The divestment of fossil-fuel stocks is both ineffectual against its corporate targets and hurtful to ordinary people. The resources and passion against carbon-based energy should be redirected to helping others — beginning with the 1.2 billion people who lack access to electricity and have to burn wood and dung for energy.
• A Futile Crusade
Fossil-fuel divestment is a fool’s errand that works against the natural preferences of the great masses. U.S. and world energy demand is dominated by natural oil, gas, and coal. Divestment does nothing to lower this energy demand. In fact, divestment by some creates an investment opportunity for others. Consider the explanation of William MacAskill, CEO of the Centre for Effective Altruism. The more people divest, the greater the buying opportunity for others. As a result, “The [stock] market price stays the same; the company loses no money and notices no difference,” concludes MacAskill in his New Yorker piece.
• From Irony to Hypocrisy
Divestment transfers wealth from anti to neutral fossil-fuel investors. Pro-carbon-based energy advocates, moreover, smile all the way to the bank. It is boycotts, not divestment, that would hurt the targeted companies. But boycotts are not part of the anti-fossil-fuel movement. In fact, the opposite seems to be the case. Consider the example of leading divestment advocate, Leonardo DiCaprio. The movie star may plant trees and drive a Prius, but he generates one of the world’s largest “carbon footprints” with his use of multiple homes, private jets, and a world-sized yacht.
• A Bad Cause
Symbolic virtue is costly virtue. Divestment wants to interfere with bringing affordable, reliable energies to the masses. The International Energy Agency estimated that the world needs $26 trillion for fossil-fuel extraction, transportation, and refining out to 2040. Moreover, divestment hurts stakeholders. A study conducted by a finance professor at Arizona State University estimated that over a two decade period, colleges that divest from fossil fuels would lose up to 12 percent of their endowments.
• Trump Energy Policy
The investment opportunities for natural gas, coal, and oil have only gotten better with the end of the Obama Administration’s keep-it-in-the-ground strategy. Drilling impediments are being removed, and politically blocked pipelines are getting back on track. Check the newspaper headlines.
“Halliburton will Beef Up and Add 2,000 U.S. Jobs,” stated a recent lead in Houston Chronicle. Another lead Chronicle business story: “Texas Sluggish on Jobs, but Energy Hiring Up.” Those jobs are in oil and gas.
In the Wall Street Journal: “Oil Investors Tap Deep Cash Well.” Then the Journal’s “Heard on the Street” tip to investors: “Plenty of Cash Lies Buried in Canada’s Oil Sands.”
“The financial community has the potential to emerge as a bulwark against Trump and his ilk worldwide,” stated 350.org, the organization behind the fossil-fuel divestment movement. But errant investment strategy helps no one except for a tiny minority. Divestment disadvantages educational institutions, retirees, and other beneficiaries of investment income. In public-sector cases, it also puts taxpayers at risk. As Alex Epstein has pointed out, “the use of fossil-fuel energy has helped us … improve every metric of human well-being, from life expectancy to nourishment to climate-related deaths.”
Expect the fossil-fuel divestment movement to lose steam. And expect more improvement and societal progress from natural gas, oil, and coal in the years and decades ahead.
The writer is the founder and CEO of the Institute for Energy Research.