By Rosaly Byrd.
Two major factors have allowed fossil fuels to stay prominent on the market, despite the growing movement to end this dependence: Fossil fuel investments and subsidies. But in recent months there has been more talk and more promises to divest from fossil fuels and end subsidies for dirty energy. These two measures offer our society an essential paradigm shift into an economic system that more properly values and prices natural resources and the environment.
In an effort to end profiting from climate change, the divestment movement encourages institutions to divest from any funds or direct ownerships in publicly-traded companies that hold coal, oil and gas reserves. By getting institutions to divest (or sell their stocks), the movement is hoping that these resources will stay in the ground. 350.org has started “Fossil Free,” a campaign working to spur divestment from fossil fuels. With a team of university students, environmental organizations and activists around the world, Fossil Free has been pushing for divesting from fossil fuels by pension funds, universities, and local governments. The Fossil Free campaign has been successful in getting various universities, religious institutions and even entire cities to commit to divesting in fossil fuels. Yet unfortunately, universities like Harvard have stated the impossibility of getting rid of carbon-related stocks. In October, Harvard president Drew Gilpin Faust stated that the school’s endowment is not “a tool to inject the University into the political process”, and that no amount of student pressuring would change the decision. But in a time where these universities are key leaders in climate science progress and in developing climate policy, it is vital that they lead the way and signal to the world that they are serious about reducing fossil fuel use and slowing climate change. And now with more attention being paid to what Al Gore has called the “carbon bubble”, it is likely that these institutions and governments will realize the risk involved in having carbon-related stocks. Fossil fuels are being overvalued and as a result, our environment and climate are being devastated. By divesting, institutions will signal to other investors that these stocks are losing worth, the first step in ensuring that the price of the environment is aligned with its value.
Along with divestments, ending government subsidies and tax credits to the fossil fuel industry is an important measure in revealing the true price of climate-damaging processes. This past year President Obama announced the end of U.S. subsidies to new coal plants abroad and put strict requirements for coal plants within the U.S., but this is just one step. Because of the environmental (not to mention long-term economic) degradation caused by these actions, a monetary tax should actually be imposed to reduce them. Similar to Obama’s announcement, the World Bank has recently announced they intend to limit financing of fossil fuel projects in developing nations. This also presents a key opportunity for the multinational banks in establishing more decentralized renewable energy projects, which can provide more electricity access than large power plant projects where connection to the grid is necessary. And in actuality, subsidies for fossil fuel projects don’t even properly address poverty; the World Bank acknowledged that the “biggest beneficiaries of fossil fuel subsidies are not the poor” but rather the wealthy, because of the regressive nature of the subsidies. Subsidies should be left for those procedures that correct market failures, not create them. By eliminating these subsidies we can put an end to incentivizing more environmental degradation.
Although it is incredibly difficult to monetarize ecosystem services, procedures that so clearly have negative environmental impacts must be re-valued to adjust to the real price. In pure economic terms, besides the diminished labor productivity associated with air pollution, climate change has severe consequences on various economic inputs, outputs and efficiency. More subjectively, increased ocean acidity, glacier loss, and ecological distress caused by climate change are prices we should have never had to pay. Yet there is much potential to realign the value and price of natural resources by divesting from fossil fuels and ending subsidies to dirty energy. Let’s end the time where profit is valued over the environment. Let’s leave the time where negative externalities are lucrative because of a few extremely powerful lobbyists. Let’s bring an economic system where sustainability is taken into account when considering investments and when clean technologies are given a chance to flourish and provide jobs to thousands. By using mechanisms like divestment and taxes we can shift to a system that more accurately values our natural world.