As the war in Ukraine grinds on, a look at the economic battlefield and how the conflict might permanently reshape the global economy. Diane talks to Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations.
It began on college campuses, students lobbying their schools to pull out of investments in coal, oil and gas companies. Recently, however, the fossil fuel divestment movement has expanded beyond university walls. Last year, heirs to the Rockefeller oil fortune announced they’d purge a portion of their portfolio of coal and tar sand investments. Earlier this month, Norway voted to cull coal stocks from the holdings of its government pension fund, worth $890 billion. Many see these developments as a victory for climate change activism, but others argue divestment is both ineffective and actually hurts the cause it claims to help. For this month’s Environmental Outlook, a look at fossil fuel divestment.
- John Schwartz Science reporter, The New York Times.
- Frank Wolak Director of the Program on Energy and Sustainable Development and a professor of economics at Stanford University
- Robert Massie Senior advisor, Boston Common Asset Management, initiator of the Investor Network on Climate Risk and author of "Loosing The Bonds: The United States and South Africa in the Apartheid Years"
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. In the 1980s, college students called for U.S. investors to pull their money out of South Africa. Today, the target is fossil fuel companies and the movement has recently gained traction beyond our nation's campuses with a number of high profile funds and foundations saying they plan to go fossil free.
MS. DIANE REHMFor this month's Environmental Outlook, an exploration of the fossil fuel divestment movement. Joining me, Robert Massie, an independent consultant on finance and climate change, from studio in New York, John Schwartz of the New York Times and from Mexico, Frank Wolak of Stanford University.
MS. DIANE REHMYou're welcome to take part in the discussion. Give us a call at 800-433-8850. Send an email to email@example.com. Find us on Facebook or send us a tweet. And welcome to all of you.
MR. ROBERT MASSIEThank you very much.
MR. JOHN SCHWARTZThank you.
REHMGood to see you all. Bob Massie, talk about just what is fossil fuel divestment.
MASSIEFossil fuel divestment is an attempt, almost a final attempt, to wake up the planet and particularly wake up our governments to address the most severe problem we have now in humanity, which is the rise of greenhouse gases that is leading to the transformation of our climate and therefore a threat to planetary life. We have not seen action by the government and so now, more and more institutions are saying we look at the cause of this problem.
MASSIEWe see massive oil and gas and coal companies continuing to look for reserves, even though we have five times more the reserves than we can afford to burn. And so an increasing number of people are looking at what will it take to move the economy from where we are now to a low carbon economy and that includes getting rid of the stock of those companies whose business model is leading down a destructive path.
MASSIEAnd we're seeing hundreds of institutions make that financial decision and moral decision right now.
REHMI gather it's a pretty fast-growing movement.
MASSIEI wrote a very long book on the South African divestment movement and that movement, which was successful, took almost 20 years. And we've seen a dramatic expansion of this particular movement in less than three so I think that's a remarkable testimony.
REHMJohn Schwartz, how big is the movement? Who has actually divested?
SCHWARTZWell, there are hundreds of organizations, Diane, and so many individual investors. What's impressive is the big names, the sovereign wealth fund of Norway, with nearly a trillion under management, said it's getting out of coal. That's not full fossil fuel divestment, but it's a very interesting move by them. The Church of England, the Rockefeller Brothers Foundation, which is the philanthropic arm of the Rockefeller family, which, let's face it, made its money from Standard Oil.
SCHWARTZIt's both the large numbers of groups and also the big names that are involved that's impressive.
REHMSo when you look at this, Frank Wolak, can divestment really hurt these companies? What does it actually do? Their holdings, whether it's companies or countries, are so large, how much of an impact can it really have?
MR. FRANK WOLAKAlmost nothing. Virtually nothing, I would say. I mean, the simplest way to describe it is that the global private equity market is about $60 trillion and if you took the sum of the university endowments, you only get $500 billion, which is still, you know, less than -- significantly less than 1 percent of world capitalization. The other is that, you know, previous divestiture movements, such as South Africa, there's actually no empirical evidence from academic research to suggest that it had any impact on the share prices of companies in South Africa.
MR. FRANK WOLAKSo this is largely, at best, a symbolic effort, but a symbolic effort that I think is mostly counterproductive.
REHMCounterproductive, Bob Massie?
MASSIEWell, I've heard Professor Wolak make this claim that divestment is ineffective and I would like to suggest otherwise. Taking the South African case, where I wrote a 700-page book on it, it's absolutely true it had no effect on the stock price and that's totally irrelevant. At no point during the South African divestment or in the fossil fuel movement does anyone care about the stock price of these companies.
MASSIEIf you look at it through finance, you see no effect and therefore you conclude that there's been no impact. But if you look at it through the discipline of history, you see that it's incontrovertible that step by step by step it was the South African divestment movement that changed the public discourse, that transformed the decisions of corporations to get out of South Africa and our government, led by a Republican Senate, to pass a comprehensive sanctions bill. So this...
REHMHow did it change the discourse?
MASSIEWell, one of things that's fascinating about it is that climate change has been one of those problem where we've been hoping that someone else would do something about it. But divestment has the impact of saying, what are your direct responsibilities? If you own stock in Exxon, if you're receiving dividends from Exxon whose business model is to destroy the planet, do you feel comfortable with that? Do you endorse what they're doing?
MASSIENormally, when you own a stock, you're endorsing their business plan. And so instead of pushing this off to someone else, it transforms people and institutions exactly as a democracy should.
REHMJohn Schwartz, is there a shame factor involved?
SCHWARTZWell, in fact, the idea of making these companies pariahs is, it seems to me, part of the goal and to change the way that people think about fossil fuels and the companies that rely on them. And I think that the people that feel this way think that that's a perfectly reasonable, you know, part of the plan.
REHMFrank Wolak, how do you see it?
SCHWARTZAnd I think Bob would say that.
WOLAKI just have a very difficult time vilifying somebody for producing something that I consume every single day. I mean, that's my big problem with it, is we all consume fossil fuels. And the other is I just think there are far more productive things that can be done and that these sorts of actions really distract the discussion from achieving really tangible progress.
WOLAKAnd I guess I'm far more optimistic about the possibilities for change in these various ways with respect to governments. There are a number of regions that are pricing carbon, are embarking on climate policies. I think the progress is moving forward. I think these sorts of attempts are sort of making it more difficult for those things to move forward.
REHMAt the same time, can it be argued, Frank Wolak, that these kinds of movements put pressure on the very politicians who are charged with making the decisions that are so necessary at this time?
WOLAKWell, I think just the opposite. I think it gives them an excuse to sort of ignore it. I think the way that we put pressure on politicians to say, look, we need to do something tangible and meaningful, i.e. we need to price carbon. And the thing is, is that it's not the fact that producing fossil fuels is necessarily harmful to the planet. What's harmful to the planet is the greenhouse gas emissions that can accompany the combustion of fossil fuels, but there are many technologies that are possible and can be developed to essentially mitigate those greenhouse gas implications of the consumption of fossil fuel.
WOLAKSo we're, in some sense, not really hitting on what really needs to be addressed, which is the carbon emissions, not necessarily the consumption or production of fossil fuels.
SCHWARTZWell, in fact, this has been a very common complaint. I was talking with David Oxtoby of Pomona College and his point is, if this is a distraction from the kind of things that universities can do to move toward a fossil free future and, you know, my role as a journalist as opposed to an activist is to write down what people say when they say interesting things. And Oxtoby's point was that we need to be working toward the kind of goals that'll give us a less dependence on fossil fuels over time.
SCHWARTZThe activists disagree.
MASSIEWell, if this were 1989 or 1991, I think I would agree with both of the comments that we heard, that this is a time for research and for education and so forth. But I first got involved in this, held the first big meeting in Boston in 1992 and here we are, 23 years later, and essentially the United States government and many other governments have abysmally failed. And they have failed, in part, because of the direct actions and hundreds of millions of dollars put by these fossil fuel companies into denial of the science, into blocking political action.
MASSIEOne of the things that I've wondered for Professor Wolak is how we get a carbon tax. I think he's correct, that many people would be interested in that and particularly solving the regressive problems, the impact on poor people and so forth. Exxon believes in a carbon tax. That's been the official position for more than 15 years and yet, absolutely no progress has been made. And to continue to insist that that's the path we should go down without the energy to get there is, I think, really problematic and is more distracting, let's pursue this thing that no one will ever do, than dealing with the issue right now that institutions with strong values are accepting large amounts of money from dangerous, rogue companies.
REHMRobert Massie, he's an advisor to the Boston Common Asset Management. He's initiator of the Investor Network on Climate Risk. Short break here. We'll be right back.
REHMAnd welcome back. In this hour of our environmental outlook, which we do on a monthly basis, we're talking about the movement on divestment of certain types of energy, oil and coal. Here in the studio, Robert Massie, he's an advisor to Boson Common Asset Management. He's an initiator of the Investor Network on Climate Risk. Joining us from the New York Times studio, where he is a science reporter, John Schwartz, and joining us by phone and Skype from Puebla, Mexico, is Frank Wolak. He's director of the Program on Energy and Sustainable Development, professor of economics at Stanford University.
REHMI know before the break, Frank Wolak, you wanted to jump in. Why don't you go ahead.
WOLAKOh, thank you very much. Yeah, I just wanted to respond to the fact that I think there has been a lot of political action in recent years for -- around the world. So there's of course the European Union Emissions Trading System, the British Columbian government has a $20-per-ton carbon tax. California has a cap-and-trade market for greenhouse gases that recently linked up with the cap-and-trade market for greenhouse gas emissions in Quebec. The Australian government implemented a carbon tax, albeit they have since rescinded it. Sweden and Norway, at the university level, a number of universities are considering carbon pricing, and there, I think, is where universities have a lot to contribute, simply because there is a lot of very complex technical, economic and political challenges associated with implementing such a charge, and a university environment is a great place to try to work those things out.
WOLAKAnd to that end, Yale University has recently decided to implement a carbon charge on its campus. So I think there's a lot of progress taking place, and it's taking place in the way that it typically does, at a sort of grassroots level, and I think that as it will move forward more and more, these countries will decide to link up their carbon policies as California and Quebec has decided to do.
WOLAKSo I think that the political process is moving forward if -- and as long as people focus on really what's going to achieve the reductions in greenhouse gases, which is pricing carbon, we'll make progress.
MASSIEWell, I think Professor Wolak is correct in the sense that divestment is one tool in a massive transition in our economy away from fossil fuel, carbon-generating systems of energy to a low-carbon economy. And so if you look at what that really requires, it requires many different actions. And if you take the average investment company now, you're seeing them address this across the board. What are their guidelines? What kinds of portfolios do they construct? What kind of engagement do they do with corporations? How do they seek energy efficiency across their entire portfolio, not just in energy?
MASSIEThat's something that Boston Common and many other firms do regularly now, and the number of funds that are flowing into fossil-fuel-free funds is rising dramatically. So that's true. At the same time, I think where Professor Wolak and I would disagree is that we need to do this at ludicrous speed, as they would say in "Spaceballs." We need to move unbelievably quickly. And what he's referring to are small, incremental steps that have been taken in many cases reluctantly by governments trying to do often as little as possible.
REHMAnd you believe that this divestment effort can speed things up?
MASSIEWell, I do this partly from history. And just a very quick anecdote. In 1986, when South Africa was exploding, a sanctions bill arrived in Congress. It passed the Democratic house. To everyone's amazement, it passed the Republican Senate. It went to the president, Ronald Reagan. Reagan said I'm going to veto it. He did veto it, and then in the Republican Senate they led an override fight, and they got 66 votes in the Republican Senate to push back their own popular president. It was his only rollback of a veto or override of a veto in his presidency.
MASSIEThat happened because the United States, the people of the United States, and institutions, had reached a point where they could no longer tolerate any excuses about halfway measures in relation to South Africa. We need to get to that same state now.
REHMJohn Schwartz, are the situations, at least as the press is looking at them, comparable?
SCHWARTZWell, it's always important to bring up the South Africa example, there are significant differences, of course. But it's good to have a source like Massie around to talk to because he's been involved with both. He actually is very good at defining the differences between them but also explaining where the similarities are. So that can be helpful if you were a reporter climbing a learning curve.
SCHWARTZBut it's also important to talk to people who want to say these are very different situations. The divestment in South Africa had end points, and the end point of the fossil fuel industry is, what, shutting down these companies? The questions there are hard to address.
REHMFrank Wolak, do you think combating climate change should be a moral issue?
WOLAKYeah, I certainly don't see that that really helps to advance the cause because I think it simply divides people unnecessarily. I think that, you know, a simpler way for me to think about it is to say look, this is a risk that the best science tells us is a significant risk. Just like you buy insurance against floods for your home, against a fire in your home, don't you think you would want to buy insurance against this risk of catastrophic climate change or something that could dramatically alter the state of the economy?
WOLAKI think that is a far more compelling argument to people than to try to make it a moral issue, simply because I think morality depends very much on people's perspective, but hopefully science is at least subjective in saying these are real objective risks that you would probably, you know, want to address. I also want to just point out the difference between, I think, the Apartheid situation and fossil fuels. I mean, you can stop purchasing goods and services produced in South Africa, but, I mean, there is currently no way for you to stop consuming goods and services that contain fossil fuels.
WOLAKIt is -- if you fly on a jet airplane, if you drive your car, if you heat your home, you name it. So I think, you know, it's the old saying of, you know, we've met the enemy, and it is us. So vilifying the companies for providing a product that really enhances our life seems really misguided.
REHMHow do you respond to that, Bob Massie?
MASSIEWell, I guess what I would say is that people don't really want to burn coal or energy or oil.
WOLAKThey can disconnect from the grid?
REHMHold on, Frank.
MASSIEExcuse me, professor. What they want is energy. And I'll take my own house in Summerville, 100-year-old house, it started off heating with coal, long before I was there. It then moved to heavy heating oil when I arrived. we've now moved to a high-efficiency natural gas, and if I could put solar, given the way -- I would have solar on there or a ground-source heat pump now. So there is a progression toward lower and lower carbon use.
MASSIESo Professor Wolak is correct that we all need energy, but I would just as soon it were clean energy, and one of the things that's frustrating is that the oil companies, primarily, have blocked the transformation to renewables while promoting their own dirty, destructive source with massive amounts of subsidies. The International Monetary Fund just calculated that fossil fuel gets $5 trillion in global subsidies to maintain this source that is destroying us. So I think -- also the other thing, I think it is -- when you're talking about the destruction of a planet, that is a moral question, it goes to the heart of who we are as a people, and I think I was certainly very proud when Pope Francis nailed it last week, saying this is a core issue for every human being.
REHMJohn Schwartz, it's an interesting point that the pope himself has come out here, and the press has made a great deal of that. To what extent do you believe the pope's message will resonate in this divestment movement?
SCHWARTZWell, I think it's a real shot in the arm for people like Bob Massie, who can take it and run with it. It is a tremendous tool for further convincing the convinced and a rallying cry for people. You know, it energizes the base. As far as convincing other people, the usual suspects, the people who deny that climate change is caused by humans, the people who deny that climate change exist at all, have simply responded by making fun of the pope. And so these people are, you know, they're tweeting about the red pope and the bumbling pope and all that.
SCHWARTZSo, you know, our discourse has become so toxic that it's very hard for even the pope to make a dent in a conversation like this, but it does bring the activists together, I think potentially, and I think it could be a shot in the arm to this movement.
REHMYou know, it's interesting, Bob Massie, Frank Wolak raised the whole question of airplane travel and how much we have met the enemy, and it is us. So isn't asking them, those companies that provide that fuel, to divest or at least turn to other forms of energy, isn't that somewhat hypocritical?
MASSIEWell, there's always a line. I mean, the phrase is you can't make the perfect the enemy of the good. And so yes, we all use fossil fuels, but we can be opposed to hunger in the world without stopping eating ourselves. I mean, there are other -- there are ways in which you can oppose something and ask for a change, and in this case it's a fundamental cultural and economic change. We do need to reduce our energy use, and there are many efforts, but right now those efforts are primarily not being supported by government on a large scale commensurate with what's being done to support the fossil fuel industry.
MASSIESo yes, we need to move forward, but it's not an either-or, it's let's do both. The people who are pushing consumption of fossil fuels and blocking government action for us to alter that are the fossil fuel companies themselves. They're not innocent parties here responding to demand, they are shaping demand by altering the way the subsidies -- and right now they're benefitting from the fact that oil and coal and gas and carbon are not adequately priced.
MASSIEProfessor Wolak surely must understand, as part of a carbon pricing, that this is a major market failure.
WOLAKYeah, thank you. I would just like to say that yes, I will agree, I certainly agree that there is an externality associated with producing greenhouses gases, but I think the issue of subsidies to fossil fuels beyond that is certainly a far more tricky issue. There are massive subsidies per -- if you look at subsidies per BTU produced, renewable fuels certainly annihilate fossil fuels in terms of subsidies per unit of energy produced.
WOLAKSo, I mean, we can tilt the playing field however we want in terms of saying how the subsidies are going, but I think the important point for me, at least, is everyone needs to do their job. And by this I mean that as you, as a voter, if you feel passionately about climate, go out and vote for people that are going to put in a price of carbon. Don't, you know, don't focus on actually solving the problem. The other is that -- and then that will help the energy companies do their job. I also don't think the energy companies are necessarily, you know, pushing their product to the exclusion of renewables. They are in business to make the highest returns for their shareholders, and many of them had significant investments in renewable fuels, but the thing is those investments aren't nearly as lucrative as the investments in fossil fuels. Why? Because people demand fossil fuels.
WOLAKAnd so the simple solution is if you say you're going to tax the brown part, and the voters do their job of getting politicians in place to put that tax in place, then what the energy companies that are interested in making a profit for their shareholders are going to do is they're going to switch to producing the fuels that are low-carbon energy sources.
WOLAKAnd that's what's going to then shift the energy landscape towards lower-carbon energy sources. Divestiture does nothing to reduce greenhouse gas emissions, nothing to the ability of these guys to raise capital. It simply, as John Schwartz said, polarizes the debate.
REHMAll right, and you're listening to "The Diane Rehm Show." We have many callers. I'm going to open the phones now first to Carolyn here in Washington, D.C. You're on the air.
CAROLYNGood morning, thank you for taking my call.
CAROLYNMy name is Carolyn James (PH) . I'm a senior at Georgetown University and a member of Georgetown University Fossil Free, which is Georgetown's student-run campaign to divest from fossil fuels. I wanted to echo what Mr. Massie has said, that what's right about our financial impact. It's not about -- divestiture is not about making a financial impact on these companies or necessarily reducing the carbon impact so much as it is about changing the paradigm about fossil fuels.
CAROLYNAnd one thing that's specific to some of these institutions like universities is that institutions like Georgetown are claiming to make strides in reducing our own carbon emissions and becoming more sustainable and yet somehow refusing to align those goals with our investments. I don't think it makes a lot of sense to be trying to reduce our own carbon emissions while simultaneously investing in the very companies whose products we're trying to use less of.
CAROLYNThus, I would disagree with one of the panelists. This is not a distraction from what universities can do about our own sustainability efforts. In fact, I think in order to have a comprehensive sustainability and environmental strategy, not to mention a social impact strategy, we need to not only be reducing our own carbon emissions and researching ways universities can help but also divesting. It only makes sense to do both.
REHMAll right, thanks for your call, Bob Massie.
MASSIEWell, thank you, Carolyn. I think one of the things that's so important about this is the students are pointing to these illogical inconsistencies, all the different problems. They're also pointing to not only the moral question of alignment but just the deep financial problems that universities can get in by committing to fossil fuel. So we're seeing universities and many institutions drop coal because the demand for coal globally is going into the toilet. And I could go into the details about that, but it is dropping.
MASSIEAnd, you know, oil companies, who are supposedly doing so well, their stock prices have tumbled. We've seen Exxon go from $104 to $83, Chevron $135 to $96. If people had listened to the message about divestment a year ago, they would be richer now because the very companies that they had confidence in as moneymakers have lost money.
MASSIEAnd so -- and the final thing I would say is that Carolyn and her colleagues are pointing out that the purpose of a university is to educate students today and future students to - for the future and to build a better world. If you run into problems now, you jeopardize the students of the future by failing to address the problems of the present.
REHMAll right, we'll take a short break here. When we come back, we have callers waiting from Tennessee, Texas, Michigan, Pennsylvania and North Carolina.
REHMAnd welcome back. Let's go right back to the phones to Jane in Pittsburgh, Pennsylvania. You're on the air.
JANEYes, I wanted to ask if your panel is familiar with and knows of any influence of the Guardian Newspaper in the UK, whose Editor-in-Chief, before he retired, decided he didn't want to miss the greatest story in the world, as he called it, and has directed his paper to focus on issues of fossil fuels and climate change. And the campaign is known as Keep It in the Ground, rather than use this energy. And I just wanted to know if it is having any influence, even though it's a young decision, or an early decision.
REHMAll right. Frank Wolak, do you want to comment?
WOLAKYes, I've certainly heard of this policy. I mean, I think it's one of those things that it's difficult to keep in the ground. I mean, I just wanted to correct a couple of errors in what Mr. Massie said. In particular, coal demand, globally, is in fact rising. It is the world's fastest growing fossil fuel, from 2010 to 2015, the growth in coal consumption, globally, exceeded the growth in both oil and natural gas consumption and on a heat basis. So, coal is growing like crazy outside the US. It is the engine of development outside of the US to raise the developing world out of poverty.
WOLAKSo, it is being consumed. It is true that it's decline is occurring in the United States, largely because of the shale gas revolution. So, the Keep It in the Ground has a problem that most of the rest of the world would like the same modern energy services that we enjoy, such as iPhones and TVs and computers and the like. The other point that I'd like to at least comment on is the previous caller's question about the sustainability effort on campus. I certainly agree with her point, that it seems rather bizarre that campuses focus on their carbon reductions.
WOLAKMy favorite example of this at my campus is the vehicles that drive around campus that are electric powered that say they are zero emissions vehicles, but they are only zero emissions vehicles if you assume that the electricity was not produced from any fossil fuel. So, I think I would completely agree that most of those efforts are misguided and campuses should not focus on reducing their carbon footprint. But instead, should be focused on things like spreading and implementing carbon pricing mechanisms, showing the world how this can be done.
WOLAKAnd students should be advocating for carbon pricing at their campus and carbon pricing globally, because that is what is going to change the landscape of the energy sector. Divesting fossil fuels, again, is just going to only give those who purchase the stocks of the fossil fuel companies a higher rate of return and make them more attractive.
REHMJohn Schwartz, do you want to comment?
SCHWARTZWell, you know, we're in an age of journalism in which an entire journalism organization can declare itself part of an activist campaign. I think that, you know, in talking about The Guardian, I don't see a newspaper like The Times doing this. I see The Times editorial page taking strong stands on climate change issues, but if you're trying to do reporting on a day to day basis, it -- I think it hinders you to have your entire organization thrown in with a side. And so, I'm, you know, I mean, The Guardian doesn't need my approval.
SCHWARTZNobody asked me. But I'm a little more comfortable with the classic news split. It doesn't mean that you do false balance and you say one side is equally valid. You certainly don't say that climate change isn't happening. But there are real sources of conflict in this, as this show -- as this program shows. And you've got to be able to approach people and have a conversation about it.
REHMSure, of course you do. John, do you see a difference in the conversation when it comes down to divesting from coal, oil and gas?
SCHWARTZWell, coal is such an easy case, because of the -- along with the very high carbon dioxide levels that happen, that come out when you burn coal as compared to say natural gas. Or the zero emissions, you know, renewables. Or nuclear, for that matter. And then, there's an open question about how -- what you get out of burning natural gas. It certainly, on the surface, burns, creates less carbon dioxide when you use natural gas for your power source. But there's plenty of good science out there that suggests if you just shift to natural gas, you get no carbon gain in the future.
SCHWARTZYou still get this carbon dioxide level rising in the atmosphere, you still get the climate change that flows from that. These are areas of serious discussion, but that's why Norway said coal. 30 percent of coal, you know, any business that gets 30 percent of its revenue or is dependent on coal, we're getting out of that. But they didn't say they're gonna get rid of gas and oil. And by the way, getting rid of gas and oil for a major oil producing nation, kind of an issue. You know, kind of a, kind of a, difficult conversation.
REHMAll right, let's go back to the phones to Johnson City, Tennessee. Hi there, Jule. You're on the air.
JULEDiane, a couple of years ago, a gentleman came to my home with a proposition where about the federal government would help me install solar panels here at my home. Now, he concluded that after installing only one side of the top of my garage here, enough energy would be produced to satisfy the needs of my home and I can sell back to our local power company here approximately 360 dollars a month of energy. Then, he told me the installation price was a little over 21,000 dollars, which was absolutely prohibitive for me.
JULEAnd I'd like to hear your panels comments on their speculation about solar energy possibly coming down to a more affordable level.
MASSIEWell, thank you for raising that question. The -- what we're seeing is a transition in the way our energy system works, and you had the experience, the early experience of moving away from a utility and the proposal that you would become the generator of your own energy. And that's called distributed energy. And the biggest barrier, as you noted, is the investment that has to go in up front. But there are many mechanisms now, to either lend that money at low cost or you actually rent your roof and the company that installs gets the energy and you get a benefit from that.
MASSIEThere are many different mechanisms. I would just like, very quickly, to mention this battle is unfolding all over the world. In Australia, they had what was called a feed in tariff and they had a carbon tax and they were moving away from -- and it was dramatically reducing emissions. And they reached 10 percent of solar, residential solar, and then a fanatical Prime Minister, pro-coal Prime Minister, backed by Chevron and backed by the coal barons in Australia came in and ripped all of that up.
MASSIEAnd they're, in fact, now proposing to dig up the largest coal area in the world, in the Galilee Basin, which would dredge the Great Barrier Reef. And which would create six percent, by itself, those mines would be responsible for six percent of the world emissions. So, you have a country that could go completely renewable. I mean, you think about sun and wind and water in Australia and you have a government backed by a very small number of very rich people who want to maintain this and they want to sell coal to India and China who have made clear they do not want it. So that's...
REHMNow, one question on solar. Hasn't the price gone down substantially?
MASSIEThe price, the price has dropped and dropped and dropped. And -- but we've had unstable systems, so sometimes it's supported, and sometimes, then, it, the government withdraws the benefits. There are well known, Germany and Denmark are moving to reduce their fossil fuel emissions by 80 percent, Denmark by 100 percent. Germany has made this transition in less than 10 years. They made a commitment, they put it in place, they have the government support, and it works.
WOLAKI just have to correct so many incorrect statements in the last statement. I mean, Australia is one of the world's largest coal producers. Australia gets more than 85 percent of its electricity from coal, so I mean, and coal is extremely cheap to mine. It is among the cheapest in the world to mine. The big problem with the carbon tax in Australia was the fact that it is assessed on every kilowatt hour of electricity produced. The -- I mean, the conspiracy theory that you're espousing...
MASSIENo, Frank, I was just there. I was just...
WOLAK...I think are certainly in your head.
MASSIEI was just there for two weeks.
REHMHold on, Bob.
WOLAKI would like to...
MASSIEWell, I want to -- this is just wrong.
WOLAKThe other thing I'd like to say is about the solar situation is that there is a lot of support for solar investments. There are a number of subsidies. This is where the renewable energy subsidies comes in. And the price of solar panels is declining. There is a lot of penetration of solar panels in certain parts of the world. Solar does make sense. One of the places where it is showing a lot of great high rate of penetration is in Australia where -- sorry, not Australia, but in Hawaii, where essentially, what they have to rely on to produce electricity is essentially diesel generation.
WOLAKWhich is very expensive and there, solar looks fairly economic, relative to grid supplied electricity. But the story in Australia is far different from what you're saying.
REHMAll right. Hold on, Frank. Go ahead, Bob.
MASSIEI, as a former professor myself, it's always disturbing to be accused by a professor of falsifying the facts. I was in China for two weeks in December, going around the country. Demand for imported coal is going down. It's going down partly because of the emissions arrangement that the President has made with President Obama. And many other reasons. The Indian government said they want to eliminate imported coal. They get most of their coal from Australia. The demand for Australian imported coal is dropping globally.
MASSIEEvery major investment bank says that. So, to bet your future of the country, financially, on a product that is diminishing around the world, is crazy. On top of that, we have the problem, and this is something that I'd like to ask Professor Wolak. He seems to lack any sense of real urgency that within the next year or two, we are going to cross the two centigrade boundary which will permanently damage the planet. I mean, these ideas that yes, eventually, if Congress did this or that, those are ideas appropriate for 20 years ago.
MASSIERight now, we need to move immediately to the complete transformation of our economy to a low carbon economy. That requires, as he said, everyone doing it, but I don't see a sign that his academic approach is ever going to be implemented.
WOLAKYeah, I don't think that that does anything to solve the problem. I think that, I mean, I guess the way that I would describe it would be is it took us over 150 years to develop the current fossil fuel based energy infrastructure and that, I think, it does take time. These are all very long lived and very expensive investments and I think yes, I certainly agree that we want to move as quickly as possible to address the problem, but I think we also have to realize that people have to live their lives and people need to do, you know, to do all the things they need to do.
WOLAKBut certainly, I think that, you know, moving forward as quickly as possible is certainly the way to go. The best way to do that is to price carbon. If you price carbon, people will stop making investments in carbon intensive technologies. If you divest fossil fuels, that does nothing. All that does is just divide the debate.
REHMAll right. And you're listening to The Diane Rehm Show. John Schwartz, I think you wanted to jump in.
SCHWARTZNo, I was fine with where we are right now. Just, you know, these are, this is such a tough conversation. It is such an angry set of topics for people. You know, this is why this conversation needs to go forward.
REHMAll right. And let's go to Gainesville, Florida. Hi there, Tom. You're on the air.
TOMThank you, Diane. Aren't the campaign contributions from the wealthy fossil fuel companies helping the shape the politicians that get elected, so when it comes to taxing fossil fuels, to subsidize the carbon free energy sources, Congress lacks the will to succeed.
WOLAKI mean, I certainly don't debate the fact that, you know, certainly, folks are going to advocate, but -- and I guess the way that I view it is is that any company is certainly going to spend money and contribute to furthering the cause to their industry. I don't think the fossil fuel industry is unique in that regard. I think that, you know, the, you could say the fast food industry or any other industry where we think that there may be, you know, public policy concerns associated.
WOLAKThe healthcare industry, I mean, think of how the Affordable Care Act came into play. So, you know, but I think our job as voters is to say I see through that. I become informed. I listen to shows like this and I form my own opinion. I speak to my friends and I tell them that this is the sorts of politicians that we should elect, ones that want to implement these policies. Don't be, you know, when you hear a campaign ad, go up on Google and investigate and see what the facts have to say. Unfortunately, that's the way democracy works. And, you know, but it's as Winston Churchill said, it's a poor form of government, but it's the best we've got.
MASSIEWell, I think Professor Wolak just gave a brilliant reason for divestment, which means that you're invested in a company. Let's say you want, you have stock. That company is apparently against your will spending vast amounts of shareholder money influencing elections to stop the movement toward renewable energy and low carbon that we want. So, in other words, if you own stock, you have to endorse the fact that some of your money, as an owner, is going to be used to block any change.
MASSIEAnd that's a fundamental problem. It's a moral problem. It's a political problem. So, not only are you receiving the dividends from these dangerous and rogue activities, you are funding the refusal to move forward. And so, if, and that's what Professor Wolak just said was the process, and that's a perfect argument to divest.
WOLAKBut that's true of every country.
REHMYou used some numbers a moment ago about how quickly all this is happening. Tell us those numbers.
MASSIEWell, so we can be very informed by different forms of social change. And this requires a paradigmatic shift, as one of the callers put it. So, some things have taken 150 years. Our ongoing battle on race, but we just had the tremendous transformation of American culture with the ending and equal marriage and gay rights. That went very, very quickly. The people who opposed it thought they were in the majority, and suddenly, they've discovered that they're in the minority.
MASSIEAnd, in South Africa, it took 25 or 30 years. We are moving very, very quickly. The problem is we only have two or three more years where we can make a difference and the major impediments are the fossil fuel companies themselves.
REHMRobert Massie, John Schwartz, Frank Wolak, thank you all so much. Thanks for listening. I'm Diane Rehm.
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