Environmental column: Iatrogenics and the Folly of Fossil Fuel Divestment Part 2
Published: Monday, October 7, 2013
Updated: Monday, October 7, 2013 23:10
Last week, I showed how even a highly “successful” Fossil Fuel Divestment (FFD) campaign will achieve nothing by its very design. This week, I will attempt to show that it is likely to result in negative and unintended (but not unforeseeable) consequences.
I know of no term in the world of policy that describes unintended negative consequences. One must turn to the world of medicine for the term “iatrogenic.” Iatrogenic describes a phenomenon in which an illness results from intended cure or treatment. (For some additional humility, it is estimated that iatrogenic illnesses are the third leading cause of death in the United States.) Applied more broadly, iatrogenics can be understood as the pervasion of negative unintended consequences from well-intentioned policies and actions. Like medicine, policy is replete with cases of iatrogenics. In an effort to solve one problem, several more spring up from our collective naivete.
The venerable institution of democracy is alive and well at the corporate level, even within fossil fuel companies. Ownership of a company (through stocks) provides certain rights; after all, the company is owned by the shareholders. An annual vote held by the company determines who sits on the company board and influences the strategic direction and operations of the company. For example, shareholders of Continental Resources recently demanded more environmentally-friendly practices during drilling operations, and the company had no choice but to comply. When we sell our shares, we abdicate the ability to directly influence the company’s operations.
Secondly, when we drive down the share price of a company, it becomes increasingly attractive as a takeover target. This can result in industry consolidation—concentrating power in fewer hands. In the stock market, this happens all the time. BlackBerry was acquired by a private company just last month after its share price sank to near multi-year lows. If the acquirer is a private company, public disclosure requirements are greatly reduced. It is these public disclosures that represent the best hope to force oil and gas companies to divulge the secret chemical cocktails used in modern fracking operations.
Divestment is fraught with risk to university portfolios, and this risk is greatly underappreciated by FFD supporters. Many of the explanations are far too complex to address in this forum, but it is comforting to know that the vast majority of universities (many exceedingly liberal) have so far chosen against divestment. Despite the ability to win short-term populist appeal, university officials continue to strive for the well-being of their endowment, and the support for tuition and research it allows.