Calls for financial institutions to divest from fossil fuel producers have become a staple of climate activism. Bill McKibben, founder of the climate activist group 350.org, reprises the idea in a New York Times op-ed called "Cashing Out of the Climate Casino." On "a planet with a melted Arctic and a burning California," he writes, investing in or lending to a fossil fuel company is "the single most dangerous and reckless way to deploy money."
McKibbens' group argues that world is experiencing a "carbon bubble." Fossil fuel businesses "are overvalued," 350.org argues, "because if and when the world ever gets serious about dealing with the climate crisis, the fossil fuel companies won't be able to burn their carbon reserves, from which they derive their value."
McKibben's op-ed argues not merely that fossil fuel divestment would be wise, but that it's starting to happen. The Axa insurance company, he notes, has said it will divest from Canadian oil sands production. ExxonMobil, he adds, has agreed to do assessments of how climate change can affect its businesses. And the World Bank has declared that it will end all financial support for oil and natural gas projects by 2019. "Finance, not politics, may turn out to be the soft underbelly of the climate monster," McKibben concludes.
But divestment will have an effect only if demand for fossil fuels falls signficantly in the future. As long as companies and consumers want to buy oil, gas, and coal, some institutions will want to invest in their production. So what does future demand look like?
In 2015, fossil fuels accounted for 83 percent of all energy consumed. Oil made up 33 percent of that total, natural gas 23 percent, and coal 27 percent. The Energy Information Administration (EIA) projects that fossil fuels will still account for 77 percent of global primary energy consumption in 2040. By then the agency expects humanity to consume 28 percent more energy than we do today. As a result, the EIA projects that global oil consumption will increase by 15 percent and natural gas by 41 percent, while coal consumption will essentially remain flat.
The EIA's forecasters think global energy consumption from nuclear and renewable power will rise from 17 percent today to 23 percent by 2040. But it sure sounds like somebody will be financing and profiting from new fossil fuel wells and mines over the next couple of decades.
Of course, these projections assume no truly disruptive technological developments with regard to energy production and consumption. The prices of solar panels continue to fall steeply, as do battery prices. And who knows? Perhaps regulators will finally get out of the way and allow tech entrepreneurs to develop and deploy novel nuclear power technologies like thorium and traveling wave reactors.
Disclosure: Bill McKibben very generously blurbed my book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution.