal, oil and gas.
(Originally appeared at DailyKos. )