John Cook is President of Greenchip Financial Corp. Andrew Heintzman is President of Investeco Capital Corp.
Recently, the first Canadian university joined a growing global movement to divest endowments from fossil fuels. Concordia's $5-million was largely symbolic; it still has $95-million invested in oil and gas companies. But its decision was another signal that the divestment movement is gaining momentum.
In fact, divestment is creating a significant new challenge for an oil industry that is already fighting hard to maintain its pre-eminence in the world of energy.
This year alone, over 800 organizations with more than $50-billion in assets have officially committed to divestment. These include the Rockefeller Brothers Foundation, the World Council of Churches, the University of Glasgow, Stanford University, and a pending vote at the University of California. In Canada, several faith-based organizations have signed up as well, including parts of the United Church. Their congregations are well versed in the issues and highly committed to pushing divestment from oil the way they did from tobacco 15 years ago.
On campuses throughout the Western world, students and faculty are forcing their governors to vote on divestment. Last week Dalhousie became the first university in Canada to vote. The result was 15 to 3 (with several abstentions) to keep its investment in oil stocks. George McLellan, the committee head, said afterwards: "If we turn our backs on a number of [big oil] companies, why would they put their money in here?"
Indeed, the arguments in Canada track those in America and Europe: a battle of philanthropic and research support versus moral, scientific and investment arguments. But votes are pending at the University of British Columbia, the University of Toronto and the University of Victoria; McGill, Trent and Simon Fraser University are all likely to vote in the next twelve months. The implications of the "no" vote at Dalhousie could go both ways, providing ammunition to university advancement teams, but also steeling the resolve of students and faculty.
The moral argument for divesting has taken on a new nuance. As University of Toronto student Ben Donato-Woodger recently said, "It is a structural injustice against young people to have people who won't be paying the price make judgments that will harm the next generation. Failing to divest would be a clear act of not caring about their students."
Simon Rockefeller admitted on a recent webcast that the $50-million of fossil fuel company shares his foundation planned to sell would quickly be picked up by other investors. But he also said that focusing on the money misses the point; it's about leadership and awareness. Politicians will have to think carefully about ignoring the growing wave of engaged students, professors, church-goers and other voters.
They're less patient and more organized than their forebears in the South African Apartheid divestment movement in the 1980s, who were told divestment was hopeless and would never work. They know that it eventually did.
It isn't hurting their cause that the operating economics of the fossil industry are deteriorating as quickly as the price of oil is falling. Even over longer periods, the argument that investment returns would significantly suffer without oil doesn't seem to bear out.
· In the past five years, the TSX with all its oil and gas constituents has significantly underperformed the TSX 60 excluding fossil companies.
· Over the past 10 years, the performance is almost identical with or without oil and gas in the index.
· According to the New York Times, U.S. universities hold an average of just 2.1 per cent of their assets in fossil investments. If this is so, it will be an even easier argument in the States that divesting won't really affect investment returns.
Indeed, sector past performance and "investable universe" arguments are small potatoes. The real risk investors face sits on the balance sheets of the petro companies. As much as 80 per cent of fossil reserves may be worthless if the oil, gas and coal is kept in the ground by regulation or capital constraints.
Even Bank of England Governor Mark Carney told a recent World Bank seminar that the "vast majority of reserves are unburnable" if global temperature rises are to be limited to below 2C. But to stay within that 2 degree limit, we can only emit 565 more gigatons of carbon. Yet oil and gas companies have five times that amount frozen in their fossil fuel reserves.
Activism doesn't come naturally to Canadians. But this battle has legs and divestment is finding its historic place in the transition to a more sustainable energy future.
FAQs
A central ethical issue is how we should weigh the short-term benefits and the rights of doctors and hospitals to have a relatively large carbon footprint (from use of fossil fuel energy, plastics, etc.), against the longer term harms of such a footprint (increased climate change, with its devastating consequences for ...
Why is releasing fossil fuels bad? ›
Producing and burning fossil fuels creates air pollution that harms our health and generates toxic emissions that drive climate change. From the electricity that lights our homes to the cars we drive to work, modern life was built on fossil fuels like coal, oil and natural gas.
What is the argument against fossil fuel divestment? ›
As consumers, we're the ones ultimately responsible for the anthropogenic greenhouse gas emissions that threaten the planet. Divestment, by shifting the blame to extracting companies, creates the impression that someone else is responsible. This works against solving the problem.
What are the unethical outcomes resulting from fossil fuels? ›
Air pollution from fossil fuels can cause acid rain, eutrophication (excessive nutrients that can harm aquatic ecosystems by lowering oxygen levels), damage to crops and forests, and harm to wildlife. Water pollution: From oil spills to fracking fluids, fossil fuels cause water pollution.
What are 3 problems with using fossil fuels? ›
Using fossil fuels for energy has exacted an enormous toll on humanity and the environment—from air and water pollution to global warming. That's beyond all the negative impacts from petroleum-based products such as plastics and chemicals.
What is the biggest issue with the use of fossil fuels? ›
When fossil fuels are burned, they release nitrogen oxides into the atmosphere, which contribute to the formation of smog and acid rain. Major sources of nitrogen oxide emissions include: Cars and trucks. Coal-fired power plants.
Why can't we ban fossil fuels? ›
One drawback of trying to ban or curtail fossil fuels by government edict is that it's a political impossibility: The oil and gas industry is too influential.
What happens if we stop using fossil fuels? ›
Without that power, electricity grids would see widespread blackouts. Within a few weeks, a lack of oil — still the major fuel used for trucking and shipping goods worldwide — would impede deliveries of food and other essential goods.
What is the truth about fossil fuels? ›
Fossil fuels are formed from the decomposition of buried carbon-based organisms that died millions of years ago. They create carbon-rich deposits that are extracted and burned for energy. They are non-renewable and currently supply around 80% of the world's energy.
What can we use instead of fossil fuels? ›
The five primary alternatives to fossil fuels are renewable energy, nuclear power, hydrogen, biomass, and geothermal energy. Renewable energy is defined as power derived from natural sources that can replenish themselves, such as wind, solar, tidal or hydroelectric.
We understand today that humanity's use of fossil fuels is severely damaging our environment. Fossil fuels cause local pollution where they are produced and used, and their ongoing use is causing lasting harm to the climate of our entire planet.
Should we abandon fossil fuels? ›
No living person has ever known a world without fossil fuels; we are so used to them that it is hard to imagine an alternative reality. But experts insist that if we are to achieve the goals of combating climate change, we will need to abandon these sources of energy.
What are 3 negative consequences of the rise of fossil fuels? ›
What Are 3 Effects of Burning Fossil Fuels? There are three adverse effects of burning fossil fuels: air pollution, water pollution, and climate change. These effects are caused by the products released when fossil fuels are burned.
What percentage of electricity comes from fossil fuels? ›
In 2023, about 4,178 billion kilowatthours (kWh) (or about 4.18 trillion kWh) of electricity were generated at utility-scale electricity generation facilities in the United States. About 60% of this electricity generation was from fossil fuels—coal, natural gas, petroleum, and other gases.
Which is the cleanest burning fossil fuel? ›
Natural gas, which primarily consists of methane, is the cleanest burning fossil fuel. When methane is produced from non-fossil sources such as food and green waste , it can literally take carbon out of the air.
What are the ethical issues in the oil industry? ›
They include forced relocation, human rights violations by oil companies focused on maximizing profit at the risk of infringing on property rights, bribery and corruption on the part of the companies and the government and the proliferation of criminal activities relating to oil.
What are the ethical issues of energy? ›
Continuing dependence on fossil fuels raises several major ethical issues. Ethical questions concerning our responsibilities to future generations are raised by the fact that fossil fuels are a nonrenewable energy source, so that every barrel of oil or ton of coal burned today is forever lost to future generations.
What are the ethical concerns of biofuels? ›
There are concerns about the effects on the environment, on food security and prices, and on the human rights of workers and communities in countries where biofuels crops are grown. such as palm, soybean, oilseed rape, or sunflower. The USA is the world's largest bioethanol producer.
What are the ethical and environmental issues of coal? ›
Coal mining causes extensive degradation to natural ecosystems such as forests and can scar the landscape irreparably. Damage to humans, animals and plants, occurs due to habitat destruction and environmental contamination. Coal-fired power plants emit more than 60 different hazardous air pollutants.
