Former Secretary of the California Environmental Protection Agency Terry Tamminen came up with an interesting question the other day. In a post on Fast Company, the author and founder of the NGO 7th Generation Advisors asked a simple question regarding the carbon-producing fuels that we are now bent on relegating to the environmental trash heap: Can we really afford to divest from fossil fuels?
What a great question. It’s the kind that only one who has sat in the proverbial hot seat and lobbied for consensus and compromise would be asking right now.
Divestment strategies have gained a lot of media steam these days, despite their debatable success at times. As Tamminen points out, they worked in slowing down the tobacco industry – until investors realized there were now a whole lot of cheap stocks out there to buy up. And of course, they’ve worked in some humanitarian issues, like the South Africa Apartheid in the 1990s.
But they haven’t always worked as well in either the political or corporate arena. A research team at the Catholic University of Leuven in Belgium found that companies under pressure for political or environmental reasons to divest an operation from a given international region were less likely to do so if they only had one investment than companies that operated a broad spectrum of operations in different countries in the same region. In other words, those that had all their eggs in the same basket felt less able to divest than those who had other “flexibility options.”
Tamminen points out that while it’s great to see increasing dialogue about fossil fuel divestment, we haven’t really grappled with the full impact or requirements of such a sweeping measure.
“We’ll need alternatives in more than the transportation sector,” points out Tamminen. “What about making plastics, pharmaceuticals and cosmetics? Or making artificial rubber, something that other environmental advocates applaud as they try to end the deforestation caused by rubber tree plantations?”
But the question that I’ve found myself wondering recently is: Why isn’t more attention given to incentivizing investment changes by the companies that have all or most of their money tied up in fossil fuel industries?
We use tax credits and retraining stipends like crazy to bolster the U.S. economy. We offer tax credits and other incentives to small businesses, to farmers we want to encourage to grow new crops, and families who have dependants. We offer systems to train unemployed workers, to train soldiers returning from war, to aid disabled veterans who aren’t able to work and other individuals in need of new careers. Recently, we encouraged millions of uninsured citizens to get health insurance by offering tax credits to defray the cost of monthly premiums. It’s a step that, however controversial, is expected to improve the economic wellbeing of not just those now insured, but also the country as a whole.
While it’s debatable whether oil and gas companies need tax credits to diversify to other industries, it seems to me that the real question is what we ultimately want to see from any successful divestment process. If we want companies to change their mindset, maybe we need to make it a bit easier to find a new path, rather than expecting them to simply absorb the losses that come from decreasing demand and increasingly hostile pressure of those who want change.
Perhaps establishing industry-specific federal tax breaks that encourage companies to diversify into new research areas is an answer. Or perhaps it’s graduated tax credits for new forms of renewable energy that benefit regional power companies still relying on coal power. Or perhaps it’s establishing retraining incentives that take some of the financial sting out of transitioning from fossil fuel industries.
And yes, most of these incentives would come with legislative considerations that help to ensure that political and legal quagmires such as what Minnesota recently experienced wouldn’t occur.
As we learned with the tobacco industry, simply divesting from the fossil fuel industry isn’t going to make gasoline investments go away, any more than it will transform kitchens that have relied on plastic dishes and microwave-safe bowls and manufacturing companies that have built empires from plastic fittings. The cost of restarting such industries will just become cheaper as companies loose money and struggle to dump their losses. But creating incentives that make it worthwhile for those companies to diversify into renewable energies and use the decades of expertise to retool our energy sector does more than start businesses. It helps to change mindsets about where we’re really trying to go.
Image credit: Cjp24