Why the Fossil Fuel Divestment Movement Still Matters.

Protesters in Ottawa / Wikipedia.

The election of Trump hasn’t changed the importance of the fossil fuel divestment movement. It still makes sense.

The election of Donald Trump has placed the American climate movement on its back foot. During the Obama administration it saw several victories such as the launch of the Clean Power Plan and the ratification of the Paris Climate Treaty. Now it is fighting to ensure that climate change research continues and that renewable energy programs are not threatened. With the constant onslaught of mostly bad news, climate activists can struggle for motivation. They shouldn’t, since this arguably the most important moment for the climate movement. A key area in this fight could very well be the fossil fuel divestment movement.

Divestment movements have a long history in the United States. Divestment was used as a tactic against apartheid South Africa and the tobacco industry. It’s material affect on its targeted industries is debatable and there has been intense discussion about whether fossil fuel divestment will lead to a big impact on the bottom line of the companies. Whether or not it impacts the companies it targets, it does have a chance to have broader impact: Fossil fuel divestment, along with other tactics such as fighting the development of new fossil fuel infrastructure, provide pathways for victories for a movement that by its nature will struggle to gain any. Divestment has an added bonus, it could help institutions avoid an oncoming financial disaster.

The moral objective of the fossil fuel movement has always been to stigmatize the industry. This was, after all, the point of the divestment campaigns against the tobacco industry and South Africa. The reasoning was that if it was wrong to wreck the planet, it is thus wrong to profit from it. The bonus for the fossil fuel divestment movement is that divesting from fossil fuels may make sense in the long term as a financial strategy.

Fossil fuel companies represent a major potential bubble in the existing financial markets. Their valuations in financial markets are based on the assumption that the world will burn most of their inventory.* Stopping climate change will likely mean preventing these companies from ever selling much of their product. This has been laid by groups such as the International Energy Agency. Thus if humanity takes serious action on climate change, barring a technological stop-gap, fossil fuel companies will lose their value. The potential for a rapid devaluation of fossil fuel companies creates financial risk.

We’ve already begun to see what such a financial bubble may look like with coal companies. The total market value of publicly-traded U.S. coal companies between April 2011 and April 2014 dropped 63%. While this is largely attributable to the expansion of shale gas, it may be a general warning sign. The expansion of shale gas and subsequent drop in price has provided the political cover necessary for coal plants to be targeted for a new set of regulations (the Clean Power Plan). Renewables are getting ever closer to price parity with natural gas (granted with subsidies), and when that begins to happen we may begin to see natural gas give way as well.

Climate change is, by its nature, a nuanced issue that can be difficult to organize a movement around. The divestment movement provides something valuable to the climate movement. It provides an area for tangible victories. At this time roughly 732 institutions representing approximately $5.45 trillion dollars in assets have announced plans to divest from fossil fuels. Movements thrive on building momentum through victories. The more momentum the climate movement has, the greater the political capital it can generate to convince policymakers its time to fight this issue head on. I can see no more important time to create this political capital then during this administration.

*It should be noted that products like oil and coal are ingredients in other products such as many types of plastic or steel.