I’m one of 10 000 Australian academics who signed an open letter to Unisuper (our industry superannuation fund) calling for a policy of divestment from carbon-based fuels. The first step in such a policy has to be divestment from thermal coal. Purely on fiduciary grounds, getting out of thermal coal is now a matter of cashing out before the assets are completely unsaleable. Just in the last week, here’s a list of investors, ranging from small institutions to financial giants that have made announcements along these lines
- JP Morgan
- Moody’s (saying that insurance companies should divest to reduce climate litigation risk)
- The Royal College of Psychiatrists
- The Jesuit Order in the UK
- Creighton University (Jesuit University in the US)
- Bristol University (UK)
- Danish pension fund APG (selling its holding in KEPC)
That’s certainly a partial list, indicating that divestment decisions are now being announced on a daily basis, with many more happening quietly.
As the Wall Street Journal reported today, the exodus has reached the point where many coal companies have only a handful of institutional shareholders. These institutions, are too put it mildly, exposed to a lot of risk. And, for any other investors, a divestment decision by one of the remaining institutional shareholders would imply a big drop in the share price and therefore a capital loss.
Part of this flight is the toxic reputational risk associated with coal. As coal industry magazine CoalZoom has observed, reporting a study by Alva Group the bushfire catastrophe has had a huge impact in this respect to the point that
public awareness and a latent activist momentum which may only take one more high-profile incident to trigger concerted action have been built.
Sooner or later (as Moody’s notes above) that concerted action will include attempts to recover the damage caused by carbon dioxide emissions first from emitters, and then from their financiers and insurers.
… Australia’s tourist numbers may take years to recover. That’s the headline for my latest piece in The Conversation. It’s part of a larger project on the economic impact of the bushfire catastrophe. It’s going to be hard to disentangle this from coronavirus – I’m still thinking about this issue.
ABC Fact Check has a piece looking at a claim by the Young Greens that “making lattes provides more Australian jobs than the entire coal industry.” The detail of the tweet included the claim that there were 86000 barista jobs compared to 52000 in the coal mining industry
The Fact Check Unit observed that the quoted firgure is for total employment in the cafe industry, not just barista. By comparing an estimate of the number of baristas to total employment in coal mining, the Fact Check Unit concludes that the claim is Incorrect.
There is an apples and oranges problem here. There are two reasonable ways to do this comparison
(a) Treat “barista” as shorthand for “someone who works in a coffee shop”. Then compare employment in the coffee shop sector, including “permanent, part-time, temporary and casual employees, working proprietors, partners, managers and executives within the industry” with employment in the coal mining sector, including managerial, professional and clerical staff, general trades workers and others.
(b) Define “baristas” to refer to the occupation of making coffee, and “coal miners” to refer to the occupation of “Drillers, Miners and Shot Firers”, that is, people whose occupation is extracting coal from the ground. Based on the proportion for mining as a whole, the latter is about 20 per cent of total employment in the mining industry.
Either approach, applied consistently, would imply that there are more baristas than coal miners. The fact check uses the first, broader definition for miners and the second narrower one for baristas. This is an apples and oranges comparison, and should be corrected.
A couple of years ago, I published an article on why “extremely unlikely” climate events matter. The central point was that climate outcomes with a probability of 5 per cent or less (“extremely unlikely” in IPCC terminology) were still much more likely than risks we take seriously in our daily life, like dying in a car crash). As an illustration, at the time the piece was written, it seemed less than 5 per cent probable that, within two years, many countries in the world (including Australia) would see catastrophic fires on the scale of those that have actually happened.
I made this point in an interview for an ABC story on economists’ views of the likely costs of 3 to 4 degrees of climate change. Most of those interviewed agreed with me that the costs were likely to be much higher than suggested by economics Nobelist William Nordhaus (with whom John Horowitz and I had a debate in the American Economic Review quite a while ago). We pointed out, among other problems, that a paper he had co-authored implied an optimal July temperature of -146 degrees Fahrenheit.
Nordhaus declined an interview, but his viewpoint was represented by Richard Tol. Longstanding readers will remember Tol as a commenter here who eventually wore out his welcome.
The other point I made in the interview was that the abstruse debate about discount rates central to much of the debate between Nordhaus and Nicholas Stern has turned out to be largely irrelevant. The premise of that debate was that the costs of unmitigated climate change would be felt decades into the future while the costs of mitigation would be immediate.
As it’s turned out, the costs of climate change have arrived much sooner than we expected. And the only mitigation options adopted so far have been low cost or even negative cost choices like energy efficiency and abandoning coal (more than justified by the health costs of particulate pollution).
That doesn’t mean discount rates are completely irrelevant. If we manage to decarbonize the global economy by 2050, benefits will keep accruing well after that. But even if we stopped the analysis at 2050, we would still have a substantial net benefit. The likely cost of near-complete decarbonization now looks to be less than a two per cent reduction in national income. Reducing the frequency and severity of disasters like the bushfires will more than offset that.
Estimating the cost of the bushfires, on ABC The Money
I’m still writing furiously (in both senses of the word) about climate change, the fire disaster in Australia and the responsibility the entire political right bears for this catastrophe, along with those of the centre and left who have shirked the struggle. Australian writer Richard Flanagan, in the New York Times, has compared our leaders to famous traitors like Benedict Arnold, Vidkun Quisling and Mir Jafar, and that’s a pretty good summary of how large numbers of Australians feel.
Over the fold, links to some of my latest commentary
An Open Letter on Australian Bushfires and Climate: Urgent Need for Deep Cuts in Carbon Emissions from 80 current and former Australian Laureate Fellows (our most prestigious research award, across natural and social sciences and humanities).
Humans are good at thinking their way out of problems – but climate change is outfoxing us (The Conversation)
Invest with the best, Inside Story (the case for divestment)
Neoliberalism is declining, but the Right wing refuses to die
As promised, my article on climate change and the death of libertarianism/propertarianism, in Jacobin.
Global warming is the ultimate refutation of Lockean propertarianism. No one can pump greenhouse gases into the atmosphere while leaving “enough and as good” for everyone else. It has taken thirty years, but this undeniable fact has finally killed the propertarian movement in the United States.