The religious crusade against fossil fuels and various methods of extracting it to heat and light our homes, offices, and factories continues apace. The 2014 proxy shareholder season is a veritable spider web of networked religious-affiliated activist groups decrying coal, natural gas, oil, hydraulic fracturing and mining. Ceres, for example, reports “35 institutional investors have filed 142 resolutions in a coordinated effort to spur action by 118 companies” on what it calls climate-related measures.
Based in Boston, Mass., the nonprofit group coordinates investment funds and other groups to support “sustainability.” This past March, Ceres boasted a who’s who of environmental organizations intent on eliminating greenhouse gases once and for all, including Walden Asset Management, Mercy Investments, Green Century Capital Management and the Interfaith Center on Corporate Responsibility. Companies targeted for shareholder resolutions include, “Chevron, ConocoPhillips, Kinder Morgan, Lowes and several electric utilities.”
Among the utilities selected is Dominion Resources, Inc., a Richmond, Va., company that supplies portions of Virginia and North Carolina with electricity. Ceres submitted the following resolution on behalf of its cadre of investor activists:
RESOLVED: Shareholders request that the Board of Directors publish a report for investors within 6 months of the 2014 annual meeting, at reasonable cost and omitting proprietary information, on how Dominion Resources is measuring, mitigating, setting reduction targets, and disclosing methane emissions.
One senses a bit of disingenuous in such a resolution. It makes sense that the utility would strive to reduce methane emissions as a good business practice, but Ceres positions its investor posse as the entity solely responsible for prompting something which Dominion (and other utilities and energy companies) are already pursuing on its own.
But what rankles most is the presumption that Dominion cares so little for the environment that such a resolution is necessary in the first place. Ceres stated reason for the resolution is:
Dominion Resources currently operates one of the largest natural gas storage and transportation systems in the U.S. and is planning to expand significantly its natural gas power plant generation capacity. Methane leakage has a direct economic impact on Dominion Resources because lost gas is not available for sale and causes climate change and environmental impacts, whereas natural gas captured through control processes can be sold in the market, generating positive returns.
Methane emissions from natural gas pose a risk to shareholders’ investments and the company’s social license to operate. Dominion Resources has a responsibility to implement a program of measurement, mitigation, disclosure, and target setting. Some operations may currently incorporate best practice management; however, the risk of leaks at high growth or select geographies can negate best practices elsewhere. Without such a program, Dominion cannot quantify with any certainty, and thus minimize, the extent of risk to shareholders or the environment resulting from its methane emissions.
Measuring, mitigating and setting reduction targets for methane emissions could improve worker safety, maximize available energy resources, reduce economic waste, protect human health, and reduce environmental impacts. Upgrading production assets may also improve performance, making assets more robust and less susceptible to upsets and downtime.
Note the stridency of such claims as “Dominion cannot quantify with any certainty, and thus minimize, the extent of risk to shareholders or the environment resulting from its methane emissions.” The statement contains more than a whiff of the precautionary principle wherein the mere suggestion of less-than 100 percent elimination of all methane emissions is considered unacceptable.
In his wonderful April 25 Wall Street Journal essay, “The Scarcity Fallacy,” Matt Ridley reveals the wrongheadedness of the Ceres’ resolution. Ridley advocates technological advancement as a boon to reducing harmful emissions from the use of fossil fuels:
I studied various forms of ecology in an academic setting for seven years and then worked at the Economist magazine for eight years. When I was an ecologist (in the academic sense of the word, not the political one, though I also had antinuclear stickers on my car), I very much espoused the carrying-capacity viewpoint—that there were limits to growth. I nowadays lean to the view that there are no limits because we can invent new ways of doing more with less.
This disagreement goes to the heart of many current political issues and explains much about why people disagree about environmental policy. In the climate debate, for example, pessimists see a limit to the atmosphere’s capacity to cope with extra carbon dioxide without rapid warming. So a continuing increase in emissions if economic growth continues will eventually accelerate warming to dangerous rates. But optimists see economic growth leading to technological change that would result in the use of lower-carbon energy. That would allow warming to level off long before it does much harm.
It is striking, for example, that the Intergovernmental Panel on Climate Change’s recent forecast that temperatures would rise by 3.7 to 4.8 degrees Celsius compared with preindustrial levels by 2100 was based on several assumptions: little technological change, an end to the 50-year fall in population growth rates, a tripling (only) of per capita income and not much improvement in the energy efficiency of the economy. Basically, that would mean a world much like today’s but with lots more people burning lots more coal and oil, leading to an increase in emissions. Most economists expect a five- or tenfold increase in income, huge changes in technology and an end to population growth by 2100: not so many more people needing much less carbon.
The same approach applies to methane emissions. Ridley writes that environmentalists lack imagination when casting dire predictions for the planet due to a restricted view of technology. In reality, technology has performed wonders for energy production, clean air and water, and plentiful and affordable foods since such Cassandras of the 1970s as Stanford University’s Paul Ehrlich:
It is striking, for example, that the Intergovernmental Panel on Climate Change’s recent forecast that temperatures would rise by 3.7 to 4.8 degrees Celsius compared with preindustrial levels by 2100 was based on several assumptions: little technological change, an end to the 50-year fall in population growth rates, a tripling (only) of per capita income and not much improvement in the energy efficiency of the economy. Basically, that would mean a world much like today’s but with lots more people burning lots more coal and oil, lead
ing to an increase in emissions. Most economists expect a five- or tenfold increase in income, huge changes in technology and an end to population growth by 2100: not so many more people needing much less carbon….
The best-selling book “Limits to Growth,” published in 1972 by the Club of Rome (an influential global think tank), argued that we would have bumped our heads against all sorts of ceilings by now, running short of various metals, fuels, minerals and space. Why did it not happen? In a word, technology: better mining techniques, more frugal use of materials, and if scarcity causes price increases, substitution by cheaper material. We use 100 times thinner gold plating on computer connectors than we did 40 years ago. The steel content of cars and buildings keeps on falling.
Until about 10 years ago, it was reasonable to expect that natural gas might run out in a few short decades and oil soon thereafter. If that were to happen, agricultural yields would plummet, and the world would be faced with a stark dilemma: Plow up all the remaining rain forest to grow food, or starve.
But thanks to fracking and the shale revolution, peak oil and gas have been postponed. They will run out one day, but only in the sense that you will run out of Atlantic Ocean one day if you take a rowboat west out of a harbor in Ireland. Just as you are likely to stop rowing long before you bump into Newfoundland, so we may well find cheap substitutes for fossil fuels long before they run out.
Richer countries are greener countries, after all. Since the “bridge” of fossil fuels seems to be the go-to for affordable fuels required for the steadily increasing quality of life on the planet for the foreseeable future – and cleaner methods are developed for obtaining and using it – it seems not only arrogant but also cruel to drive up fuel costs with nuisance shareholder resolutions. Such folly should be rejected in favor of clear-headed approaches that benefit us all, especially the world’s most economically challenged.