Betting on Climate Failure - The Ethics and Economics of Fossil Fuel Divestment

Abstract

Across the United States the growing Fossil Fuel Divestment movement has confronted universities, local governments, churches and other institutions with the demand to divest their investment portfolios from the fossil fuel industry. Such institutions are faced with a complex economic and ethical decision as to whether they should heed the advice of the divestment movement. Unsurprisingly, in response to such a seemingly radical proposal, a growing number of academics, lobbyists and organizations are resisting the fossil fuel divestment movement claiming that it is ineffective, dogmatic, unbalanced and naive, among other accusations. However, many of those who criticize the divestment movement are yet to truly engage with the substance of the movement, and in response to their criticism it is worth examining the economics and ethics behind the fossil fuel divestment movement in detail and in doing so assess the validity of the critiques levelled against the divestment movement in order to assist critics, institutions and divestment groups in their deliberations around divestment. In this research paper I attempt to do just that by elaborating on the economic and ethical case for divestment. I conclude that the divestment movement, far from being a naive, idealistic and dogmatic movement, is playing an important role in revealing the risks associated with the fact that much of the fossil fuel industry is over-valued if we as a global community are to keep levels of climate change below two degrees Celsius. Not only is the fossil fuel divestment movement helping to bring this ‘carbon bubble’ to light, thus revealing the true value of the fossil fuel industry in a carbon-constrained world, but furthermore through their actions they are helping many institutions to make stronger financial and ethical decisions and in many cases are even helping spur investment in the clean economy.