The carbon bubble

carbon_bubble_main

If you’re anything like me, then you think about the stock market very rarely, if ever, and can press that off switch quicker than for a safety assessment test. But what if you found out your university had invested in shares that were overvalued and that these investments could contribute to another economic crash? And what if the science you were doing was benefiting oligopolies and affecting democracy?

Imperial College London’s £79.1 million endowment fund is the UK’s 10th largest, and up to 10% of this is directly invested in oil, coal and gas. Imperial has no active ethical investment policy in this area and so has no obligation to be socially and environmentally conscious about its investment. But aside from this deficit in ethical considerations, it’s simply bad money management.

Shares in fossil fuels listed on the stock exchange are worth approximately £900 billion compared to renewable energy shares that stand at just £5 billion, but they are overvalued.

The share value of fossil fuel companies is mostly based on estimates of how much oil, gas or coal they will be able to extract from their network of wells and mines. If all the fossil fuel reserves were burned, we would be heading towards a catastrophic 6°C increase in global temperatures. This is well above the 2°C limit that the UK government and other nations have committed to.

Research by Carbon Tracker has revealed that to meet this target, only 20% of the total fossil fuel reserves can be burned by 2050, and yet the share price of fossil fuel companies (the £900 billion that Imperial owns a stake of) is based on extracting and burning all the oil, coal and gas they can access.

Investors like Imperial College London put money into the fossil fuel industry assuming that the reserves held by the company can be burnt and therefore sold at the market price. If carbon limits are put in place and only 20% of reserves can be burnt, then 80% of the reserves become worthless. Similar to the housing bubble that created the 2008 financial crash; this is the carbon bubble, produced through speculating the future price of oil and ignoring the environmental imperative to leave a large proportion of known fossil fuels in the ground.

So how does Imperial protect itself and its students from an expanding bubble, which is tearing at the seams? Bill McKibben addressed that question in Rolling Stone magazine and the answer is divestment – just sell the fossil fuel shares and use the money to buy shares in another industry. With over 130,000 likes on Facebook alone, the article has started a global student movement to get universities all over the world to divest from the fossil fuel industry. But how did an article talking about maths and science get more views than a Justin Bieber feature in the same issue of the popular culture magazine?

It was because the maths and science were a lot more comprehensible than your regular academic paper, and it came in the form of 3 numbers:

  1. 2°C. This is the only target our global leaders have settled on to limit global warming.
  2. 565 gigatonnes. This is how much carbon we can emit before reaching that 2°C threshold. (Global annual emissions estimated at 30 gigatonnes).
  3. 2,795 gigatonnes. The amount of carbon stored in the fossil fuel industry’s known reserves. Five times more than is safe to burn.

 

Why divestment?

Today, universities such as Imperial wouldn’t dream of investing in, or accepting funding from, tobacco companies. It would conflict with the Faculty of Medicine’s innovative research on cancer. So how does investment in fossil fuels correlate with the Grantham Institute’s research on Climate Change? It doesn’t. And neither does it make sense for universities to invest in a system that will leave their students with no liveable planet to use their degrees on. Imperial College London has a duty to shape public debate on energy policy and climate change. Divestment from fossil fuel companies certainly fits the bill.

In the 1970s and ‘80s, universities took part in a global divestment campaign in response to the apartheid regime of South Africa by selling off the stocks of companies that did business in South Africa. Public pressure lowered targeted companies’ stock prices and forced them to comply with the divestment activists’ demands.

The evidence from South Africa suggests that divestment can have an impact by shaping public discourse. If universities across the country divested from fossil fuels this may again be the case.

But Imperial’s relationship with the fossil fuel industry is a lot deeper than its investments. With more funding received from fossil fuel companies than any other UK institution and £17.5 million in funding from BP and Shell alone, Imperial College London prides itself on strong partnerships with industry. Through weekly career events with energy companies and departments such as the Energy Futures Lab sponsored by Shell, Imperial has oil running through its institutional veins.

How is this funding affecting the kind of science being produced in Imperial? I’m led back to the miniature investments in renewable energy on the stock market. Fossil fuel funding is  keeping renewable energy research out of the loop while deepening the focus on pricey commodities such as oil, gas and coal. This is powering a vicious cycle where fossil fuel research is fat with funding cash and renewables are scraping by on their hard-won but meagre quotas.

Oil and gas companies are taking advantage of academic vulnerability caused in part by the government’s fixation on the cuts-led commercialisation of higher education. What better way than to offer lots of money in exchange for social credibility, young staff and enhanced technology?

One could argue that for Imperial to divest from fossil fuels would involve tearing down the walls and starting from scratch, the fossil fuel industry is so embedded in Imperial’s scientific core. But there is plenty to be done to begin with; from publishing an ethical investment policy and screening all funds for their social and environmental impacts, to restricting the amount of funding accepted from large fossil fuel companies.

Over the next five years, university students will be joining faith groups and pension holders in tackling the fossil fuel industry head on. It’s time to pull away the apathetic, misguided and sometimes corrupt support our universities, churches and pension funds give to the fossil fuel industry. Goodbye, oligopoly. Hello, democracy.

 

IMAGE: Flickr, doug88888

Related Posts

5 thoughts on “The carbon bubble

  1. Hello Tara,

    I co-ordinate a group called The Loose Anti Opencast Network, an umbrella group which links together 31 groups from across the UK opposed to opencast coal mining and proposed opencast coal mines. I love your clear exposition of some of the climate change issues associated with exploiting fossil fuels, so I do hope that you don’t mind me sending the following tweets on your blog article:

    #CarbonBubble Gt article explaining why #Universities should rethink their relationship with #FossilFuel owners @ http://www.isciencemag.co.uk/features/carbon-bubble/

    #ClimateChange Gt article on why #Universities should rethink their relationship with #FossilFuel companies @ http://www.isciencemag.co.uk/features/carbon-bubble/

    I tweet as https://twitter.com/Seftonchase

  2. Completely agree with you. How is this campaign going? Have debates with the right people happened yet?

    Many thanks,
    Seb

Leave a Reply

Your email address will not be published. Required fields are marked *