Fossil fuel industry is no longer a good investment
Why are we still investing in the industries that fuel climate change?
A new report from Corporate Knights reveals a shocking truth about the investments of the Colorado Public Employees’ Retirement Association (PERA). It found that PERA is estimated at $2.7 billion less than it would have been if it had divested from fossil fuels a decade ago, an opportunity cost of over $4,100 per PERA member. Additionally, the report predicts that PERA could lose $6.4 billion more if it continues investing in fossil fuels.
Of course, there are other factors to consider with investments, but the main factor should be whether or not it is a smart, long-term investment. As far as long-term investments go, fossil fuels are one of the worst choices to make. Oil and gas will both run out within the next 40 years, according to some estimates, and the closer we get to the end of their supply, the harder it will be to profitably extract them.
Moreover, not only are fossil fuels an unfavorable investment, but their indirect influences are even more costly. According to the Mercer consulting firm, impacts of climate change could cost $4 trillion by 2030. In Colorado alone, the costs of oil and gas pollution will be $1.36 billion per year, based on Colorado Fiscal Institute’s new report. This annual cost is 1.5 times more than the total taxes and fees that oil and gas provides Colorado, meaning the net economic impact of fossil fuels on Colorado is negative.
Based on science and data, this decision is simple. Fossil fuels are no longer a smart investment for our environment, economy or lives. The main reason why the oil and gas industry succeeded for so many years is because it had a long enough period as the only available energy source that we built our societies around it. Now, the energy sector is a vastly different system. Solar and wind power are the cheapest energy sources, and they have the potential to fuel our civilization for much longer than oil and gas. It is long past time to divest from climate disaster and accept the evident truth that our environment is changing and we must adapt.
The question then becomes, if this decision is so obvious, why are people not acting accordingly? There are many possible answers to this inquiry, one being the propaganda behind the oil and gas industry. In the three years after the Paris Climate Agreement of 2015, this industry put $1 billion dollars into climate-related lobbying and misinformation. New research also reveals that Exxon knew about the consequences of climate change almost 40 years ago, yet continued on their path, and ignored their team of scientists that we now know had some of the most accurate predictions for global warming. Another explanation is simply the demand for fossil fuels. Even though many wish it were different, fossil fuels are still used or wanted by most people, and with demand, there is the potential for profit. What we should consider with this explanation is that eventually this demand will not be able to be met, and the longer we wait, the more painful the transition will be. But of course most people are not thinking about these long-term consequences and instead focus on short-term gain. Yet another reason for the lack of divestment is that clean energy firms may not be large enough to acquire the $5 trillion invested in fossil fuels, according to Bloomberg New Energy Finance.
A problem at the root of this dilemma is how to look beyond short-term benefits and consider both short-term and long-term consequences of fossil fuel investments. The transition away from fossil fuels certainly won’t be easy or seamless. If continuing to rely on them is an option, most people will take it, as they are currently proving. However, as many are beginning to realize, our reliance on fossil fuels will have to end eventually. The sooner we can collectively shift our mindset around the energy industry, the fewer losses, both economically and environmentally, we will face.