Earth Day and the Divestment Campaign Against Humanity

Is it confusion? Or is it malevolence? “It” is the driving force underlying the loud clamor for divestment from fossil fuel assets, a political pressure campaign that is growing in sound and fury—and international jet-setting—even as actual government actions to reduce the production and use of fossil fuels are proving futile.

@vinnikava via Twenty20

The answer: It is both, so that divestment will be a central theme of Earth Day 2017. Note that current world oil consumption and production are around 98 million barrels per day (mmbd). The International Energy Agency projects global consumption over 103 mmbd by 2040, despite some dubious assumptions. The projection from the Energy Information Administration is almost 121 mmbd by 2040. Even BP and Exxon, driven by political pressures to be politically correct, project global oil consumption and production at 110 mmbd in 2035 and 105 mmbd in 2040, respectively.

So the campaign to “leave it (fossil fuels) in the ground” shows few ongoing signs of prospective success. As Pravda in its glory days would have put it: This inverse relationship between government action against fossil fuels and the divestment movement is no accident, Comrade, as there would be no need for the latter were the former meaningful.

Zycher Capitol Hill testimony: Do Federal Energy-related Tax Policies Improve Economic Wellbeing?

Let us begin with confusion as a significant but lesser source of the divestment argument, as exemplified here. The argument used to be that high oil prices would suppress demand and thus make many investments in fossil fuel reserves uneconomic. Let me be blunt: That argument—high oil prices make divestment the wise choice—is rather silly, frankly, as reserves that can developed and produced in the context of high prices are an investor’s dream.

That silliness seems to have dawned on the divestment advocates because their new argument is that low oil prices will make it uneconomic to produce many fossil-fuel reserves. Low prices will “strand” those reserves, that is, make them unprofitable to produce, and those who invested in them will suffer losses. Better for investors to get out now before the coming crash. Note that this argument has been combined with the assertion that international action against (anthropogenic) climate change will reduce investment in fossil fuel reserves: “Oil companies must avoid destroying shareholder value by investing in resources that could be forced to the sidelines in a carbon-constrained world.”

Where to begin? It is dangerous to begin a conceptual experiment with a price assumption or change because the price is an outcome rather than a parameter. High oil prices might result from strong economic growth and resulting increases in the demand for energy, in which case the “demand suppression” assumption would be the opposite of reality. High oil prices, in other words, are not necessarily caused by supply disruptions or by analogous supply conditions yielding a reduction in consumption. But even in that case—a supply reduction yields high prices—existing and new reserves that can offset the adverse supply condition would be viewed as a godsend by the market, which would reward investors in these substitute sources of energy.

Similarly, low oil prices might result from an expansion of supply conditions—fracking and horizontal drilling perhaps?—in which case some reserves might prove unprofitable to produce, but which must result in an increase in oil output for the market as a whole. It is that overall increase in supply conditions that results in the lower price, which certainly might make some high-cost reserves uneconomic to produce, but which cannot result in an aggregate decline in oil consumption, and which is inconsistent with “international action” to “keep it in the ground” in any case. New discoveries, technological advances—tell any story you choose—low prices resulting from a supply expansion must have the effect of increasing consumption.

Let us turn to the malevolence dimension of the divestment campaign, equally confused in ways more subtle, but darker in its implicit but clear anti-human character. The global divestment campaign advertises itself as on a roll, having received pledges from about 700 institutions and 58,000 individuals to divest approximately $5.2 billion in fossil-fuel assets, in particular the 200 or so oil, gas, and coal producers with the greatest “carbon” content of their reported reserves.

“Divest” is a curious term; a simpler verb is “sell,” and it is a source of some interest that the divesting institutions and individuals are pledging to do so within three to five years. Why not just give the assets away immediately on a first-come/first-serve basis? The obvious answer is that those divesting—selling—the fossil-fuel assets prefer to get the highest prices that they can, an objective rather inconsistent with the purported moral imperative underlying a shift out of fossil fuels and toward the “new energy economy,” about which more below.

Related reading: The Real Threat Is Environmental Extremism

For now let us consider the implications of the divestment stance. The fossil-fuel sector is huge—about $5 trillion in market capitalization—because other sectors demand energy and fossil fuels overwhelmingly are the most efficient forms with which to provide it. To say that “other sectors” demand energy is to say that people demand it. So if investment in fossil-fuel sectors engenders some sort of moral quandary, does the same principle apply to investment in industries that use energy? After all, they are responsible for the very existence of the energy producers. Will the divestment campaign expand to agriculture, manufacturing, transportation, retailing, the household sector, and all the rest? Is investment in government bonds the only moral course? Well, no: Government too uses vast amounts of energy.

And let us not stop there: Precisely why do all sectors demand energy? Obviously, it is because people demand the goods and services made affordable by fossil fuels. Notice that the correlation between energy consumption and household income is high and rises as income increases; for the bottom three U.S. income quintiles, the respective correlations are about 0.75, 0.85, and 0.91. If fossil fuels are evil, so are rising incomes, as the latter drive up the demand for the former.

So let us be very clear that one central implication of the divestment campaign—remember, it is a moral imperative—is the desirability of poverty as a tool with which to dampen energy demands and thus incentives to invest in fossil-fuel sectors. This is separate from the impoverishing effect of substituting expensive energy in place of conventional energy produced with fossil fuels.

Accordingly, the divestment campaign has slipped into the anti-human trap that is the hidden but essential core of modern environmentalism: Far from being a resource, ordinary people are a scourge on the planet. They prefer cheap energy, strongly, but the moral imperative of divestment is diametrically opposed, and investments in people—education, health, etc.—make matters worse by increasing human capital and wealth, and thus the demand for energy.

Therefore, the moral imperative of the divestment campaign—its very logic—leads to disinvestment not only from virtually all economic activities, but also from investments in people, in particular in a third world desperate to emerge from grinding poverty.

Consider also one central dimension of what it means to be human: the application of intelligence to overcome the obstacles that define life outside the Garden of Eden. From backbreaking toil by hand to the use of animals and tools to the evolution of energy from wood to whale oil to coal to oil and gas to nuclear power to new technologies yet to be invented or proven competitive, the history of energy is a fundamental component of mankind’s evolution, reflecting the inventiveness that is uniquely human, a process utterly at odds with the underlying imperatives of the divestment campaign.

Supporters of divestment might respond that they too favor inventiveness in the form of the “new energy economy,” which means such unconventional technologies as wind and solar power. Let us therefore examine the “moral” dimension of that investment shift. Because unconventional energy sources are unconcentrated, they are expensive and cannot compete without large subsidies and guaranteed market shares. Because they are intermittent—sometimes the wind blows and sometimes the sun shines, and sometimes not—they must be backed up with conventional power units, which must be cycled up and down depending on wind and sunlight conditions. In a word, they must be operated inefficiently, yielding an increase—yes, an increase—in the emissions of conventional pollutants.

Even an impossible 20–30 percent decrease in global greenhouse gas emissions would reduce temperatures in 2100 by only about half a degree. Would an enterprising journalist somewhere please ask the supporters of divestment about the morality of a campaign that would (1) impoverish millions of people, (2) increase conventional pollution, (3) yield zero offsetting environmental benefits, and (4) forcibly extract resources from ordinary people, while (5) providing the environmental left with a rationale for moral preening?

Related reading: Wind an Even Bigger Boondoggle Than Ethanol

Despite the constant appeals of the divestment advocates to climate “science” and their poor use of economic analytics, the reality is that the divestment campaign, like modern leftist environmentalism more generally, is essentially a religious movement. The constant warnings about the adverse impacts of increasing greenhouse gas concentrations, apart from being utterly inconsistent with the evidence, are similar to the ancient interpretation of destructive weather as the gods’ punishment of men for the sins of Man. Just as the pagans for thousands of years attempted to prevent destructive weather by worshipping golden idols, so do modern environmentalists now attempt to prevent destructive weather by bowing down before recycling bins. At a more general level, consider the basic theological stance of the divestment campaign: In the beginning, Earth was the Garden of Eden. But mankind, having consumed the forbidden fruit of the tree of technological knowledge, has despoiled it. And only through repentance and economic suffering can we return to the loving embrace of Mother Gaia.

Let us not fail to take note of the breathtaking hypocrisy of some members of the current generation of Rockefellers, announcing loudly their decision to divest the fossil-fuel assets of their charity, the Rockefeller Brothers Fund, while maintaining a deafening silence about the fossil-fuel investments of the far-larger family investment and wealth management firm Rockefeller & Company. Nor have we heard that they will divest themselves of the lavish lifestyles engendered in past Rockefeller generations by the historical growth of the oil and gas sector. Their central objective is loud applause at the upper-crust cocktail parties for a divestment that will have no effect on the fossil-fuel sector, that will cost them literally nothing, and that is part of a leftist campaign that views ordinary people as a liability. Such are the dimensions of moral cowardice.

Benjamin Zycher is the John G. Searle scholar at the American Enterprise Institute.