To effect change, climate activists need to pursue both divestment and limiting demand for carbon emissions.
Read the full Risky Climate column at Bloomberg Green.
A two-day stretch last week brought the end of three different fossil-fuel pipeline projects—a defeat for energy lobbyists. The fact that energy lobbyist-turned-Energy Secretary Dan Brouillette blames climate activists for pipeline setbacks is a clear sign: Activism works.
For years activists have focused on the supply side, with “divestment” playing a prominent role especially across college campuses. Targets have included everything from university endowments to pension funds, and investors have taken note or even been on the forefront of the movement.
Jeremy Grantham has argued forcefully for divesting from fossil fuels. Bob Litterman, Goldman Sachs’s former top risk manager, has bet against fossil fuels since 2014, with average annual returns of more than 20%. His bet is up about 50% so far this year alone. (Litterman is also a co-author of mine on the EZ-Climate carbon pricing model.) Meanwhile, too many economists have traditionally considered the divestment focus misguided at best, arguing instead to focus on limiting demand for carbon emissions.
Both demand and supply limits are important. But it’s time for economists to update their own model of how much supply matters. In short: a lot.
Continue reading at Bloomberg Green.