Coalition of big investors pushes banks to defund carbon emitters(ft.com)
ft.com
Coalition of big investors pushes banks to defund carbon emitters
https://www.ft.com/content/cad45ac2-3778-4db6-a43c-96b83b195516
128 comments
Banks shouldn't be put in the position of public policy making. If society thinks certain activities are desired/undesired, this can be accomplished via taxes and regulations. Financial cancel culture is a road to hell laid with good intentions.
Except then people come out of the woodwork to say that government shouldn't be legislating morals, and that if it's really an issue investors would avoid investing in funds they find immoral. Which is exactly what's happening here.
Why is that a problem?
If there's not sufficient voter support for legislating morals then democracies shouldn't be legislating morals. The voters should get what they want even if it's stupid.
If there's not sufficient voter support for legislating morals then democracies shouldn't be legislating morals. The voters should get what they want even if it's stupid.
I wasn't trying to imply that there was. More that any push toward long-term stability gets a ridiculous amount of pushback on the methods. If it is done through legislation, the free-market libertarians come out in droves to say "No! Let the market decide!" If it is done through market forces, the free-market libertarians come out in droves to say "No! The market should be amoral and profit-oriented! Let legislation decide!"
I recognize that these may be entirely separate subsets of free-market libertarians, but it's enough to make me grow frustrated at the entire group.
I recognize that these may be entirely separate subsets of free-market libertarians, but it's enough to make me grow frustrated at the entire group.
The right answers are leaf nodes—-either voters or consumers. If consumers act, intermediary institutions like banks will naturally follow. Ditto if the laws change.
Consumers and investors are free to find different banks if they disagree with these policies. These banks believe this is what their customers actually want them to do.
Except in this case, consumers can't act. Can consumers vote with their wallets to prevent using technologies that are excessively polluting, say a necessary chemical which they use only indirectly, one that has a polluting manufacturing process? Can poorer car buyers opt for any thing cheaper than the currently available options? Or rather, because there are no options available for them, should they simply not use cars instead of using the polluting gasoline cars?
Should that choice be taken out of their hands by non-elected intermediary institutions? Because that’s what’s going on here.
> choice be taken out of their hands by non-elected intermediary institutions
Why can't they go to a different bank if they feel so strongly about it?
Why can't they go to a different bank if they feel so strongly about it?
There wasn't even much of a choice in the first place.
>Except in this case, consumers can't act. Can consumers vote with their wallets to prevent using technologies that are excessively polluting, say a necessary chemical which they use only indirectly, one that has a polluting manufacturing process?
Pesticides are a necessary chemical to industrial food production. Consumers can opt to prevent that from being used/manufactured by buying organic[1]. Organic goods are widely available in US supermarkets. The fact that organics haven't outpaced conventional foods tells you all you need to know about consumer preferences.
>Can poorer car buyers opt for any thing cheaper than the currently available options? Or rather, because there are no options available for them, should they simply not use cars instead of using the polluting gasoline cars?
So according to you, poor car buyers are forced to choose between a gas guzzler or no car at all, because the fuel efficient cars are too expensive. Clearly the right thing to do is... stop gas guzzlers from manufactured in the first place so they're forced to not have a car?
[1] organic allows certain kinds of "natural" pesticides, which might or might not be worse than their banned counterparts, but this is another can of worms
Pesticides are a necessary chemical to industrial food production. Consumers can opt to prevent that from being used/manufactured by buying organic[1]. Organic goods are widely available in US supermarkets. The fact that organics haven't outpaced conventional foods tells you all you need to know about consumer preferences.
>Can poorer car buyers opt for any thing cheaper than the currently available options? Or rather, because there are no options available for them, should they simply not use cars instead of using the polluting gasoline cars?
So according to you, poor car buyers are forced to choose between a gas guzzler or no car at all, because the fuel efficient cars are too expensive. Clearly the right thing to do is... stop gas guzzlers from manufactured in the first place so they're forced to not have a car?
[1] organic allows certain kinds of "natural" pesticides, which might or might not be worse than their banned counterparts, but this is another can of worms
> Clearly the right thing to do is... stop gas guzzlers from manufactured in the first place so they're forced to not have a car?
Or tax gas guzzlers more? Provide tax incentives for fuel-efficient and electric cars? Both?
Or tax gas guzzlers more? Provide tax incentives for fuel-efficient and electric cars? Both?
Both of those are things elected governments can, and maybe should, do. But what the article is talking about is having banks refuse to do business with e.g. Ford unless it stops making gasoline cars. This does nothing to help the poor but environmentally conscious person. It simply removes a (perhaps non-ideal) option that currently exists.
> Both of those are things elected governments can, and maybe should, do.
Agreed. And what banks do has (or should have) little bearing on that.
> This does nothing to help the poor but environmentally conscious person.
That's debatable.* But in any case, banks aren't charities. Modern capitalism holds that they have no obligation to anyone except their shareholders.
*For actually "poor" people, car ownership is a burden. They have to pay high interest rates and tie up a significant portion of their capital just to get around. Whereas most developed countries (and even a great many developing countries) have efficient public transportation, which doesn't have these downsides for poor people. Also the poor have more to lose from climate change, so arguably these banks are serving them better in the long-term by divesting from carbon.
Agreed. And what banks do has (or should have) little bearing on that.
> This does nothing to help the poor but environmentally conscious person.
That's debatable.* But in any case, banks aren't charities. Modern capitalism holds that they have no obligation to anyone except their shareholders.
*For actually "poor" people, car ownership is a burden. They have to pay high interest rates and tie up a significant portion of their capital just to get around. Whereas most developed countries (and even a great many developing countries) have efficient public transportation, which doesn't have these downsides for poor people. Also the poor have more to lose from climate change, so arguably these banks are serving them better in the long-term by divesting from carbon.
If I say action X hurts the poor and you say if we lived in an entirely different society then action X wouldn’t hurt the poor, have we actually disagreed?
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For the other part I agree companies aren’t charities. My entire point here is that people should quit trying to pressure them into acting like charities. Let companies make money, that’s what they are good at. If you want to eliminate ICE engines pass a law.
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For the other part I agree companies aren’t charities. My entire point here is that people should quit trying to pressure them into acting like charities. Let companies make money, that’s what they are good at. If you want to eliminate ICE engines pass a law.
> people should quit trying to pressure them into acting like charities
You keep saying "pressure" as if it's a magic word. How can you pressure a business to do something against what it believes to be its own (or its shareholders') interest? All kinds of people lobby companies and government to do literally everything under the sun. Companies don't listen to all of them. They only listen to the ones they think are good for them. And if they choose wrong, the market will punish them. Right?
On a separate note "companies shouldn't be woke" people also tend to be among the most ardent worshippers of the free market. Somehow their faith is shaken when companies do something they personally disagree with - then they fall back to "they're just giving in to activist pressure". I'm not saying you're like that. Just pointing out the irony.
Re: more expensive cars hurting the poor in North America, I'm honestly skeptical. If anything more expensive cars will be a forcing function towards developing more affordable housing close to work and better public transportation systems. Kind of an inverse Jevon's paradox. This will save the poor money in the long term.
You keep saying "pressure" as if it's a magic word. How can you pressure a business to do something against what it believes to be its own (or its shareholders') interest? All kinds of people lobby companies and government to do literally everything under the sun. Companies don't listen to all of them. They only listen to the ones they think are good for them. And if they choose wrong, the market will punish them. Right?
On a separate note "companies shouldn't be woke" people also tend to be among the most ardent worshippers of the free market. Somehow their faith is shaken when companies do something they personally disagree with - then they fall back to "they're just giving in to activist pressure". I'm not saying you're like that. Just pointing out the irony.
Re: more expensive cars hurting the poor in North America, I'm honestly skeptical. If anything more expensive cars will be a forcing function towards developing more affordable housing close to work and better public transportation systems. Kind of an inverse Jevon's paradox. This will save the poor money in the long term.
How is this different than a bank denying a loan to someone with bad credit? Giving money to polluters is financially risky, because they destabilize the economy and shrink your customer pool.
Because they don't have bad credit. This is more similar to how some banks reuse service to pornstars. If banks are making decisions for non financial reasons that seems problematic to me.
If they really see it as a risky investment, that's fine.
If they really see it as a risky investment, that's fine.
I can only find news articles about this, not a release from IIGCC itself, but financial risk is clearly at least part of their rationale:
> Bruce Duguid, head of stewardship at Federated Hermes’ EOS division, said there was a need for “dramatic shifts” in bank financing in order to meet the Paris goals and “avoid the looming systemic risk of a ‘carbon crunch’ hitting their balance sheets”.
It seems pretty straightforward that investing in something that violates a global UN agreement is not a financially sound decision.
> Bruce Duguid, head of stewardship at Federated Hermes’ EOS division, said there was a need for “dramatic shifts” in bank financing in order to meet the Paris goals and “avoid the looming systemic risk of a ‘carbon crunch’ hitting their balance sheets”.
It seems pretty straightforward that investing in something that violates a global UN agreement is not a financially sound decision.
> If they really see it as a risky investment, that's fine.
Climate change threatens to devastate hundreds of millions of lives. It will disrupt the global economy for decades. So, yes, fossil fuels are a risky investment.
Climate change threatens to devastate hundreds of millions of lives. It will disrupt the global economy for decades. So, yes, fossil fuels are a risky investment.
We're not talking about that kind of risk to humanity here. We're talking specifically financial risk to the bank.
The financial well-being of banks is inextricably tied to the financial well-being of their human customers and employees. Until they can find a new species to take over, "risk to humanity" is relevant.
Not to the bank. The bank's actions won't make one iota of difference either way to climate change. All the banks acting together could - but each individual bank, much like each individual person can do nothing that will matter. It's a tragedy of the commons. So it's not an actual risk to the bank acting alone in its own interest - despite the fact that the risk to humanity as a whole is very real.
> The bank's actions won't make one iota of difference either way to climate change
How do you know these banks aren't betting that being seen as climate-friendly will make them more attractive to customers and investors? And thereby increase pressure on competitor banks that aren't similarly climate-friendly to follow suit? This would result in the type of coordinated action that actually can make a difference to climate change at a macro level. Mission accomplished.
At the end of the day banks are businesses doing what they feel is right for themselves. If you disagree with how they run their business, you should divest yourself from them and end your business relationship with them.
How do you know these banks aren't betting that being seen as climate-friendly will make them more attractive to customers and investors? And thereby increase pressure on competitor banks that aren't similarly climate-friendly to follow suit? This would result in the type of coordinated action that actually can make a difference to climate change at a macro level. Mission accomplished.
At the end of the day banks are businesses doing what they feel is right for themselves. If you disagree with how they run their business, you should divest yourself from them and end your business relationship with them.
I disagree, climate change is not an on/off switch. There is a spectrum of possibilities, and marginal changes can have marginal effects.
Of course group action is more meaningful, and that's why this group of investors is pressuring a group of banks.
Of course group action is more meaningful, and that's why this group of investors is pressuring a group of banks.
> There is a spectrum of possibilities, and marginal changes can have marginal effects.
That marginal effect is exactly that, marginal. It makes as much difference as adding a single drop of water to the ocean. If you're doing a risk calculation, which is what we're talking about - not a moral calculation - then adding zero to any term in the calculation doesn't change the result.
I know where you're coming from, your heart is in the right place, but your mathematically wrong here.
> Of course group action is more meaningful, and that's why this group of investors is pressuring a group of banks.
That's the only way it can work. I wish them luck.
That marginal effect is exactly that, marginal. It makes as much difference as adding a single drop of water to the ocean. If you're doing a risk calculation, which is what we're talking about - not a moral calculation - then adding zero to any term in the calculation doesn't change the result.
I know where you're coming from, your heart is in the right place, but your mathematically wrong here.
> Of course group action is more meaningful, and that's why this group of investors is pressuring a group of banks.
That's the only way it can work. I wish them luck.
How does the bank profit if all shareholders, board, CEO, and their progenity are wiped out by the end of mankind? Seems money REaLLY becomes worthless at that point.
Climate change is not the end of mankind. Your point is valid without the hyperbole, but see my comment above for why it doesn't necessarily matter to the bank.
The global economy tanking due to climate-driven catastrophes isn't a financial risk to the bank? Why not?
What about refusing service to marijuana businesses? There's both a real and perceived regulatory and reputational risk in giving money to these types of companies.
That’s a bit different because, for now at least, a bank knowingly doing business with a marijuana company violates BSA and AML regulations. The adult entertainment industry is also frequently refused banking services by citing the same laws and regulations but those aren’t flat-out prohibited where marijuana is because it’s a criminal enterprise in the eyes of the federal government.
Funds coming from adult entertainment are (1) high risk (in theory) for being proceeds from a crime (prostitution) and (2) high risk for money laundering because those businesses are often high cash or cash-only.
You can see how designating a business as #1 necessarily creates the situation that gives rise to #2 and so it becomes a self-fulfilling prophecy: the business is high risk because it’s high risk.
Funds coming from adult entertainment are (1) high risk (in theory) for being proceeds from a crime (prostitution) and (2) high risk for money laundering because those businesses are often high cash or cash-only.
You can see how designating a business as #1 necessarily creates the situation that gives rise to #2 and so it becomes a self-fulfilling prophecy: the business is high risk because it’s high risk.
I think the banks are far more worried about medium term "the government de-facto prohibits the business your customer is engaged in and they go bankrupt en-mass" than long term climate driven macroeconomic problems.
Agreed, should have mentioned that too, and these investors do seem to be focused on meeting Paris Agreement commitments.
I don’t disagree but money is speech and corporations are people so why wouldn’t banks and their investors flex their enormous spending power to influence public policy? Banks aren’t victims “put” in this position - they’re largely the beneficiaries of it.
On that note, society should really stop subsidizing fossil fueled power production. Any action that the financial industry do has limited power if government simply gives the biggest carbon emission players more money in order for them to continue emitting carbon in the name of stable and cheap energy.
there is a middle ground in the Western finance system -- willing participants declare themselves and band together with market positioning and customer information.
Agree here that soft-rules to exclude finance will cause a lot of negative results, expected and otherwise.
People that complain finance will not voluntarily comply are right, most finance activity specifically and actively "does not care" and this also must be exposed publicly. Sunlight is a strong disinfectant.
ps- per piketty [0] the finance system is currently self-perpetuating, no longer solely an expression of real value. Humans are proven dangerous, so, take care with "laws"
https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
Agree here that soft-rules to exclude finance will cause a lot of negative results, expected and otherwise.
People that complain finance will not voluntarily comply are right, most finance activity specifically and actively "does not care" and this also must be exposed publicly. Sunlight is a strong disinfectant.
ps- per piketty [0] the finance system is currently self-perpetuating, no longer solely an expression of real value. Humans are proven dangerous, so, take care with "laws"
https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
Climate change from burning fossil fuels is also a road to hell laid with good intentions. Have you done the cost-benefit analysis on which is worse?
This is literally the path that capitalism laid out.
Either you're for or against the system. Capitalism's end game was not to be counted a citizen but to become the oligarchy. Congress has a lot of power but only what the people give them, well the people have lost most of their voice/power so now congress is fueled by the power that money can buy from the companies that fund them.
Thus it is we've entered late-stage capitalism. The federal government won't ever do anything about it as long as they're allowed to control congress by the wallet.
Short-term as myself a libertarian-socialist I see this as a positive - because the alternative is lots of death from climate change...
Long-term as a libertarian-socialist, I see this as a scary power grab by corporations. In some movies/shows/books you see companies that govern and have whole worlds and solar systems named after them.
When you take away regulations, when you move to allow companies total freedom to do whatever you want you have to be willing to take the consequences of whatever those freedoms bring, whether that's polluting the water supply or encouraging MLB to pull out of Georgia over voter rights.
You can't have your cake and eat it too!
Either you're for or against the system. Capitalism's end game was not to be counted a citizen but to become the oligarchy. Congress has a lot of power but only what the people give them, well the people have lost most of their voice/power so now congress is fueled by the power that money can buy from the companies that fund them.
Thus it is we've entered late-stage capitalism. The federal government won't ever do anything about it as long as they're allowed to control congress by the wallet.
Short-term as myself a libertarian-socialist I see this as a positive - because the alternative is lots of death from climate change...
Long-term as a libertarian-socialist, I see this as a scary power grab by corporations. In some movies/shows/books you see companies that govern and have whole worlds and solar systems named after them.
When you take away regulations, when you move to allow companies total freedom to do whatever you want you have to be willing to take the consequences of whatever those freedoms bring, whether that's polluting the water supply or encouraging MLB to pull out of Georgia over voter rights.
You can't have your cake and eat it too!
I don't think that's really what's happening here.
Banks have been choosing who they fund and who they don't for a while and it hasn't really been decried so far. This only highlights that we live in a society that is both democratic AND capitalist: decision making power is distributed, on the one hand, "equally" to each citizen via voting rights, and, on the other hand, to whomever holds the most capital.
You could even argue that the proportion of the power that goes to capitalists is inversely proportional to the amount of state actions in the form of redistributive policies, market legislation, etc.
Once you take this into consideration, your initial observation doesn't reflect a new financial "cancel culture". Rather it reflects how much of the decision making power is now in the hands of capitalists in the US.
Banks have been choosing who they fund and who they don't for a while and it hasn't really been decried so far. This only highlights that we live in a society that is both democratic AND capitalist: decision making power is distributed, on the one hand, "equally" to each citizen via voting rights, and, on the other hand, to whomever holds the most capital.
You could even argue that the proportion of the power that goes to capitalists is inversely proportional to the amount of state actions in the form of redistributive policies, market legislation, etc.
Once you take this into consideration, your initial observation doesn't reflect a new financial "cancel culture". Rather it reflects how much of the decision making power is now in the hands of capitalists in the US.
Banks are doing what they believe their customers and investors want them to do. If they're wrong, they'll lose market share and profits to banks that don't do this. It's not cancel culture, it's capitalism.
They already are: Banks fund certain things and don't fund others. There's no 'neutral' choice on offer here.
I'd much rather banks and investors were explicit and public about the values driving their choices.
If your hypothesis is right that the big banks are leaving money on the table, I'm sure somebody will start a tobacco/child labour/fossil fuels ETF investors can buy if they can stomach it.
I'd much rather banks and investors were explicit and public about the values driving their choices.
If your hypothesis is right that the big banks are leaving money on the table, I'm sure somebody will start a tobacco/child labour/fossil fuels ETF investors can buy if they can stomach it.
> If your hypothesis is right that the big banks are leaving money on the table, I'm sure somebody will start a tobacco/child labour/fossil fuels ETF investors can buy if they can stomach it.
The optics of such a nonsense ETF would itself drive investors away. Like seriously?
The optics of such a nonsense ETF would itself drive investors away. Like seriously?
Tobacco companies and fossil fuel companies have no trouble finding investors, so it doesn't seem all that nonsensical that an ETF based on those industries would have no trouble getting investors.
The existence of several vice ETF's undermines your thesis.
Every person and institution has a right to decide what things they're willing to support with their money. That's why we have the expression "voting with your wallet".
If a bank decides not to invest in some given company or sector, that's not "public policy making". That's just the bank exercising their right to decide where to put their money. Indeed, they can't do anything less. Whether they invest or not, they are making a decision that has social impacts.
If the bank instead paid lobbyists to persuade politicians to create new rules (and I'm sure they do), that would be closer to "public policy making".
Also, this concept of "cancel culture" is absurd. People and companies have always risked falling from public grace if they say or do things that go against the values of the majority of the public.
Was it "cancel culture" when Studio 54 got shut down? Or when Tim Leary got fired from Harvard? Or when Ellen's sitcom got cancelled?
Right or wrong, each was merely the result of going against the grain. Today, the cultural middle has shifted, and so some groups are finding themselves in a position they're unaccustomed to: being in the minority. (Or more accurately: not being _consistently_ in the majority.)
But the consequences are no different than those faced by any minority, and this is healthy for society. It's never a good thing when one group has so much social leverage that they get to dictate the terms for everybody else. I would argue that today, there's no such thing as a majority group. We're all minorities to varying degrees, and we all need to learn how to get along. I think that's a net positive, albeit a very messy one.
If a bank decides not to invest in some given company or sector, that's not "public policy making". That's just the bank exercising their right to decide where to put their money. Indeed, they can't do anything less. Whether they invest or not, they are making a decision that has social impacts.
If the bank instead paid lobbyists to persuade politicians to create new rules (and I'm sure they do), that would be closer to "public policy making".
Also, this concept of "cancel culture" is absurd. People and companies have always risked falling from public grace if they say or do things that go against the values of the majority of the public.
Was it "cancel culture" when Studio 54 got shut down? Or when Tim Leary got fired from Harvard? Or when Ellen's sitcom got cancelled?
Right or wrong, each was merely the result of going against the grain. Today, the cultural middle has shifted, and so some groups are finding themselves in a position they're unaccustomed to: being in the minority. (Or more accurately: not being _consistently_ in the majority.)
But the consequences are no different than those faced by any minority, and this is healthy for society. It's never a good thing when one group has so much social leverage that they get to dictate the terms for everybody else. I would argue that today, there's no such thing as a majority group. We're all minorities to varying degrees, and we all need to learn how to get along. I think that's a net positive, albeit a very messy one.
There is a big difference between an individual "voting with their wallet" and foundational institutions like banks pursuing activist policies.
Is there? Institutions are just organized groups of individuals. Is the difference that one is more effective than the other?
Also, why does THIS count as an activist policy, and not literally everything else banks have ever done?
There's no such thing as a neutral way to invest money. Every investment sends money towards one group and away from another. We give control of our money to banks with the trust that they are being intentional about how to use it.
Why is this an "activist policy" more than anything else?
Also, why does THIS count as an activist policy, and not literally everything else banks have ever done?
There's no such thing as a neutral way to invest money. Every investment sends money towards one group and away from another. We give control of our money to banks with the trust that they are being intentional about how to use it.
Why is this an "activist policy" more than anything else?
You've labeled this an "activist policy", but it seems to me that label actually means "a policy I personally disagree with."
If banks decided to invest in carbon producing companies, is that an activist policy? What about if they invest in US companies? Or invest in developing countries?
What makes this (avoiding investments in polluting firms) activist investing while the opposite isn't in your view. Seems hypocritical.
If banks decided to invest in carbon producing companies, is that an activist policy? What about if they invest in US companies? Or invest in developing countries?
What makes this (avoiding investments in polluting firms) activist investing while the opposite isn't in your view. Seems hypocritical.
But how is this different than any other investment choice they make trying to maximize their profits? Investors and banks are looking at the data and thinking, “if we don’t do something about climate change, it will really hurt our long term profits”, so they use their power to prevent the thing that will lower their profits.
Isn’t that what a corporation is supposed to do?
Isn’t that what a corporation is supposed to do?
For some corporations, yes, that is what they are supposed to do. However I make a distinction when it comes to the size of the company and the type of service they provide. There are some businesses and industries that I believe need to act like impartial utilities. Banking is one such sector.
There's no such thing as an impartial utility. Every move impacts some groups positively and others negatively.
You might be able to argue for the existence of a naive utility, one that doesn't bother being aware of the impacts of its investments. But that seems kinda silly in my books.
You might be able to argue for the existence of a naive utility, one that doesn't bother being aware of the impacts of its investments. But that seems kinda silly in my books.
If banking is a utility, are they required to invest in anyone who asks?
So then you also oppose banks being able to lobby politicians? Fund political campaigns? That's also "activist", right?
Should they stop advertising too? Advertising also has a viewpoint, after all.
Should they stop advertising too? Advertising also has a viewpoint, after all.
> “The problem we face today is that too many banks are failing to consider climate harm when they make financing decisions, and too much money is being ploughed into carbon-intensive activities that we so desperately need to move away from,” said Natasha Landell-Mills, head of stewardship at UK asset manager Sarasin & Partners.
The question remains: how will you do activities like e.g. making steel in a "green" manner? Moving money around cannot alone answer that question; finance can only help by moving money toward new technology that can perform the jobs of the old, non-green tech. What are these investors willing to invest in to make the needed tech?
The question remains: how will you do activities like e.g. making steel in a "green" manner? Moving money around cannot alone answer that question; finance can only help by moving money toward new technology that can perform the jobs of the old, non-green tech. What are these investors willing to invest in to make the needed tech?
Steel can use electricity for heat and hydrogen for reduction. There are some things where we don't know of good replacemets (e.g. concrete, aviation), but steel is not a good example.
In any case, if we get rid of fossil fuels everywhere where it's easy (electricity, heating, mobility except for flying), then we have a lot larger budget for figuring out how to do the things where it's not easy.
In any case, if we get rid of fossil fuels everywhere where it's easy (electricity, heating, mobility except for flying), then we have a lot larger budget for figuring out how to do the things where it's not easy.
Many modern steel plants already use electric arc furnaces originally developed for aluminum manufacture in the 30s and 40s.
There is no inherent reason not to collocate steel plants with plentiful renewable energy. As energy is one of the primary input costs to steel manufacture, it should be practical to develop “peaker” plants which take advantage of the midday energy cost dips due to solar.
There is no inherent reason not to collocate steel plants with plentiful renewable energy. As energy is one of the primary input costs to steel manufacture, it should be practical to develop “peaker” plants which take advantage of the midday energy cost dips due to solar.
see Industrial Ecology https://en.wikipedia.org/wiki/Industrial_ecology
I'm guessing initiatives like cap-and-trade programs or carbon offsets for heavy polluters could also be done.
And then there's the bitcoin miners who bought a natural gas power plant. Speculation drives so many evils for short term gain to a very few beneficiaries, blinded to all future impacts to everyone else. If ever there was an argument for carbon tax, here it is.
https://www.archpaper.com/2021/04/greenidge-power-plant-mine...
https://www.archpaper.com/2021/04/greenidge-power-plant-mine...
Exactly. Make pollution (incl CO2) sooooo heavily taxed that we can lower the tax on other "more wholesome" things (like income from labor and housing).
And the market will solve this issue real fast.
Sadly the power structures in place prevent creative thought, as those milking the cows of the status quo prevent change.
And the market will solve this issue real fast.
Sadly the power structures in place prevent creative thought, as those milking the cows of the status quo prevent change.
If we did that, we’d merely outsource all carbon heavy industries to where they’d inevitably pollute way more. You could try to do a carbon VAT I suppose - sounds tricky in practice because there is no market price discovery equivalent for emitted carbon (before/after manufacture), and taxation before markets was a dumpster fire mess.
Then we tax pollution imports at the border :) Because, as you point out well, this is not a matter of national interest: this is a world wide problem.
We have all types of tax already in place, we just need to emphasize.
If we dont the run for profit will make human life unbearable in many places.
We have all types of tax already in place, we just need to emphasize.
If we dont the run for profit will make human life unbearable in many places.
Not that I disagree per se, but there is no way of verifying the co2 emissions that goes into making anything from any foreign country ... even approximately.
Edit, meant to reply below
Edit, meant to reply below
> ‘...that we can lower the tax on other "more wholesome" things (like income from labor and housing)’
we don’t necessarily need lower income taxes across the board, but rather a sharp, smooth sigmoidal tax rate curve with the inflection point at the median income. and an end to deductions and carveouts like the lower capital gains tax. that one change would fix a lot of incentive problems in the fiscal system.
edit: i should add that we likely don’t need to lower taxes on housing either, as it won’t make a dent in getting more people housed where they want. what we need to lower are the barriers to development, like restrictive zoning, overly specified building codes, and arduous permitting and review processes.
we don’t necessarily need lower income taxes across the board, but rather a sharp, smooth sigmoidal tax rate curve with the inflection point at the median income. and an end to deductions and carveouts like the lower capital gains tax. that one change would fix a lot of incentive problems in the fiscal system.
edit: i should add that we likely don’t need to lower taxes on housing either, as it won’t make a dent in getting more people housed where they want. what we need to lower are the barriers to development, like restrictive zoning, overly specified building codes, and arduous permitting and review processes.
It would also have a worse effect on the poorest.
The concept of a Pigovian tax [0] on externalities is to dissuade anti-social behavior by assigning it a price, while giving the proceeds right back to citizens as a universal dividend. It would actually function as a progressive tax, with the poorest collecting more than they pay in, and is heavily favored by economists [1].
[0] https://en.wikipedia.org/wiki/Pigovian_tax
[1] https://clcouncil.org/economists-statement/
[0] https://en.wikipedia.org/wiki/Pigovian_tax
[1] https://clcouncil.org/economists-statement/
In this case, the universal dividend could be invested in carbon capture.
Carbon negative coal(). Woot!
() Certainly causes cancer, respiratory damage and widespread property and ecological damage. Not available in all locations.
Carbon negative coal(). Woot!
() Certainly causes cancer, respiratory damage and widespread property and ecological damage. Not available in all locations.
That's true of most consumption taxes, but this can be offset by giving a fixed tax credit to everyone. eg. if the median person is expected to pay $1000/yr in carbon taxes, then give them a yearly check for $1000 so it doesn't cost them extra. If they can reduce carbon on top of that, great! It's free money for them.
The German CO2 as currently implemented gives back the credits via the electricity bill (essentially lowering the high taxes there, but could also be a credit).
While not perfect, it strikes me as a rather great „90%“ solution since it gives back the tax in roughly the same proportion as energy use and cost (single/couple/family), so it‘s pretty fair to the poor as well.
While not perfect, it strikes me as a rather great „90%“ solution since it gives back the tax in roughly the same proportion as energy use and cost (single/couple/family), so it‘s pretty fair to the poor as well.
Besides lowering income tax, what else could help offset this?
Universal basic income. (And, in the US, replacing the current income tax system with a flat tax. Due to loopholes, the US system is regressive after a certain income level. A flat tax isn’t)
Tangentially, is is presumptions to see the wave of stimulus checks as the genesis of a UBI system, not named as such, but essentially what we will end up with? Since many times government programs are never rolled back.
Imagine: every 6 months or so, $X gets sent out.
Imagine: every 6 months or so, $X gets sent out.
Sounds incredibly unlikely to me. It's also neither universal, nor basic. Which is perhaps healthier in the long run.
The us income tax may be regressive past certain income levels, but for the 99% of the population below those levels, it's a progressive system. A flat tax might be more progressive on average, weighted in dollars, but will undoubtedly be more regressive to the majority of poor people.
> The us income tax may be regressive past certain income levels, but for the 99% of the population below those levels, it's a progressive system.
"Regular people pay higher marginal rates than rich people, but other than that it's a progressive tax system" is basically the opposite of a progressive tax system.
But on top of that, it isn't even true that the marginal rates paid in practice by lower income people are lower than those paid by middle income people, because of benefits phase outs. The system we currently have is worse than a flat tax across the board. The people at the bottom pay the highest marginal rates.
The only sense in which it's progressive is the same one you get with a UBI and a flat tax, i.e. that the effective rates on the poor are lower because the taxes they pay are more than offset by the lump sum benefit(s).
"Regular people pay higher marginal rates than rich people, but other than that it's a progressive tax system" is basically the opposite of a progressive tax system.
But on top of that, it isn't even true that the marginal rates paid in practice by lower income people are lower than those paid by middle income people, because of benefits phase outs. The system we currently have is worse than a flat tax across the board. The people at the bottom pay the highest marginal rates.
The only sense in which it's progressive is the same one you get with a UBI and a flat tax, i.e. that the effective rates on the poor are lower because the taxes they pay are more than offset by the lump sum benefit(s).
> "Regular people pay higher marginal rates than rich people, but other than that it's a progressive tax system" is basically the opposite of a progressive tax system.
Not really what I said. If richer people progressively pay more tax for the bottom 99% of the population, that's arguably still a progressive system. The top 1% not paying more feels more like a problem in the implementation of what is otherwise a fairly progressive setup.
I don't think I believe that poor people pay the highest marginal income tax rates given that some poor people pay none and all rich people have the amt. Other taxes, like sales tax, might make that true. A flat tax is more regressive than a progressive tax with loopholes cut out.
Not really what I said. If richer people progressively pay more tax for the bottom 99% of the population, that's arguably still a progressive system. The top 1% not paying more feels more like a problem in the implementation of what is otherwise a fairly progressive setup.
I don't think I believe that poor people pay the highest marginal income tax rates given that some poor people pay none and all rich people have the amt. Other taxes, like sales tax, might make that true. A flat tax is more regressive than a progressive tax with loopholes cut out.
> Not really what I said. If richer people progressively pay more tax for the bottom 99% of the population, that's arguably still a progressive system.
Except that that isn't what happens for the people at the very top, i.e. the investment class. The capital gains rate (paid by billionaires) is lower than the top earned income rate (paid by millionaires) and billionaires and international corporations use tax avoidance strategies to reduce the amount of income they pay tax on to begin with.
A flat tax can't be avoided in the same ways.
> I don't think I believe that poor people pay the highest marginal income tax rates given that some poor people pay none and all rich people have the amt.
You're confusing marginal rates with effective rates.
Suppose you make $15,000/year and get $5000/year in government assistance. But the assistance programs phase out at various rates that add together to 80%. If you make an extra dollar, you lose $.25 of food assistance, $.30 of housing assistance and $.25 of childcare assistance, something like that. Because those benefits phase out. The government takes 80% of the marginal dollar. Even if your "income tax bracket" is 0%, your marginal tax rate is 80%. This is more than some higher income person paying a marginal rate of 25% or 35%.
Your effective tax rate is -33%, because you made $15,000 and then "paid" -$5000 to the government, i.e. received $5000 in assistance.
Now compare this with a UBI that has no phase out and a 30% flat tax rate. You make $15,000, receive $12,000 UBI, pay $4500 (30% of the $15,000) in tax, so you net $7500 from the government. Your marginal rate is 30%, your effective rate is -50%. This is more progressive than the status quo on both metrics, despite being a "flat tax."
Because all "flat tax" means is that everybody pays the same marginal rate, whereas any rational definition of "progressive" implies that lower income people are paying lower effective rates.
Except that that isn't what happens for the people at the very top, i.e. the investment class. The capital gains rate (paid by billionaires) is lower than the top earned income rate (paid by millionaires) and billionaires and international corporations use tax avoidance strategies to reduce the amount of income they pay tax on to begin with.
A flat tax can't be avoided in the same ways.
> I don't think I believe that poor people pay the highest marginal income tax rates given that some poor people pay none and all rich people have the amt.
You're confusing marginal rates with effective rates.
Suppose you make $15,000/year and get $5000/year in government assistance. But the assistance programs phase out at various rates that add together to 80%. If you make an extra dollar, you lose $.25 of food assistance, $.30 of housing assistance and $.25 of childcare assistance, something like that. Because those benefits phase out. The government takes 80% of the marginal dollar. Even if your "income tax bracket" is 0%, your marginal tax rate is 80%. This is more than some higher income person paying a marginal rate of 25% or 35%.
Your effective tax rate is -33%, because you made $15,000 and then "paid" -$5000 to the government, i.e. received $5000 in assistance.
Now compare this with a UBI that has no phase out and a 30% flat tax rate. You make $15,000, receive $12,000 UBI, pay $4500 (30% of the $15,000) in tax, so you net $7500 from the government. Your marginal rate is 30%, your effective rate is -50%. This is more progressive than the status quo on both metrics, despite being a "flat tax."
Because all "flat tax" means is that everybody pays the same marginal rate, whereas any rational definition of "progressive" implies that lower income people are paying lower effective rates.
Lower sales tax.
Mining bitcoin is a terrible way to speculate on the price of Bitcoin. Why not just buy/short it directly?
Is it really true that Bitcoin mining is such a huge source of emissions ?
It is, but what people omit is that the energy is protecting the 14th largest currency in the world.
For fiat currencies military is providing protrction of that value with other things, so it's quite hard to compare the enrrgy needed by other countries to protect their currency (Marco Polo was a great Netflix series showing what happens to a currency when the military is defeated).
For fiat currencies military is providing protrction of that value with other things, so it's quite hard to compare the enrrgy needed by other countries to protect their currency (Marco Polo was a great Netflix series showing what happens to a currency when the military is defeated).
Capitalism/trade is generally morally good for all consenting stakeholders (with a few exceptions such as taking advantage of addictions) and morally ambivalent for everyone else.
That ambivalence for parties outside of the consenting exchange can lead to negative or positive externalities.
Ideally these negative externalities are banned (if they're too extreme, such as with lead pollution) or taxed.
I wish more adults understood the above. Capitalism isn't always an unadulterated good (for people outside of the exchange) but it mostly is positive-sum good for people within the exchange, and we need government to implement taxes that prevent the former and otherwise mostly stay out of the way for the latter.
That ambivalence for parties outside of the consenting exchange can lead to negative or positive externalities.
Ideally these negative externalities are banned (if they're too extreme, such as with lead pollution) or taxed.
I wish more adults understood the above. Capitalism isn't always an unadulterated good (for people outside of the exchange) but it mostly is positive-sum good for people within the exchange, and we need government to implement taxes that prevent the former and otherwise mostly stay out of the way for the latter.
> Capitalism/trade is generally morally good for all consenting stakeholders (with a few exceptions such as taking advantage of addictions) and morally ambivalent for everyone else.
It is so because morality is the affirmitation of societal norms.
> I wish more adults understood the above. Capitalism isn't always an unadulterated good (for people outside of the exchange) but it mostly is positive-sum good for people within the exchange, and we need government to implement taxes that prevent the former and otherwise mostly stay out of the way for the latter.
Your argument goes the way that lousing each other is beneficial to all if there are strict rules and punishment for those that don't louse back, instead of simply washing yourself or seeking other ways to delouse oneself. I'm well off and thanks to wide diversification of assets my future descendants will have all the time in the world to wonder why people still equate labor and property.
> I wish more adults understood the above. Capitalism isn't always an unadulterated good (for people outside of the exchange) but it mostly is positive-sum good for people within the exchange, and we need government to implement taxes that prevent the former and otherwise mostly stay out of the way for the latter.
Your argument goes the way that lousing each other is beneficial to all if there are strict rules and punishment for those that don't louse back, instead of simply washing yourself or seeking other ways to delouse oneself. I'm well off and thanks to wide diversification of assets my future descendants will have all the time in the world to wonder why people still equate labor and property.
"Capitalism" is not merely a short-hand for "trade"; it's also a theory of capital. And its shortcomings are numerous: not only the ones you describe (externalities, exploitation of addictive behavior), but also game-theoretic races to the bottom, rent-seeking behavior, conflating capital with land [0], zero-sum positional goods, quasi-sociopathic corporations, the list goes on.
Your core point is a good one: trade tends to be mutually beneficial, and good policies of ownership design [1] incentivize net-positive wealth creation. But there's a lot of good and bad ideas (and ideology) wrapped up in "capitalism" as such; it's worth teasing them all apart independently rather than the simple "Capitalism: Y/N" stances that pervade the discourse. I'm frankly ready to banish the words "capitalism" and "socialism" from our vocabulary entirely; they're simply not helpful.
[0] https://astralcodexten.substack.com/p/your-book-review-progr...
[1] https://www.penguinrandomhouse.com/books/601899/mine-by-mich...
Your core point is a good one: trade tends to be mutually beneficial, and good policies of ownership design [1] incentivize net-positive wealth creation. But there's a lot of good and bad ideas (and ideology) wrapped up in "capitalism" as such; it's worth teasing them all apart independently rather than the simple "Capitalism: Y/N" stances that pervade the discourse. I'm frankly ready to banish the words "capitalism" and "socialism" from our vocabulary entirely; they're simply not helpful.
[0] https://astralcodexten.substack.com/p/your-book-review-progr...
[1] https://www.penguinrandomhouse.com/books/601899/mine-by-mich...
You're right about the capitalism/trade distinction and it was a mistake to group them together. My post was pertaining more to trade than capitalism proper.
Take positional goods. If there's no negative externalities, how is that bad? If person A wants to give lots of money to person B for a diamond, that has zero negative impact on me. Person A is presumably happier and person B is presumably happier (otherwise they wouldn't have traded). Nobody is losing in a nontrivial way here. You could maybe argue that a society with status strata is undesirable, but it's a bit of a stretch to lay the blame for that on capitalism, diamonds (or family pedigree or whatever) would be a status marker irrespective.
Take quasi-sociopathic companies. Yes, they're amoral and generally will do anything for profit, but this is mostly a point about externalities. A chemicals company will treat their customers extremely well but will dump in the river because those impacted aren't their customers. There's examples of businesses treating their customers atrociously (e.g lead spiking of turmeric, not doing safety recalls, etc), but these are exceptions and aren't the rule, brand equity all the way through the supply chain incentivizes the opposite in general. Every business I patronage treats me like royalty and it's no coincidence.
Regarding races to the bottom, do you mean things like the zero sum competion for speed among HFT firms? Isn't this waste just an inevitable byproduct of competition? As an industry, they've largely successfully automated away expensive human market makers, despite this zero sum waste that comes from that competition. It's not efficient to have 5 supermarket chains with 5 legal department and 5 HR departments, but we accept that we need that waste for competiton to function.
Regarding rent seeking, that's fairly broad and it'd be better to discuss specifics.
"its shortcomings are numerous:"
Take positional goods. If there's no negative externalities, how is that bad? If person A wants to give lots of money to person B for a diamond, that has zero negative impact on me. Person A is presumably happier and person B is presumably happier (otherwise they wouldn't have traded). Nobody is losing in a nontrivial way here. You could maybe argue that a society with status strata is undesirable, but it's a bit of a stretch to lay the blame for that on capitalism, diamonds (or family pedigree or whatever) would be a status marker irrespective.
Take quasi-sociopathic companies. Yes, they're amoral and generally will do anything for profit, but this is mostly a point about externalities. A chemicals company will treat their customers extremely well but will dump in the river because those impacted aren't their customers. There's examples of businesses treating their customers atrociously (e.g lead spiking of turmeric, not doing safety recalls, etc), but these are exceptions and aren't the rule, brand equity all the way through the supply chain incentivizes the opposite in general. Every business I patronage treats me like royalty and it's no coincidence.
Regarding races to the bottom, do you mean things like the zero sum competion for speed among HFT firms? Isn't this waste just an inevitable byproduct of competition? As an industry, they've largely successfully automated away expensive human market makers, despite this zero sum waste that comes from that competition. It's not efficient to have 5 supermarket chains with 5 legal department and 5 HR departments, but we accept that we need that waste for competiton to function.
Regarding rent seeking, that's fairly broad and it'd be better to discuss specifics.
But won't other investors step in and replace them? If a coal power plant can't raise capital from these guys, they'll get it from someone else instead. Failing that, they could offer slightly higher interest rates which will surely attract amoral investors.
edit: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates (ft.com) https://news.ycombinator.com/item?id=20998948
edit: Fossil fuel divestment has ‘zero’ climate impact, says Bill Gates (ft.com) https://news.ycombinator.com/item?id=20998948
> If a coal power plant can't raise capital from these guys, they'll get it from someone else instead.
For coal in the US this process has now played itself out enough that there is no longer sufficient value to extract. All of the major players have gone through multiple rounds of bankruptcy where they have shed pension, retiree healthcare, environmental cleanup costs, etc. They are at the point where even the lowest bottom feeders will no longer bid for them. Take for example Blackjewel which was already a bottom feeder holding company for a number of consolidated assets, they went to liquidation because there was no value left.
https://www.courier-journal.com/story/news/2021/03/03/blackj...
Of course tax payers will be stuck with the healthcare, pension and cleanup bills, not to mention the underfunded Black Lung Fund and of course all the climate and pollution costs.
For coal in the US this process has now played itself out enough that there is no longer sufficient value to extract. All of the major players have gone through multiple rounds of bankruptcy where they have shed pension, retiree healthcare, environmental cleanup costs, etc. They are at the point where even the lowest bottom feeders will no longer bid for them. Take for example Blackjewel which was already a bottom feeder holding company for a number of consolidated assets, they went to liquidation because there was no value left.
https://www.courier-journal.com/story/news/2021/03/03/blackj...
Of course tax payers will be stuck with the healthcare, pension and cleanup bills, not to mention the underfunded Black Lung Fund and of course all the climate and pollution costs.
"Amoral" or just not convinced by the case made by climatologists for their predictions. Although many try to shut down all discussion of it, there are plenty of rational grounds for suspecting climate change related predictions are incorrect. People who believe that could invest in carbon-emitting industries without any cognitive dissonance or belief that they were being amoral, because they don't believe it's a big deal in the first place. That pushes the decision further downstream to the buyers of the power, and so on. It's a market based solution to making these decisions and weighing the evidence, which incorporates far more people and analysis power than a government department or political party can marshal. So this seems like fair game to me, or at least, preferable to the alternatives.
Literally everyone would be more than happy to hear solid evidence that our climate predictions are wrong. The scientist publishing a solid paper with that conclusion would become a hero.
It would be nice if that's the case, but do you really think a global community of academics would welcome a paper with open arms that destroyed their entire life's work and careers? Come on. Plenty of papers and analyses have been published showing many wrong predictions and it's had no impact on the field whatsoever.
We know from internal documents that over the course of decades the oil majors had their own scientists both review mainstream climate science as well as conduct their own original research and they agreed with the overall mainstream conclusions.
There was also a pretty famous case of a climate skeptic that got funding from Koch to look into things and wound up becoming convinced.
https://www.scientificamerican.com/article/converted-contrar...
All the oil majors in the world, plus Saudi Arabia, Russia, China, etc have plenty of motivation and resources to poke holes in the theory and have failed to do so. Can you explain why that is?
There was also a pretty famous case of a climate skeptic that got funding from Koch to look into things and wound up becoming convinced.
https://www.scientificamerican.com/article/converted-contrar...
All the oil majors in the world, plus Saudi Arabia, Russia, China, etc have plenty of motivation and resources to poke holes in the theory and have failed to do so. Can you explain why that is?
Can you cite a couple? There is an exceedingly rich lobby behind fossil fuels. Do you think they wouldn't be happy to sponsor the career of people that prove that their business model isn't killing the climate? Why do you think the scientific consensus is that man made climate change is real and dangerous despite these powerful incentives?
OK, so there are multiple things to break down here.
Firstly, no such lobby exists anymore, if it ever did. All the supposed oil majors have reinvented themselves as energy companies a long time ago and have big investments in solar, wind, etc. They are well aware that green initiatives aren't going to undermine the oil business any time soon; it will happen on a long enough timescale that they can easily build new businesses and make money from the new tech too. Even if every car factory in the world switched to making electric cars and only electric cars tomorrow, it would take decades for the vehicle fleet to turn over, so there's no real pressure on these people to mount diabolical schemes because the time horizon is far too long.
Secondly, the opposite of "climate change science is unreliable" is not "and therefore there is reliable science saying the opposite". If climatology as a field is unreliable then we are in a knowledge vacuum in which the claims might be true, or they might not be, or they might be some exaggeration of the reality or some over-simplification. All these things are possible if the science is not reliable.
Thirdly, climatology is uniquely difficult to deal with because academic climatologists are the ones producing the actual temperature record itself. There have been arguments in the past about the temperature record because global temperatures didn't follow predictions, at all (e.g. the "pause"), and the response of climatology was to issue new versions of the historical datasets that simply created the trend they had predicted. Sometimes the raw data isn't even available at all, only their adjusted datasets. Thus if climatology is an unreliable field there's actually no way to construct an alternative more reliable narrative, because you'd have to build on datasets controlled by the people you don't trust and which are repeatedly revised to bring data in line with predictions. (they have various justifications for doing so, but the incentive problems created by scientists "fixing" the historical record are obvious enough that they don't need elaboration).
Ideally collection and processing of climate related data would be done by totally different people to those making predictions about it. That doesn't happen: the community is just far too small. So, apparently untrustworthy practices can be pointed out like ... well, like claiming you can accurately predict the temperature a hundred years in advance whilst simultaneously claiming you were unable to accurately measure the actual temperature just ten years ago. But that doesn't then let you say "and so here is a more reliable set of predictions".
At any rate, if you'd like a citation for a reasonable, apparently rational and well argued alternative take, have a look at this talk:
https://www.youtube.com/watch?v=cYZW-6jw98U
Firstly, no such lobby exists anymore, if it ever did. All the supposed oil majors have reinvented themselves as energy companies a long time ago and have big investments in solar, wind, etc. They are well aware that green initiatives aren't going to undermine the oil business any time soon; it will happen on a long enough timescale that they can easily build new businesses and make money from the new tech too. Even if every car factory in the world switched to making electric cars and only electric cars tomorrow, it would take decades for the vehicle fleet to turn over, so there's no real pressure on these people to mount diabolical schemes because the time horizon is far too long.
Secondly, the opposite of "climate change science is unreliable" is not "and therefore there is reliable science saying the opposite". If climatology as a field is unreliable then we are in a knowledge vacuum in which the claims might be true, or they might not be, or they might be some exaggeration of the reality or some over-simplification. All these things are possible if the science is not reliable.
Thirdly, climatology is uniquely difficult to deal with because academic climatologists are the ones producing the actual temperature record itself. There have been arguments in the past about the temperature record because global temperatures didn't follow predictions, at all (e.g. the "pause"), and the response of climatology was to issue new versions of the historical datasets that simply created the trend they had predicted. Sometimes the raw data isn't even available at all, only their adjusted datasets. Thus if climatology is an unreliable field there's actually no way to construct an alternative more reliable narrative, because you'd have to build on datasets controlled by the people you don't trust and which are repeatedly revised to bring data in line with predictions. (they have various justifications for doing so, but the incentive problems created by scientists "fixing" the historical record are obvious enough that they don't need elaboration).
Ideally collection and processing of climate related data would be done by totally different people to those making predictions about it. That doesn't happen: the community is just far too small. So, apparently untrustworthy practices can be pointed out like ... well, like claiming you can accurately predict the temperature a hundred years in advance whilst simultaneously claiming you were unable to accurately measure the actual temperature just ten years ago. But that doesn't then let you say "and so here is a more reliable set of predictions".
At any rate, if you'd like a citation for a reasonable, apparently rational and well argued alternative take, have a look at this talk:
https://www.youtube.com/watch?v=cYZW-6jw98U
[deleted]
The same logic applies to contract killing, doesn't it? If you can't find somebody to take the contract, you can just sweeten the pot until you reach somebody's price, right?
If banks decide to become moral investors and quit the game, the carbon fuel industry will be scrambling to replace about $1T/y in funding. Those shadier investors might be out there with higher interest rates, but I doubt they've got nearly as much to spend. So now carbon production is less profitable, and has less capitol to work with. That would be good.
But the cynic in me says that banks will agree to this, but move to an arms-length model.
If banks decide to become moral investors and quit the game, the carbon fuel industry will be scrambling to replace about $1T/y in funding. Those shadier investors might be out there with higher interest rates, but I doubt they've got nearly as much to spend. So now carbon production is less profitable, and has less capitol to work with. That would be good.
But the cynic in me says that banks will agree to this, but move to an arms-length model.
>The same logic applies to contract killing, doesn't it?
...which is why it's illegal, rather than relying on individuals doing the right thing.
>If banks decide to become moral investors and quit the game, the carbon fuel industry will be scrambling to replace about $1T/y in funding
This only works if enough banks participate. If banks control 50T of capital, and 90% of banks pull out, but fossil fuels only need 1T of funding, then the fossil fuel industry wouldn't be capital constrained. Given the total size of the global capital market ($118T), I find this hard to achieve.
...which is why it's illegal, rather than relying on individuals doing the right thing.
>If banks decide to become moral investors and quit the game, the carbon fuel industry will be scrambling to replace about $1T/y in funding
This only works if enough banks participate. If banks control 50T of capital, and 90% of banks pull out, but fossil fuels only need 1T of funding, then the fossil fuel industry wouldn't be capital constrained. Given the total size of the global capital market ($118T), I find this hard to achieve.
As the biggest players leave, maintaining that level of investment will require the remaining players to concentrate their portfolios into an increasingly unpopular industry. Those investors will price that elevated risk into their offerings, and the result is lower profit margins for the carbon industry. I think this is fully in line with the goals of the movement to divest
>The same logic applies to contract killing, doesn't it?
I don't think anyone expects the rate of contract killing to hit zero just because they personally don't do it...
I don't think anyone expects the rate of contract killing to hit zero just because they personally don't do it...
Anything that makes investments into fossil fuels more expensive (i.e. higher interest rates), makes investment in carbon neutral technology more attractive.
This is naive thinking about capital markets.
Like water, capital will always find its level.
Like water, capital will always find its level.
Notice that there is nothing 'democratic' about this. It is large players in the economy who have unparalleled power in the market, unilaterally making a decision.
At least it's an improvement over the usual way it works where big players with unparalleled power in the market don't care about the future and unilaterally decide that we should pollute for another decade or two.
Government policies would be better than both of these options. The only reason that it "usually" works that way is because of the persistent effort of conservatives to paint government as ineffective at best and harmful at worst, when in reality democratic government is the best way we have to solve problems that require society-level intervention and coordination.
Well, unfortunately it doesn't seem like we're willing or able to make these decisions in the US. We as a country don't seem to be able to get everyone on the same page on these matters. There are just too many people who either don't believe the problem is serious or they do not care.
I'm relatively sure that there is not a single country on the planet with a climate policy that is compatible with the 1.5° goal. Maybe some island nation or so?
I think you're oversimplifying if you're just blaming the US flavor of conservatives.
I agree that no nation has regulations compatible with that goal, but I don't see how that means I'm oversimplifying. We have two common ways to organize and direct the actions of many people for a common goal: corporations and governments. Is there a third option for achieving these goals?
That's not unusual. What is unusual is that they're using their central market power to make things better, not worse, in terms of externalities.
This feels like a PR play though. Banks aren't the most competitive market in the country but the idea that 100% of banks will stop doing business with a multi-billion dollar industry has to be a conceit.
Oil companies have a ton of money. "Start their own bank" money, if it came to that. There's no way this actually works against them. This kind of thing only works against marginalized people.
So what it's meant to do is normalize the tactic. The banks are doing this against evil oil companies, and screw those guys amiright? Show everybody that our benevolent overlords are doing this for our own good.
Then they come after others, actually marginalized groups without "start your own bank" money, and anybody who objects to that but not this is a hypocrite doing battle with existing precedent.
Oil companies have a ton of money. "Start their own bank" money, if it came to that. There's no way this actually works against them. This kind of thing only works against marginalized people.
So what it's meant to do is normalize the tactic. The banks are doing this against evil oil companies, and screw those guys amiright? Show everybody that our benevolent overlords are doing this for our own good.
Then they come after others, actually marginalized groups without "start your own bank" money, and anybody who objects to that but not this is a hypocrite doing battle with existing precedent.
> they come after others, actually marginalized groups without "start your own bank" money
But .. this already happens, and has for some time, and nobody defending that makes reference to climate disinvestment?
But .. this already happens, and has for some time, and nobody defending that makes reference to climate disinvestment?
It happens in the sense that some individual bank might choose not to do business with some individual marginalized person, and maybe even multiple banks do that independently. Has it been the case that they come together like this in a publicly announced explicit conspiracy?
There was nothing democratic about the rise of the fossil fuel industry in the first place. Wanting "democracy" in the other direction is an asymmetrical demand with no justification.
This is the result of 40+ years of conservative propaganda harping on how "government is the problem" and "government is bloated and their involvement makes everything worse" so now corporations are the only ones left with power and trust to address large scale issues. I'd personally rather see society-scale issues handled by government instead of Facebook and Goldman Sachs, but it seems like most of my countrymen in the USA disagree.
Sadly I noticed this too. I see this as a testimony to defunct democracies, that are heavily in the pockets of those making big money off pollution.
It's not democracy, but it is capitalism. You know, the adage, "vote with you wallet". The bigger your wallet, the more say you have.
Its investors communicating their allocation criteria to banks that they invest. It has nothing to do with democracy, its simple capitalism.
Great. Now we are going to count banks as the politicians. Who else is in line?
Well, we could always dismantle capitalism .. write it off as a failed experiment and try a more collectivism approach like non-statist socialism... aka libertarian socialism.
I find it funny though when people who fear socialism and communism so much and who consider themselves libertarians (as in the libertarian party of the USA - not left-libertarian) - start to tear down capitalism and claim they want smaller government, less oversight, less regulation on companies which would allow companies to become even MORE powerful, while at the same time crying foul when these companies push any agenda they don't approve of...as if they should have a say in what capitalists do with their own money/time/etc.
I find it funny though when people who fear socialism and communism so much and who consider themselves libertarians (as in the libertarian party of the USA - not left-libertarian) - start to tear down capitalism and claim they want smaller government, less oversight, less regulation on companies which would allow companies to become even MORE powerful, while at the same time crying foul when these companies push any agenda they don't approve of...as if they should have a say in what capitalists do with their own money/time/etc.
The issue with one group withdrawing funding is that another group steps in to provide it. And they do so at a better rate for themselves. So the least ethical market participant makes the most profit.
I prefer the opposite strategy some funds have taken: investing and then pressuring boards to behave better.
I prefer the opposite strategy some funds have taken: investing and then pressuring boards to behave better.
If there's more profit for the lender who stays, there's an dollar cost for the industry, which should reduce industry activity as projects are started/continued or not based on dollar cost and expected dollar revenues.
This might not be the best way to increase dollar costs for the industry, but it is a way to do it.
This might not be the best way to increase dollar costs for the industry, but it is a way to do it.
If capital costs go up 1%, that's a big boon for capital providers, especially in the days of zero interest rates. If capital costs go up one percent, that's a rounding error for the projects themselves...
The fewer people willing to lend the more expensive money becomes. This can make some projects unprofitable.
The Problem is that is a long long way off. If you need to borrow 100m USD for a new coal power station, and the total world debt market is about $24tn, you're only borrowing something like 4x10^-5%. So even if 99.999% of lenders decline your project on ecological grounds, you still have 20 times more funding available than you need.
The fewer people there are that make money off fossil fuels, the less opposition there is to legislating fossil fuels. I think this is the right move.
Matt Levine talks about this all the time in his column. These big institutional investors and index fund managers essentially “own the market”, meaning their profit and loss is determined by the entire market’s performance and not particular companies. Some people fear this will decrease competition (because if your biggest investor also is a big investor in your competitor, they might not want you to compete on price as much), but it also leads to big investors sometimes pushing for policies that help society as a whole in places where an investor in a few companies wouldn’t have the same incentive.
COVID-19 is an example. An investor in a drug company might want that company to maximize their profit from making a COVID vaccine, but an index fund manager would be willing to sacrifice some profit for a faster vaccine distribution because the benefit to the economy as a whole (and thus their own total profit) would be greater than the lost profit from not maximizing vaccine profits.
Climate change is similar. Having index funds and other large fund managers owning the market means their fear of climate change damaging their long term profits is greater than their greed to make profit from one individual company causing environmental damage in pursuit of profit.
In some ways it is kinda interesting, since it is a way past the collective action problem that often prevents action on things like climate change. It is also scary, of course, for non-democratic institutions to have so much power.
COVID-19 is an example. An investor in a drug company might want that company to maximize their profit from making a COVID vaccine, but an index fund manager would be willing to sacrifice some profit for a faster vaccine distribution because the benefit to the economy as a whole (and thus their own total profit) would be greater than the lost profit from not maximizing vaccine profits.
Climate change is similar. Having index funds and other large fund managers owning the market means their fear of climate change damaging their long term profits is greater than their greed to make profit from one individual company causing environmental damage in pursuit of profit.
In some ways it is kinda interesting, since it is a way past the collective action problem that often prevents action on things like climate change. It is also scary, of course, for non-democratic institutions to have so much power.