Climate Change, Public Policy, and the University

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Over the past year or more, across the United States, there has been a groundswell of student activism pressing colleges and universities to divest their holdings in fossil fuel companies from their investment portfolios.  On October 3, 2013, after many months of assessment, discussion, and debate, the President of Harvard University, Drew Faust, issued a long, well-reasoned, and – in my view – ultimately sensible statement on “fossil fuel divestment,” in which she explained why she and the Corporation (Harvard’s governing board) do not believe that “university divestment from the fossil fuel industry is warranted or wise.”  I urge you to read her statement, and decide for yourself how compelling you find it, and whether and how it may apply to your institution, as well.

About 10 days later, two leaders of the student movement at Harvard responded to President Faust in The NationAndrew Revkin, writing at the New York Times Dot Earth blog, highlighted the fact that the students responded in part by saying, “We do not expect divestment to have a financial impact on fossil fuel companies …  Divestment is a moral and political strategy to expose the reckless business model of the fossil fuel industry that puts our world at risk.”

I agree with these students that fossil-fuel divestment by the University would not have financial impacts on the industry, and I also agree with their implication that it would be (potentially) of symbolic value only.  However, it is precisely because of this that I believe President Faust made the right decision.  Let me explain.

The Value of Symbolic Action

If divestment would at best be a symbolic action, without meritorious direct financial impacts, can it not nevertheless be important and of great value?  More broadly, can’t symbolic actions be valuable?

One major problem is that symbolic actions often substitute for truly effective actions by allowing us to fool ourselves into thinking we are doing something meaningful about a problem when we are not.

But even if there are such opportunity costs of symbolic actions, can they not still be merited as part of moral crusades (as the students would presumably argue)?  The answer is, in my view, yes.  The problem, however, is that climate change is fundamentally a scientific, economic, and political challenge.  Viewing it as a moral crusade, I fear, will only play into and exacerbate the terrible political polarization that is already paralyzing Washington, a topic about which I have written previously at this blog.

The Climate Impacts of Divestment

Divestment of fossil fuel stocks would hurt, not help efforts to address global climate change.  First, natural gas is the crucial transition fuel to address climate change.  A major reason for the drop in U.S. CO2 emissions is the increased use of natural gas to generate electricity, as documented in this recent report from the U.S. Energy Information Administration.

Second, even if divestment were to reduce the financial resources of coal, oil, and gas companies (which it would not do), this would only serve to reduce research and development at those same companies of carbon capture and storage (CCS) technologies, as well as other potential technological breakthroughs; and could reduce the development of some renewable sources of energy (which the fossil fuel companies are carrying out as part of their financially rational diversification strategies).

The University’s Comparative Advantage

Most important, as I have argued for years, Harvard’s real contributions to fight climate change and promote sound climate change policies will be through our products:  research, teaching, and outreach.  That is how this great university has made a difference on other societal challenges for decades and centuries, and it is how we will make a real difference on this one.

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Three and a half years ago, I posted an essay at this blog about what I saw to be the proper role of individuals and institutions in addressing climate change.  Frequently I refer to my previous blog posts, but today I’m going a step further, and reproducing that one from March, 2010, because it applies so directly to the topic at hand (including its Epilogue at the very end):

What’s the Proper Role of Individuals and Institutions in Addressing Climate Change?

Posted on March 8, 2010 by Robert Stavins

This may seem like a trivial question with an obvious answer.  But what really is the proper role for individuals and institutions in addressing climate change?  An immediate and natural response may be that everyone should do their part.  Let’s see what that really means.

Decisions affecting carbon dioxide (CO2) emissions, for example, are made primarily by companies and consumers.  This includes decisions by companies about how to produce electricity, as well as thousands of other goods and services; and decisions by consumers regarding what to buy, how to transport themselves, and how to keep their homes warm, cool, and light.

However, despite the fact that these decisions are made by firms and individuals, government action is clearly key, because climate change is an externality, and it is rarely, if ever, in the self-interest of firms or individuals to take unilateral actions.  That’s why the climate problem exists, in the first place.  Voluntary initiatives – no matter how well-intended – will not only be insufficient, but insignificant relative to the magnitude of the problem.

So, the question becomes how to shift decisions by firms and individuals in a climate-friendly direction, such as toward emissions reductions.  Whether conventional standards or market-based instruments are used, meaningful government regulation will be required.

But where does this leave the role and responsibility of individuals and institutions?  Let me use as an example my employer, a university.  A couple of years ago, I met with students advocating for a reduced “carbon foot-print” for the school.  Here is what I told them.

“I was asked by a major oil company to advise on the design of an internal, voluntary tradable permit systems for CO2 emissions.  My response to the company was ‘fine, but the emissions from your production processes — largely refineries — are trivial compared with the emissions from the use of your products (combustion of fossil fuels).  If you really want to do something meaningful about climate change, the focus should be on the use of your products, not your internal production process.’  (My response would have been different had they been a cement producer.)  The oil company proceeded with its internal measures, which – as I anticipated – had trivial, if any impacts on the environment (and they subsequently used the existence of their voluntary program as an argument against government attempts to put in place a meaningful climate policy).”

My view of a university’s responsibilities in the environmental realm is similar.  Our direct impact on the natural environment — such as in terms of CO2 emissions from our heating plants — is absolutely trivial compared with the impacts on the environment (including climate change) of our products:  knowledge produced through research, informed students produced through our teaching, and outreach to the policy world carried out by faculty.

So, I suggested to the students that if they were really concerned with how the university affects climate change, then their greatest attention should be given to priorities and performance in the realms of teaching, research, and outreach.

Of course, it is also true that work on the “greening of the university” can in some cases play a relevant role in research and teaching.  And, more broadly — and more importantly — the university’s actions in regard to its “carbon footprint” can have symbolic value.  And symbolic actions — even when they mean little in terms of real, direct impacts — can have effects in the larger political world.  This is particularly true in the case of a prominent university, such as my own.

But, overall, my institution’s greatest opportunity — indeed, its greatest responsibility — with regard to addressing global climate change is and will be through its research, teaching, and outreach to the policy community.

Why not focus equally on reducing the university’s carbon foot-print while also working to increase and improve relevant research, teaching, and outreach?  The answer brings up a phrase that will be familiar to readers of this blog – opportunity cost.  Faculty, staff, and students all have limited time; indeed, as in many other professional settings, time is the scarcest of scarce resources.  Giving more attention to one issue inevitably means – for some people – giving less time to another.

So my advice to the students was to advocate for more faculty appointments in the environmental realm and to press for more and better courses.  After all, it was student demand at my institution that resulted in the creation of the college’s highly successful concentration (major) in environmental science and public policy.

My bottom line?  Try to focus on actions that can make a real difference, as opposed to actions that may feel good or look good but have relatively little real-world impact, particularly when those feel-good/look-good actions have opportunity costs, that is, divert us from focusing on actions that would make a significant difference.  Climate change is a real and pressing problem.  Strong government actions will be required, as well as enlightened political leadership at the national and international levels.

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Epilogue:  After I posted the above essay, I was reminded of an incident that took place many years ago (before I came to Harvard for graduate school, in fact) when I was working full-time for the Environmental Defense Fund in Berkeley, California, under the inspired leadership of the late (and truly great) Tom Graff, the long-time guru of progressive California water policy.  EDF was very engaged at the time in promoting better water policies in California, including the use of trading mechanisms and appropriate pricing schemes for scarce water supplies.  A prominent national newspaper which was not friendly to EDF’s work sent a reporter to EDF’s Berkeley office to profile the group’s efforts on water policy in the State.  A staff member found the reporter in the office bathroom examining whether EDF had voluntarily installed various kinds of water conservation devices in its plumbing.  Our reaction at the time was that whether or not EDF had voluntarily installed water conservation devices was simply and purely an (intentional) distraction from the important work the group was carrying out.   After several decades, my view of that incident has not changed.

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14 Responses to Climate Change, Public Policy, and the University

  1. Pingback: Climate Change, Public Policy, and the University | An Economic View of the Environment | Clearing House for Environmental Course Material

  2. Rob, well said that teaching, research and outreach are what universities ought to do to fight global climate change. It is not prudent to divestment in fossil fuel industry, rather we should be engaging with them to make a case for them to change their business model and support for more-leaner fuels such as natural gas and CCS technology development and deployment in the short to medium term. Parallel to it, more forcefully, universities should heavily ‘invest’ (teaching, research and outreach) in renewables, new business models and transition to low carbon world in short to long-term so that a new generation of leaders/champions, business model and technologies are developed and deployed.
    Trying to reduce internal carbon footprint is good but if that diverts the debates, discussions and efforts of the needs to address their products and services, then it is definitely wrong and bad. I work in the areas of cities and climate change mitigation- I often do see that corporate emissions/mitigations of municipal government are highlighted unnecessarily more (street lighting becomes a big issue in many cases then !!!) than it should be as opposed to emissions/mitigations from cities as a whole. We should not let the great mitigation needs in the products, activities and services to be overshadowed/green-washed by few tons of corporate emissions, the later is “necessary but not sufficient”.

  3. Zopolan says:

    “One major problem is that symbolic actions often substitute for truly effective actions by allowing us to fool ourselves into thinking we are doing something meaningful about a problem when we are not.”

    Note that this part of your argument rests on the assumption of people being irrational.

  4. Jesse Fahnestock says:

    Thanks for a useful post that frames very well the gap between the expert view and the layperson’s. I tend to consider myself a member of the former group — however, let me go to bat for the layperson’s belief in voluntary change. You put forward an economist’s conception of ‘rational self interest’ that is no doubt accurate/true at the margin. But I would not like to exclude a role for ‘enlightened self-interest’. Values-driven movements can, and have, affected widespread change. Usually they end up sweeping policy along for the ride sooner or later, but I don’t think that their impact need be insignificant to that point. I think the human and civil rights movement, as well as the environmental movement, have affected change through the interplay between changing consciousness and policy.

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  6. Ed Reid says:

    Professor Stavins,

    I agree with your assessment of the importance of the university role; and, the proper focus of that role. However, I would suggest that the focus should be broadened, from its current concentration on the impacts of increasing atmospheric CO2 concentrations on climate to a focus on climate and all of the factors which affect how, when and why climate changes. The results of such efforts could contribute to improvement of the current climate models, which appear to be modeling something other than the current climate. To paraphrase former US SecDef Donald Rumsfeld: There are known knowns, known unknowns and unknown unknowns. Climate science appears to be well endowed with issues in the latter two categories.

    While the university research scientists are broadening our understanding of the factors which affect climate, the engineers might focus on the importance of data on how climate is changing. I believe it is far more important to assure that good data is collected and properly analyzed than to support massive efforts to attempt to demonstrate that bad data are as good as good data (BEST). There are three fundamental classes of data: good data; bad data; and, missing data. In the absence of a modern day, much enhanced embodiment of Rumpelstiltskin, it is not possible to spin straw (bad data) into gold (good data), nor to spin nothing (missing data) into good data. The current climate science approach of “adjusting” bad data and “infilling” missing data merely creates “undata”. The result is presented as a global temperature anomaly to two decimal place “accuracy”, based on data which is not accurate in the first place to the left of the decimal point. (www.surfacestations.org)

    There is enormous technical and economic risk in beginning vast programs with half-vast ideas.

  7. Joern Huenteler says:

    Dear Professor Stavins,

    Thank you for your insightful analysis of the arguments for and against divestment. From my perspective, the disagreement between the two sides boils down to one single question: whether climate change is a moral issue or a scientific one. If it is the latter, a university’s primary function should be scientific education on the subject, best provided through specific courses and appoinments, as you rightfully argue.
    But many believe that in the case of climate change there is also a moral obligation to act. And even if that should not be the principal political argument for any action against climate change, as you mentioned, future leaders should be aware of the moral obligation, or better feel it themselves. Many also believe that colleges and graduate schools should provide social, emotional and ethical education just as much as scientific knowledge. From that perspective, it is questionable if it is the right thing to do for an academic institution to profit from investment in businesses that thrive on products that cause global inequality and injustice. If the university wants its students to learn its ethical principles during their studies, and wants them to adhere to them during their careers, it needs to adhere to these principles itself.

    Joern Huenteler

  8. Michele says:

    There is one more consideration. There is some thought that you should live the world you want to create – simply be a pioneer as it were. And if this is true, and your world included stopping climate change and say, living with integrity, then perhaps it would make sense to be consistent in your goal of educating the world and putting your money where your mouth is? No?

  9. John says:

    I’m not sure why you say “Divestment of fossil fuel stocks would hurt, not help efforts to address global climate change,” (referring to natural gas’s importance) when you say immediately after that divestment would not decrease the financial resources of coal, oil, and natural gas companies.

    Also, I would argue that divestment from fossil fuels by large institutions (such as Harvard) would provide ancillary growth support to socially responsible investment (SRI) funds. Say if Harvard has to divest $100 million from fossil fuel stocks, and it wants to reinvest it in something earning a similar return (we know it won’t be as good as those fantastic returns you’re getting on your oil stocks), it may go to a suite of SRI funds with $100 million. This will create demand for more SRI fund type products, suited to institutional investors. Mosaic is starting to create these types of products. And BNEF, CPI, and others have written about the challenges and opportunities of larger institutional investments in clean energy.

    You say the university’s strengths are in research, teaching, and outreach. Divestment is both a form of outreach and teaching. It teaches students to put their money where their mouth is, and get the institutions they are associated with to do so as well. It sends an outreach message to the world that a major university seeks to be entirely fossil free, in operation and/or investment, acknowledging that the transition to doing so takes time.

    An additional logistical question I have is whether universities are hesitant to divest their endowments from fossil fuel companies, because they believe it will impact professors’ ability to get money from FF companies (BP, Exxon, etc.) for their research.

    Your water example from EDF is still puzzling to me. Did not installing the water fixtures really afford you so much more time to work on your critical CA water campaign? And how is this relevant to divestment again? ::scratches head::

  10. D.R. Tucker says:

    Just had a chance to read your take on the Harvard divestment controversy. In response to this piece, I do have a couple of questions:

    1) You write:

    “If divestment would at best be a symbolic action, without meritorious direct financial impacts, can it not nevertheless be important and of great value? More broadly, can’t symbolic actions be valuable?

    “One major problem is that symbolic actions often substitute for truly effective actions by allowing us to fool ourselves into thinking we are doing something meaningful about a problem when we are not.

    “But even if there are such opportunity costs of symbolic actions, can they not still be merited as part of moral crusades (as the students would presumably argue)? The answer is, in my view, yes. The problem, however, is that climate change is fundamentally a scientific, economic, and political challenge. Viewing it as a moral crusade, I fear, will only play into and exacerbate the terrible political polarization that is already paralyzing Washington, a topic about which I have written previously at this blog.”

    To the extent that viewing climate change as a moral crusade will worsen partisan tensions, is that not exclusively because those in Congress who choose not to recognize the evidence of human-caused climate change will also choose not to recognize the moral argument in favor of climate action?

    2) You write,

    “Divestment of fossil fuel stocks would hurt, not help efforts to address global climate change. First, natural gas is the crucial transition fuel to address climate change. A major reason for the drop in U.S. CO2 emissions is the increased use of natural gas to generate electricity, as documented in this recent report from the U.S. Energy Information Administration.

    “Second, even if divestment were to reduce the financial resources of coal, oil, and gas companies (which it would not do), this would only serve to reduce research and development at those same companies of carbon capture and storage (CCS) technologies, as well as other potential technological breakthroughs; and could reduce the development of some renewable sources of energy (which the fossil fuel companies are carrying out as part of their financially rational diversification strategies).”

    Leaving aside the obvious point about the hazards of natural gas vis-a-vis methane, how exactly are people who recognize the moral (and economic, and national-security) need for the fossil fuel industry to shift its business model towards cleaner forms of power supposed to induce that shift, after the demise of cap-and-trade, and with hopes for legislative action on climate dependent on the still-dicey prospect of the GOP losing control of the House (to say nothing of the obvious hazards in the Senate, even if the Senate is still under Democratic control)? If we are supposed to regard the divestment movement as mere moral shaming, then I have to ask: didn’t moral shaming through divestment play a key role in ending apartheid in South Africa?

    Nothing against President Faust–or you!–but I think she made a bad call on this one…

  11. While its honorable for students “divest their holdings in fossil fuel companies from their investment portfolios”, the harsh reality is demand is significantly powerful enough to render these efforts useless.

    A much wiser approach is to be cautious about ones consumption of fossil fuels. This is a much more direct approach.

  12. Pingback: Is demonizing “big carbon” a strategy or a copout? | Energy Economics Exchange

  13. Pingback: Is demonizing ‘big carbon’ a strategy or a cop-out? « The Berkeley Blog

  14. Collin Rees says:

    Dear Professor Stavins,

    Thank you for your views. I would be curious to learn if your views have shifted in the several months since this post, as President Faust’s position has become less and less tenable and other universities and institutions have committed to divestment. The most example of this broad realization of divestment’s efficacy as a strategy and fiscal prudence comes via than 100 of your esteemed colleagues writing to President Faust urging divestment of the University’s endowment from fossil fuel companies. What are your thoughts on their position?

    I am troubled by many of your statements, falsehoods, and red herrings, some of which I will attempt to address here. Under “The Value of Symbolic Action,” you begin by misrepresenting the positions of divestment advocates, and present an utterly false binary in which the only possible options are that an action has “direct financial impact” or is purely “symbolic.” Surely you agree there are more nuanced approaches that fall somewhere in the middle? Divestment advocates freely acknowledge divestment will cause little direct financial impact to fossil fuel companies (though nearly all recent studies show there will actually be significant positive direct financial impacts to endowments free of fossil fuel investments). But divestment is far from a purely “symbolic” action. Divestment is about changing the conversation around carbon and climate change, revoking the social license of the fossil fuel industry to rampantly profit from wrecking the planet and killing millions, and taking steps to build the world we want to see through prudent reinvestment in renewable energy sources and sustainable energy development. Perhaps you would have a better idea of what divestment advocates are truly asking for if you engaged with them, instead of repeatedly refusing to meet with them for many months now.

    Under “The Climate Impacts of Divestment,” you claim divestment would not be an intelligent choice because of natural gas’s supposed role in combating climate change. As John correctly pointed out, this seems a misleading statement at best and a malevolent one at worst, as you then continue to reiterate the (accurate) point that Harvard’s divestment would not have measurable direct financial impact on fossil fuel companies. It also ignores the vast body of recent research on natural gas, showing that because of methane leakage in all parts of the production process (see the work of your colleague Steven Wofsy for a primer) it is much worse than previously thought for the climate, and potentially no better than coal or other carbon-dense fossil fuels.

    Under “The Climate Impacts of Divestment,” you begin your second paragraph: “Second, even if divestment were to reduce the financial resources of coal, oil, and gas companies (which it would not do)…” Taking that as fact, why write the paragraph at all? You seem to be constructing a straw man using a wholly irrelevant argument explicitly not advanced by divestment advocates, then using it in an attempt to garner sympathy for fossil fuel companies (a laughable attempt) and glorify their hypocritical “progress” on renewables. Fossil fuel companies have no real interest in changing their business model (see Exxon’s recent comments), and in fact most have significantly fewer investments in renewables than they did even a few years ago.

    Finally, under “The University’s Comparative Advantage,” you again present a false choice. Divestment advocates agree 100% that the University can play a critical role in the research and technological development that will be crucial to the long-term fight against climate change, energy poverty, and more. But presenting this as some sort of magical ideal that prevents divestment doesn’t make any sense — why are we not allowed to do both? We can and should continue researching as much as possible — and indeed should greatly increase such funding (from responsible funding sources, not the fossil fuel companies such as BP, Chevron, Duke Energy, and Shell, that fund your own work) — but that doesn’t preclude divestment. We should do both, and more. Indeed, divestment is the only way to effectively complement our crucial work in research, because otherwise we are actively supporting companies working every day to tear down the good research we are doing. Particularly with this section in mind, I’m curious as to your views on why Harvard no longer invests in tobacco companies.

    Thank you,
    Collin Rees
    Harvard Class of 2012 (Engineering)

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