A lot of well-meaning people are arguing that in order to tackle global warming, we need to disinvest in fossil fuels.
World Bank President Jim Yong Kim tells us that because of global warming, pension funds should drop fossil fuels and instead invest in green assets for the sake of future pension holders.
Yes, global warming is a problem, caused by CO₂ emissions from fossil fuels. But divestment puts the cart in front of the horse and misses the real solutions. In the meantime, it is simply a great way to feel good with other people’s money.
Remember, we don’t burn fossil fuels to annoy environmentalists but because they power almost everything we like about modern life: they keep us warm, feed us, transport us, and likely provide the electricity you are using to read here on LinkedIn.
Today, we get 81% of our energy from fossil fuels – and even in 2035, fossil fuels will provide 79% of a much higher energy consumption.
Cheap power is an amazing way to improve living standards – over the past 30 years, China has lifted 680 million people out of poverty, not through inefficient wind turbines, but with lots of cheap (and polluting) coal.
And renewables won’t become profitable anytime soon – the International Energy Agency expects that the necessary subsidies for renewables will not fade away but more than double to $220 billion per year in 2035.
Wishful thinking does not make these realities go away. Instead of campaigning for unrealistic divestment from fossil fuels, we should focus on increasing public investment in green R&D to ensure the next generations of green technologies will eventually become so cheap that everyone, including China and India, will switch.
It is simply wrong when UN Climate chief Christiana Figueres claims that fossil fuels “are already … losing value.” When, for instance, the Ann Arbor City Council requests its pension board to investigate options to divest, it is simply feeling good with other people’s money.
Take a look at how global fossil fuel and renewable investments have developed over the past 12 years. STOXX has a Global Oil and Gas stock index, including Exxon and Chevron. RENIXX is the world’s first and longest global renewable energy stock index, including Tesla and Vestas, starting in 2002. Since then, $100 invested in 2002 in fossil fuels would be worth about $238 today, whereas the same $100 invested in renewables would be worth about $28.
The simple question we need to ask is: where would you rather have had your pension money placed?
Photo: Coal workers in Shizuishan, Bert van Dijk/Flickr
