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Opinion Piece

Preventing a carbon bubble crash

Originally published in ABC Environment on 13 May 2013

Investment in fossil fuel companies is becoming increasingly unpopular for environment-minded citizens and astute investors alike.

“THIS IS THE CHURCH taking direct action and showing that it’s not willing to profit from destroying the Earth.”

That’s what Justin Whelan, Paddington Uniting Church mission development manager, had to say after the church’s NSW and ACT branches voted to stop investing in fossil fuel companies. The decision, from one of the largest churches in the country, signifies a significant point in growing campaigns in Australia to withdraw investment from fossil fuel companies.

At the height of the anti-apartheid campaigns in the 1980s, activists took aim at companies that were doing business in South Africa. This was a way to withhold resources and show outrage at the crimes of the apartheid regime. It has been credited with playing a significant role in its downfall.

Today, with the threat of climate change looming, activists are looking back to the 1980s to draw inspiration for a new fight. Fossil fuel ‘divestment’ campaigns are spreading across Australia as activists target what many think is the root cause of the problem: money.

The idea of campaigning on fossil fuel divestment largely originated in the USA. Last year, following the campaign against the controversial KeyStone XL pipeline and a highly popular ‘Do the Math’ tour by 350.org founder Bill McKibben, the Go Fossil Free divestment campaign spread to 300 university campuses across the US. The campaign is growing, drawing in religious institutions, as well as city governments into the fold. Already four universities, as well the city of Seattle and San Francisco have moved to divest completely from fossil fuel companies.

Writing in Rolling Stone Magazine, McKibben outlined why divestment is important:

“The logic of divestment couldn’t be simpler: if it’s wrong to wreck the climate, it’s wrong to profit from that wreckage. The fossil fuel industry, as I showed in Rolling Stone last summer, has five times as much carbon in its reserves as even the most conservative governments on earth say is safe to burn – but on the current course, it will be burned, tanking the planet. The hope is that divestment is one way to weaken those companies – financially, but even more politically. If institutions like colleges and churches turn them into pariahs, their two-decade old chokehold on politics in DC and other capitals will start to slip.”

For McKibben, and activists around the United States, divestment signals almost a ‘last stand’, a final opportunity to take on the fossil fuel companies and defeat them before they defeat the planet. 350.org announced earlier this year that McKibben would be bringing his Do the Maths tour (with the s included for Australian audiences) to Australia in June, bringing its divestment message with it.

But Australian campaigns have already picked up on the issue, and just like in the US, they have started with their eyes firmly on universities.

Tom Swann, a student at the Australian National University (ANU), and a founding member of one of Australia’s first divestment campaigns, Fossil Free ANU, argues that universities are essential to taking action on climate change.

“We don’t think it’s appropriate that a university that likes to boast its green credentials and its world-class research on climate change and other environmental issues invests its student fees in the companies that are creating this problem,” Swann says.

“Our campaign started when activists from the Northern Rivers of NSW contacted us about a holding that the ANU had in a coal seam gas company called Metgasco. So we asked the university why they thought it was appropriate. We set up a fake gas rig at the uni and did a lot of leafleting and postering, and we got a commitment from the vice chancellor to sell their shares.”

Fossil Free ANU was successful in this initial ask and is now campaigning for the uni to divest completely from fossil fuels. Other campuses are now starting their own campaigns, and the Australian Student Environment Network (ASEN) has set up a campaign called “Lock the Campus”, which is designed to provide resources and support to university students running divestment campaigns.

And Australian campaigns are going beyond university campuses, with activists taking on a much bigger target. At the start of the year the Australian Youth Climate Coalition (AYCC), in partnership with the Asset Owners Disclosure Project (AODP), began a campaign targeting superannuation funds’ energy investments. Charlie Wood, who helped set up the campaign, and now works with AODP, said they had decided to target super funds because of the massive influence they have in the finance sector.

“Superannuation is the largest source of wealth on the planet, so if we’re looking for ways to increase support for renewable energy and reduce emissions, then we must start focusing on the finance sector,” Wood explains. “Political campaigning is obviously important, but money speaks.”

The campaign is based around the idea of getting super fund members to take an interest in where their money is invested. Members start by emailing their funds using an online platform developed by the AODP.

“The whole idea is to engage members to approach their funds and firstly to ask them what their money is invested in. Secondly, they’ll be encouraging their funds to increase their investments in renewable energy and, in so doing, indirectly moving their money out of high-carbon economy.”

This approach has potential to yield significant results. Super funds hold huge amounts of money; in Australia alone $1.3 trillion is invested in our retirement funds. If these investors were to start withdrawing their money from these fossil fuel companies, it is certain to have an impact.

Research conducted by Market Forces for The Australia Institute in March (pdf), said that whilst most people were not engaged with their super funds, a quarter of respondents to the survey indicated that they would be “willing to switch their superannuation to another company on the basis of the environmental consequences of investments in coal or coal seam gas extraction.”

Sensible investment

For many though, this isn’t just about ethical and environmental considerations, but about financial considerations as well. Some are arguing that it will become inevitable that fossil fuel companies will have to eventually shut down and that it makes sense for organisations to pull out now before they start posting losses.

This idea has been backed up by a report by Nicholas Stern Baron of Brentford and the thinktank Carbon Tracker, which said that the burst of the “carbon bubble” could result in an economic crisis. The report said that there is a massive over-valuation of oil, gas and coal reserves, which is likely to lead to a market crash when it is eventually agreed that these reserves must stay in the ground.

Project director James Leaton says up to 80 per cent of the coal and gas reserves owned by fossil fuel companies will be “unburnable”, wiping up to 60 per cent off the value of these companies.

“There is a focus on short-term returns which means most investors follow the market, assuming they can get out before any bubble burst. The sub-prime crisis and dotcom bubble show that not everyone can get out in time… There is an a opportunity now to prevent the carbon bubble inflating further by limiting the capital flowing into developing more coal, oil and gas reserves,” Leaton says.

The smart companies are diversifying or gradually scaling back investment in carbon intensive ventures, Leaton says. “Mining companies like BHP Billition and Rio Tinto are already pulling back on thermal coal and can deploy capital elsewhere — shareholders should be encouraging this.”

He advises both institutional and mum and dad shareholders to ask the hard questions. “Reducing expsoure to pure coal operators should be considered. Challenging strategies which are pouring more capital into expensive export projects should be a priority. Capital should returned to shareholders if the company does not have a viable proposal.”

Government has a role to play too, sending clear signals to the market that it needs to factor in future emissions limits.

Tom Swann from the ANU is realistic about the power of his campaign. “Obviously divestment is not an end in itself. It is one tactic amongst many. But when you consider the scale and urgency of the problem and the fact that this is something people can do on their own campuses, in their own communities, and see tangible results, I think it is an extremely important tactic.”

“These industries have to go out of business, or the planet is going to go out of business.”


About Simon Copland

Simon Copland is a freelance writer and climate campaigner. In his spare time he plays rugby union and is a David Bowie fanatic. He is a regular columnist for the Sydney Star Observer, blogs at The Moonbat and tweets at @SimonCopland.


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