When It Comes To Climate Policy, Money Talks
Today, as the Trump administration continues to bolster the fossil fuel industry — loosening regulations and giving large tax breaks to fossil fuel companies — environmentalist Bill McKibben says that it would be wise to follow the dollar to see where the future of energy is headed, globally.
“Right now, of course, politics is making it difficult to deal with climate change in DC, but it’s not stopping cold all the work that’s going on,” says McKibben, co-founder of 350.org.
McKibben wrote an op-ed that appeared in The New York Times on Dec. 15, talking about how all of the world’s most prominent financial players are stepping away from the fossil fuel industry. Four days later, New York Gov. Andrew Cuomo unveiled a plan for the state’s common retirement fund — and its over $200 billion in assets for more than a million New Yorkers — to completely decarbonize its portfolio.
That same day, Scott Stringer, the comptroller of New York City, announced a similar fossil fuel free strategy for the city’s pension fund, which is comparable in the number of assets.
“Those are two of the 20 largest funds on the planet,” McKibben says. “So, the same day that in Washington they were passing the tax bill that gave ludicrous tax breaks to the fossil fuel industry in the world’s center of finance, New York, they were saying, ‘No, we don’t think this is good business anymore.’
“If the center of the world’s financial markets is sending the signal that we don’t want to do this anymore, it’s going to get harder and harder for the Exxons and Chevrons of the world to keep out there finding more fossil fuels that we don’t need and can’t burn.”
McKibben’s piece in the Times mentions that the keepers of Norway’s sovereign wealth fund, the largest of its kind with more than a trillion dollars in assets, have, too, proposed to do away with its oil and gas holdings — even though the fund accumulated most of its wealth from the surplus revenues from the country’s petroleum sector.
“In essence, they said, ‘We’re taking our winnings from this fossil fuel casino. We’re cashing out; we’re going to go find some other game to play in.’ The smart money is increasingly moving in that direction,” McKibben says.
“The fossil fuel industry, which has been an awful good business for the last 200 years, isn’t a good business going forward. And the smart money is heading for the exits now.”
McKibben mentions the revenue that Elon Musk has been able to generate from his Tesla electric car company alone — an enterprise that is worth approximately $53.5 billion, more than Ford and General Motors combined.
“Smart investors looking ahead can see where the future lies,” McKibben says. “Think about the scale of economic activity that comes from having to make the transition for the entire energy system off of fossil fuel and on to something else. The upside potential is enormous.”
The world’s largest emitter of greenhouse gases, China, has recently made big strides in the carbon market by putting a price on carbon emissions — factories are limited to a certain amount of carbon emissions annually, says Akshat Rathi, a Quartz reporter who recently wrote about the initiative.
“This is a market-friendly way of trying to reduce emissions,” Rathi says of the country that accounts for 30 percent of the world’s greenhouse gases. “Once you start putting a price on carbon, there is more incentive to not put it out into the atmosphere as you can do today because there’s no price on emissions and when that price comes in, it disincentivizes companies to go on emitting as they do today.”
Although the carbon emission fees are only being applied to the power sector, Rathi says that China became the biggest player in the carbon market upon its arrival.
“At a time when the American government is sending signals to not act on the climate, if a bigger emitter than America comes onboard and says that [we’re] going to try and do our best to reduce those emissions. … That’s a very strong signal to the world that the world apart from America is very serious on climate action,” Rathi says.
Rathi references the images of people walking with specialized masks amid thick gray smog that have become synonymous with the downtowns of China’s largest cities. McKibben adds that the country is also putting up solar- and wind-powered facilities at an extraordinary pace.
“You hear these stories about smog in Beijing or smog in Shanghai and those images are real and those [harmful effects] are being felt by the people,” Rathi says, “so even though it has a strong-handed government, it needs to keep its people happy and reducing fossil fuel emissions does work in their favor.”
Although the United States is now the only country not to sign the Paris Agreement, Rathi mentions how California has become a major player in the carbon market on its own through the cap-and-trade system that it established with the Canadian provinces of Québec and Ontario, in which the system sets a limit on greenhouse gases and then allows the market to determine who gets to emit those gases.
“If California is showing to America that this is something that they can make it work within the economy and keep the economy growing, it’s again a very strong signal for other states to step up and be part of this market,” Rathi says. “Even if the federal government has certain policies it can pass, states are quite powerful in what they can do to reduce emissions.”
Bill McKibben is co-founder of 350.org, an environmental writer, and Schumann Distinguished Scholar at Middlebury College in Ripton, Vermont.
Akshat Rathi is a reporter for Quartz, based in London.
IRA FLATOW: This is Science Friday. I’m Ira Flatow. Later in the hour, the sky is filled with birds making their way south for the season. Do you need help IDing that backyard brown bird or have you spotted something you haven’t seen before and you’d like to talk about it? We’re here to help. Give us a call with your birding questions. Our number, (844)-724-8255, (844)-SCI-TALK, or you can tweet us @SciFri.
But first, President Trump and congressional leaders have spoken repeatedly about doing away with what they call the previous administration’s war on coal. And they’re introducing policies that downplay environmental concerns in an attempt to be more friendly to the fossil fuel businesses. But in some cases the key decisions are not the ones Washington makes but the ones made by big banks and institutional investors. And some of those financial decision makers have decided to divest their investments away from fossil fuels.
Joining me now to talk about that is Bill McKibben. He’s cofounder of 350.org, author of a recent op-ed in The New York Times talking about financial players and the environment. Bill McKibben joins us via Skype. Welcome back to Science Friday.
BILL MCKIBBEN: Ira, best of the season to you.
IRA FLATOW: Thank you very much. Does banking and investment have a lot to do with energy policy? Can they influence energy policy?
BILL MCKIBBEN: Yeah, well, you know what they say, follow the money. Right now, of course, politics is making it difficult to deal with climate change in DC, but it’s not stopping cold all the work that’s going on. There’s a lot of really interesting developments, even in the last few months.
We started this campaign asking institutions to divest their holdings in fossil fuels about five years ago. It’s gone very well. It’s become the largest of this kind of campaign ever with about $5 trillion in endowments and portfolios already committed. But man is it gaining steam now.
In November the Norwegian sovereign wealth fund, which is the biggest pool of money on the planet, said it was beginning to divest from fossil fuel. That’s particularly interesting because they made all their money in oil, that North Sea oil that they have up there Ira. And in essence they said, we’re taking our winnings from this fossil fuel casino, we’re cashing out and we’re going to go find some other game to play in.
The smart money is increasingly moving in that direction. Just this past week since I wrote that piece in The Times, we had what may be the biggest news yet. New York Governor Andrew Cuomo on Tuesday announced that the state’s Common Fund, its huge pension fund, $200 million billion, would no longer be making new investments in fossil fuel and would begin the process of decarbonizing it’s entire portfolio.
Half an hour after he made that announcement, Scott Stringer, who is the comptroller of the city of New York and in charge of its almost $200 billion pension fund, said they were going to do the same thing. Those are 2 of the 20 largest funds on the planet. So the same day that, in Washington, they were passing the tax bill that gave ludicrous tax breaks to the fossil fuel industry, in the world center of the finance, New York, they were saying, nah, we don’t think this is good business anymore.
IRA FLATOW: I don’t have $200 billion if I’m a normal folk. Can a little investor make a difference at all?
BILL MCKIBBEN: Sure. People have been divesting themselves in such numbers that all the big financial firms have set up fossil-free funds. And of course what’s interesting is that over the last five years, those funds have done a lot better than those that were exposed to fossil fuel because fossil fuel hasn’t been performing. The bottom dropped out of the coal business. Almost all the big players went bankrupt. And the oil and gas business is in the dumps too.
Why? Because smart investors looking ahead can see where the future lies. I mean Elon Musk is starting to build cars in volume that do not need you to put petroleum in the side in order for them to work. That’s a real threat to the way that we’ve been doing business for a very long time, not to mention the fact that the melting Arctic, the blazing hills of California, the dissolving corals around the world, those are putting huge pressure, if not on Donald Trump, then on the rest of world leaders to begin to actually do something about this, not to mention the fact that with every passing month the cost of a solar panel gets cheaper and cheaper and cheaper.
The fossil fuel industry, which has been an awful good business for the last 200 years, isn’t a good business going forward. And the smart money is heading for the exits now.
IRA FLATOW: But is the money going into green energy as it heads to the exits?
BILL MCKIBBEN: Some of it. Some of it’s, I’m sure, just going into– I don’t know what, investing in bowling alleys or pizza places or something. But some of it, yes, is definitely going into investing in green energy because that’s where the returns are going to be. I mean, think about the scale of economic activity that [? comes ?] having to make the transition for the entire energy system off on fossil fuel and onto something else. The upside potential is enormous.
IRA FLATOW: I want to bring in another guest. Akshat Rathi is a reporter for Quartz based in London. And he recently wrote about China’s carbon market. And he joins us by phone. Welcome to Science Friday.
AKSHAT RATHI: Thanks for having me Ira.
IRA FLATOW: Explain what a carbon market is and how it works and why China is an important player here.
AKSHAT RATHI: So just for reference, China is the biggest emitter of greenhouse gases on the planet today. About 30% of all emissions come from China. And what it’s doing with the carbon market is a simple mechanism. It’s putting a price on carbon emissions so that companies can pass the environmental costs of those emissions to the public the way they do today.
The way the carbon market works is that you would have, say, a power plant which emits maybe about 10 million tons of carbon dioxide each year. It would tell the government that this is the amount we are emitting, currently. The government would say that we are going to give you a certain limit. You can only emit up to 9 million tons. We give you that for free. The 1 million tons on top, we’ll put a price on that. And if you want to continue to emit, you will have to pay money to do it. Otherwise you can implement policies or technologies that would reduce those emissions. And then you don’t have to pay us any money.
IRA FLATOW: So it’s sort of a cap and trade system then.
AKSHAT RATHI: It’s a cap and trade system.
IRA FLATOW: Will this make the Chinese companies overall emit less?
AKSHAT RATHI: Yes, I mean that’s the hope. This is a market-friendly way of trying to reduce emissions. Once you start putting a price on carbon, there is more incentive to not put it out into the atmosphere as you can do today because there is no price on emissions. And once that price comes in, it disincentivizes companies to go on emitting as they do today.
IRA FLATOW: Bill McKibben, what is your reaction to this? Is this a good idea?
BILL MCKIBBEN: China is doing all kinds of interesting things right now. They’re fooling around with carbon markets and seeing how that works, although they’ve dropped back the scale a little bit what they’d initially proposed. They’re also putting up sun and wind power at an extraordinary pace.
Of course some of that’s driven by the fact that they managed to make their cities all but unlivable by burning so much fossil fuel. But it’s also driven by the know that climate change is an existential threat. [INAUDIBLE] delta over there trillion dollars worth of manufacturing capacity is located. It’s a meter or two above sea level. That’s why they call it a delta.
IRA FLATOW: Akshat, do you think other countries will also join? You say China is the biggest player. Are there other bigger players that might do the same thing?
AKSHAT RATHI: Definitely. Just the sheer scale of emissions that China is part of today– and yes, they’ve only applied this to the power sector. But even by just applying it to the power sector, they’ve already become the biggest carbon market.
And look, at a time when the American government is sending signals to not act on the climate, if a bigger emitter than America comes on board and says that we are going to try and do our best to reduce those emissions, that’s a very strong signal to the world that the world apart from America is very serious on climate action.
IRA FLATOW: So this is more than just talking about it. This is actually showing that they are serious by taking action.
AKSHAT RATHI: That’s right. And China needs to do it because, just as Bill said, they’ve been burning fossil fuels and it is harming their own people. You hear these stories about smog in Beijing or smog in Shanghai, and those images are real. And those are being felt by the people. So even though it has a strong-handed government, it needs to keep its people happy. And reducing fossil fuel emissions does work in their favor.
IRA FLATOW: Bill, can this be applied to American companies?
BILL MCKIBBEN: Well, what can be applied is this kind of pincer action. We can’t do the most obvious thing that we should be doing, which is having a big, concerted, global action. We got a little bit of ways there with the Paris Accords, but of course Trump’s doing everything he can to undercut that. So in the absence of a big, global push to deal with what is, after all, the first truly global problem we’ve ever faced, we instead have to find strategic points in which to work. And China is one of them. And that’s why this stuff that’s being described that’s happening in Beijing is a real interest.
And just as they’re the biggest emitter, New York is the biggest source of money on the planet for fossil fuel and everything else. If the center of the world’s financial markets is sending the signal that we don’t want to do this anymore, it’s going to get harder and harder for the Exxons and Chevrons of the world to keep out there finding more fossil fuel that we don’t need and can’t burn.
IRA FLATOW: Akshat, you agree?
AKSHAT RATHI: Yeah, and I would jump in, I would say that actually, it’s already happening in America. California is currently part of a carbon market that includes California and a handful of provinces in Canada. And they trade emissions. And California, as we know, is one of the best states on green action, on climate action.
And so if California is showing to America that this is something that they can make it work within their economy and keep the economy growing, it’s, again, a very strong signal for other states to step up and be part of this market. Even if the federal government has certain policies it can pass, states are quite powerful in what they can do to reduce emissions.
IRA FLATOW: Akshat Rathi of Quartz and Bill McKibben, environmental advocate and cofounder of 350.org, thank you both for taking time to be with us today.
AKSHAT RATHI: Thanks for having us.
IRA FLATOW: Have a happy holiday.