Brown University Invests in Fossil Fuels

Brown University students have been pushing the University to cease investing in the coal industry.  However, recently, the University decided that climate change wasn’t a big enough threat to justify taking any financial action.  The President of Brown wrote a letter explaining the decision, but it is not an essay that a university should be especially proud of.  (It is perhaps inevitable that when one writes an essay explaining a bad decision, it will be a bit inconsistent.)  Quotes from the letter are indented and blue; my comments are dark grey.

6) “… I believe that although the social harm is clear, this harm is moderated by the fact that coal is currently necessary for the functioning of the global economy. Coal is the source of approximately 40 percent of the world’s electricity, and it provides needed energy for millions of people throughout the world. In many regions, there are serious technological impediments to transitioning away from coal. In addition, coal is used in the production of other products, such as cement and steel, which are central to the economies of both developed and developing countries. The comparison to tobacco is instructive. Unlike tobacco, which arguably has no social value, a cessation of the production and use of coal would itself create significant economic and social harm to countless communities across the globe.”
Paragraph 6 (above) makes the point that our economy currently depends on coal. It uses words like “currently necessary”, “needed”, and “central” to describe the importance of coal, and it makes it clear that the world economy cannot immediately cease to use coal without suffering grave harm. It uses words like “impediments to transitioning” to emphasize that change cannot be rapid. (That’s true enough in a strict but not very useful sense, however this is a “straw man” argument. Certainly, if we turned off all coal power plants tomorrow, 2014 would be a bad year, but in reality, nobody is actually going to do that.  Change will be gradual, and we won’t move away from coal until other energy sources can pick up the slack.)
7) “The second question to consider is whether divestiture would help correct the social harm by speeding the transition away from coal. It is clear that divestiture would not have a direct effect on the companies in question. Brown’s holdings are much too small for divestiture to reduce corporate profits. Furthermore, because the profits of these companies are determined primarily by the demand for their products rather than their stock prices, divestiture would not reduce profits even if Brown’s holdings were orders of magnitude larger.”
In Paragraph 7, the letter makes it clear that “Brown’s holdings are much too small” to have any substantial effect. Indeed they are: at approximately $3Bn, the endowment is merely 40 parts per million of the global world product. Certainly, Brown’s divestment would not cause the coal industry or the global economy to crumble immediately. So, then why does Paragraph 6 warn against rapid change? Change will be gradual; there is no need for Brown feel directly responsible for adverse consequences. (Paragraph 7 displays the fallacy of false helplessness.  It applies when many people could get together to accomplish something, but no single person can do much on their own.  It happens when people think only of their own action and assume that no one else will cooperate.  In such a case, it can become a self-fulfilling prophecy.)

What the letter does in Paragraph 6 is to falsely magnify Brown’s potential impact to raise the apparent risks of divestiture, while in Paragraph 7, it de-emphasizes Brown’s impact to reduce the apparent rewards. The combination of the two distortions would make it possible to resist divestiture for almost any industry.

 8) “… Divestiture would convey only a nebulous statement—that coal is harmful—without speaking to the technological and policy actions needed to reduce the harm from coal… . It is unclear what message divestiture would convey about the timing of the transition from coal in different regions of the country and the world; the development of alternative fuels, such as natural gas, nuclear power, and renewables; the value of investments in new technologies that may reduce the harm from coal; the effectiveness of different strategies for regulating U.S. coal companies and electric utilities; and the development of U.S. policies toward countries that are increasingly reliant on coal. … As I and others considered the matter, it became apparent that the symbolic statement of divestiture would not elucidate the complex scientific and policy issues surrounding coal and climate change and, for this reason, it would run counter to Brown’s mission of communicating knowledge.”

Paragraph 8 argues from the absurd assumption that an action like divestiture must supply details of “the technological and policy actions needed to reduce the harm from coal.” No one would seriously expect that.  The broad outlines of what needs to be done with coal are just as clear as the desegregation example. In the 1960s, we needed to stop discriminating; in the 2010s, we need to move away from fossil fuels. It will take a decade or more to figure out the details; no one really expects Brown to fix or predict when the transition from coal will happen (and certainly not on a region-by-region basis).  (Paragraph 8 is an example of moving the goalposts in the midst of an argument. When the letter started, it laid out the policy for divestiture, but this paragraph attempts to attach unnecessary extra requirements to the process.) Further along the paragraph, we come to the odd expectation that that divestiture should “elucidate the complex scientific and policy issues surrounding coal and climate change.” But, elucidation is a task for scientists, writers, and politicians, not university administrators. In reality, divestiture could be announced by a simple one-page press release.

Brown University will doubtless take up this question again, because the problem of human-induced climate change isn’t going to go away. If, in a year or two, Brown still feels that it is necessary to tie its fortunes to the coal industry, perhaps it will have time to supply a better argument. I expect that Brown will take action on a time-scale rather faster than its divestiture of tobacco stocks. For tobacco, it took thirty-three years from “Warning: The Surgeon General Has Determined that Cigarette Smoking is Dangerous to Your Health” to divestment; it can hardly be slower this time around.

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