A Trickle at First, Fossil Fuel Divestments Now Are a StreamThe Electricity Journal



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Electricity Currents

A Survey of Current Industry News and Developments

Potent New Selling Point: Climate Gain, without Pain

December 2014, Vol. 27, Issue 10 1040-6190/ 1

Momentum is gradually building towards some sort of international agreement, expected to be reached at next year’s Conference of Parties (COP) to be held in

Paris in December 2015. Then what about the 2014 COP, scheduled in Lima, Peru, for Dec. 1–12 of 2014? That appears to have been unofficially delegated to serving as a mere dress rehearsal for Paris. Don’t ask why, but hardly anyone is even talking about anything concrete coming out of Lima. With such low expectations, Lima may turn out to be a mild success.

As always happens prior to COP gatherings, various groups release reports of their findings on how dire the situation is likely to get and how much it may cost – or how much damage can be expected – if no action is taken to address climate change.

But a massive undertaking by a high-profile group called New Climate Economy breaks with the pattern.

New Climate Energy produced a report titled Better

Growth, Better Climate in September 2014 to coincide

In Electricity Currents This Month:

Potent New Selling Point: Climate Gain, without Pain . . . . . . . . . . . . . . . . . . . . . . . . 1

A Trickle at First, Fossil Fuel

Divestments Now Are a Stream . . . . . . . . . . . 1

Departing CPUC Chief Peevey Leaves

Mark in California and Points Well Beyond . . . 3

Electricity Currents is compiled from the monthly newsletter EEnergy Informer published by Fereidoon P. Sioshansi, President of Menlo Energy Economics, a consultancy based in San Francisco. He can be reached at fpsioshansi@aol.com.

A Trickle at First,

Fossil Fuel Divestments

Now Are a Stream

What started as a trickle of fossil fuel divestments has grown into a stream, and by most accounts, is likely to turn into a flood, as an increasing number of investors and fund managers pledge to cleanse their portfolios of dirty assets – whatever that means.

It started with a few environmental activists, notably Bill McKibben’s 350.org, which initially focused on gaining a foothold among American universities with sizeable financial endowments: the $32 billion managed by Harvard, the $20 billion managed by Yale and the University of

Texas, and so on, as ranked by CNN Money

Continued on page 4 early this year. The thinking was to persuade university students and rich alumni to pressure university fund managers to dispose of stocks of companies and/or industries deemed to be fossilfuel-heavy, polluting, environmentally damaging, unsustainable, and so on.

The tactic appears to be gaining traction. With each passing day, it seems, another university joins the ranks of those pledged to divest their fossil fuel holdings. Among the latest was Australian

National University (ANU), whose decision caused a political uproar in a country where coal has historically been king, not just for generating most of the country’s electricity but as a major source of income and employment in a resource-rich, exportdependent economy.

Australia’s fossil-fuel-loving Premier Tony

Abbott called ANU’s decision ‘‘stupid,’’ while environmentalists called it a brave and highly significant step. Stupid or not, it is certainly symbolic, and is likely to be mimicked by other institutions of higher learning.

Moreover, the trend is spreading beyond universities and their ivory towers. In September 2014, the Rockefeller family – the descendants of the legendary founder of Standard Oil – announced it would move away from oil. If even

Rockefellers now are shunning oil, the thinking goes, then others are likely to follow. While the size of the fund is negligible in absolute terms, the symbolism here is not. In making the announcement, Stephen Heintz, president of the

Rockefeller Brothers Fund, said, ‘‘John D

Rockefeller, the founder of Standard Oil, moved

America out of whale oil and into petroleum. We are quite convinced that if he were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.’’ In other words, it is not just about saving the environment, but about making good investments, moving away from potential risks and into growing sectors of economy.

So what has been the reaction of the fossil fuel industry? Judging from the intensity of the attacks mounted against divestments, one can say that, if not feeling outright threatened, it is greatly annoyed to have to deal with this new and unwanted grief and its attendant publicity, just as the business of extracting more fossil fuels, especially oil, gets tougher, more expensive, and more carbon-intensive. Making matters worse, oil prices have recently softened, a function mainly of tepid demand growth, and the fuel’s long-term prospects look less rosy.

According to Ben Zycher of the American

Enterprise Institute, at last count, over 180 institutions, local governments, cities, and individuals with assets worth over $50 billion have already pledged to divest their holdings of oil, gas, and coal.

That said, Zycher notes, ‘‘divest is a curious term,’’ in the sense that it is not universally clear what divestment exactly entails, nor is it entirely clear what assets should be shunned and which can be retained. One metric may be to unload shares of companies or industries with heavy carbon content in their assets, say companies engaged in the mining, transportation, or burning of coal.

No matter what definition or metric is used, one quickly ends up sliding down the proverbial slippery slope. For example, consider Caterpillar, the maker of heavy equipment to dig and haul coal in mining operations. Or GE, whose locomotives power the coal trains and whose turbines generate electricity. Caterpillar, though, also makes equipment used to build roads and flatten land to install solar PVs. GE manufactures medical imaging equipment, wind turbines and jet engines. How should such companies be treated?