On March 4, 2020, the Buckley Program hosted a Firing Line Debate with Nick Loris and Tim Weiskel on “Fossil Fuel Divestment.” Mr. Loris is currently the Deputy Director of the Thomas A. Roe Institute for Economic Policy Studies and Herbert and Joyce Morgan Fellow in Energy and Environmental Policy at the Heritage Foundation. Dr. Weiskel is the founder of Cambridge Climate Research Associates and Transition Studies and previously taught anthropology and history at Williams College, Yale University, and Harvard University. This transcript has been lightly edited for clarity.

Rachel Bitutsky: You are an energy analyst working for a conservative think tank. What first drew you to the seemingly counterintuitive idea that environmental problems are best addressed by free enterprise rather than government regulation?

Nick Loris: That’s a great question. Growing up, you always hear that free enterprise doesn’t necessarily account for externalities produced and that there’s a social cost. That’s certainly true, but economics really drew me to what is the most efficient, environmentally benign outcome in that regard. I think if you look at free market environmentalism, or the ability of individuals to take care of their own property, and those principles that are rooted in property rights and environmental responsibility, you see that economic growth and environmental wellbeing go hand in hand. They don’t have to be counter to one another- you don’t necessarily have to make tradeoffs. As an economist, I remember reading for one professor that nobody washes a rental car because you don’t take care of what you don’t own. Those principles of environmental stewardship at the individual level go a long way in promoting stronger environmental records at a macro level. Free enterprise has a very important role to play in all of that. As we grow wealthier, we have more resources to take care of our environment. From an economics standpoint, we think of taking care of our environment as a luxury good and so the more resources you have, the more resources you can dedicate to ensuring that you have clean air, drinkable water, and public access to our national parks.

RB: Given the ephemerality of nonrenewable energy sources and the inevitable switch to alternative energy, what are the arguments against subsidizing companies to speed up this transition?

NL: There’s a few arguments against subsidizing any energy source and we should be peeling back subsidies for fossil fuels and nuclear energy companies as well. The primary problems with subsidizing any type of energy source is that it traps resources in valuable places. In that I mean that there are a number of policy ideas where lobbyists have come in DC and they’ve got this next great biofuel or alternative energy technology, and they just need five years of subsidies and it’ll wean off our dependence on fossil fuels and foreign oil. So everyone’s going to love it, it’s going to be economically beneficial, and then five years later, they are still being subsidized. We have, for instance, a renewable fuel standard that mandates that we blend ethanol into our fuel supply that right now economists, environmental activists, and world hunger organizations all dislike this policy because it benefits these entrenched special interests and disperses the cost among the rest of us both as taxpayers and energy consumers. It is stuck in place. What I look for is how we can break down government-imposed barriers to alternative energy sources or to nuclear power, and how we can have decarbonization driven by market forces. The world out there uses a lot of energy, whether it is to light and heat our homes, or get our vehicles from point A to point B. These are multitrillion-dollar market economies, so any energy technology that can capture just a sliver of that marketplace shouldn’t need help from the federal taxpayer.

RB: Thinking about the global scale, do you think that the creation of a stronger international agency is necessary for the enforcement of any future international climate accords or would you argue that it is up to the markets of each individual country to reduce carbon emissions as they see fit?

NL: Climate is a difficult problem, because you have this collective action problem, no matter what the United States does to reduce greenhouse gas emissions. We could reduce greenhouse gas emissions like the Green New Deal wants to aspire to do and it would still only mitigate global temperatures a few tenths of a degree Celsius by the turn of the century, and maybe avert a few centimeters of sea level rise. The difficult aspect of regulating greenhouse gas emissions and CO₂ on a global level is that not everyone is going to play ball. We have seen this time and time again; with any type of international agreement, there’s a huge divide between the developed world and developing world. China and India will continue to grow their emissions. They’ve lied about their CO2 emissions; China has specifically lied about their CO2 emissions by underreporting, and India has used a gimmicky type of language to say they’re meeting their carbon reduction goals when in fact they’re significantly increasing their overall intensity of carbon emissions. In that regard, both the Kyoto Protocol and the Paris Climate Accord have been failures in trying to solve that collective action problem. What I see as encouraging for those concerned about climate change is that you’re seeing a more bottom-up approach. There are people who are concerned, and people are acting on that: from the free enterprise, (switching to alternative forms of beef and impossible burgers) to business demanding more renewable sources of energy, to new nuclear power plants starting up. I think that bottom-up, driven attitude is going to lead people to where they want to get, because that way it’s not controlled by top-down central planners.

RB: Okay, now I have a money question. In an interview that Ben Shapiro conducted with you last year, you argued that building infrastructure such as sea level walls are an efficient way of combatting rising sea levels. What evidence is there to suggest that preventative measures of dealing with global warming are more expensive than adaptive measures (like the construction of sea level walls, which can cost upwards of 400 billion dollars)?

NL: The aggregate cost of restricting energy will have significant economic consequences on American families and households. Because 80% of our energy needs come from carbon-emitting fossil fuels, any policy that restricts them is not only going to drive up energy prices—you’ll be harmed when paying your electricity bill every month, and when you go to the gas station—but because energy is such a critical component of everything we do, it acts as an economic vice that squeezes both the production and consumption side of the economy. Consumers are hit when they go out to eat and when they go to Walmart again and again, so our aggregate loss over a 20 year time period could be 3.5 trillion dollars. That’s what we’ve estimated using the federal government’s Energy Information Administration’s model. The flipside of that is that you don’t get much climate benefit from that. Without solving any type of collective action problem, you only get a reduction in warming that’s almost too small to measure. It’s all cost and no benefit. There are going to be costs to adaptation—to building sea level walls and being better prepared for natural disasters—but it makes sense to have those sound investments. We know sea levels are rising. It’s not happening extremely fast, though it has accelerated, from a point of 1.7 mm per year to 3.3 mm per year. We have time to create a near-term strategy while focusing on intermediate and long term efforts for deep decarbonization if that should be the policy goal.

RB: Thank you! Now on the topic of the debate you’ll be partaking in later today; do institutions like Yale have a moral obligation to divest from fossil fuel companies?

NL: That’s a good question. I’m not one to tell other people what to do with their money, but at the same time, I don’t think divestment is a particularly effective strategy. It’s symbolic at best, but could do more harm than good if you’re talking about harming companies that are leading a transition away from coal and to natural gas in the United States. A lot of these companies are leaders in green tech development, so in that regard, I don’t see how there is much impact on changing fossil fuel supply and demand. As far as the ethical and morality question, I think it’s different than things it’s been lumped into like apartheid or smoking. We know that smoking has adverse effects on human health. But fossil fuels have been instrumental in lifting people out of poverty. We have had a lot of benefits from the use of fossil fuels. The advancements of mechanization have allowed us to travel further to transport goods, and fossil fuels generally have made our lives more prosperous and cleaner. If there is a moral imperative to address climate change, it should be focused on actions that will have a meaningful impact on the climate, rather than be symbolic gestures that fail to accomplish anything very meaningful.

RB: How can conservatives—especially the new generation of college students beginning to lean more to the right—compromise with the left on what seems to be the largest environmental crisis of our time?

NL: I think there are a lot of areas of agreement between the left and the right. It certainly doesn’t seem that way, considering how climate is polarized among policymakers and even among the left and right. It doesn’t help that there’s a President calling [climate change] a hoax, but it also isn’t true that the Statue of Liberty is going to be up to our hips in water in the next ten years. These Malthusian predictions tend to not come true, and then people don’t take the actual cost of climate change sincerely. What I look at is the ways to speed up innovation in a way that advances what consumers prefer and what businesses prefer. We hear all the time that Microsoft and Google and Apple want to use more clean energy, go 100% renewable. Are there ways to empower consumers to choose the energy sources that they want? If Microsoft does want to go 100% renewable, then they should have the ability to do so. Here we see some synergy between the left and the right on more competition and retail choice and electricity markets. I don’t know how it is here in Connecticut, but in places like Texas, shopping for an electricity provider is like shopping for an Airbnb. You can choose from 90 different providers, you can choose to buy 100% renewable, or you can choose to hedge against prices in the future. We can shift electricity markets to be more modern. That will not only improve efficiency, but also be more consumer-centric and drive down emissions. I think nuclear power is another easy one. It’s been stigmatized, unfortunately, but some folks on the left understand that deep decarbonization is not going to happen without nuclear. What are those regulatory and government-imposed barriers that are prohibiting new nuclear plants from coming online? I also think that adaptation is not the end-all-be-all when it comes to a climate policy, but I think it is a sound investment strategy. We should be ensuring that the states who need the infrastructure to protect against the changing climate have the ability to make those investments. Lastly, I think that trying to understand what the actual risk of climate change is is really important. We have a lot of policies that distort the risk of where to build. In places like Florida and along the coast, we have a lot of flood insurance programs that help bail out homeowners and you don’t properly assess the risk of where you’re living. That all pays into what premiums you pay and distorts where people might live in potentially climate sensitive areas where they otherwise shouldn’t be living. I keep going on and on, but the last one I’ll say: an agreement to get rid of fossil fuel subsidies. Conservatives should be against all subsidies, but if you want to work with the left on something, I think the left made good cases that there are fossil subsidies out there, nothing more than cronyism in corporate welfare. We should be pursuing policies that get rid of those subsidies.

RB: Absolutely. Thank you so much!  

NL: No problem!

Michael Curcio: What are your initial thoughts on divestment?

Tim Weiskel: It’s interesting the way the CIO here, David Swenson seems to cite The Ethical Investor published in 1972 as something that was formative in his own background. He claims to have gone to school here and been very influenced by Boener and John Simon. He doesn’t quite realize it because he was in middle school at the time, but I wrote the first draft of the book as an undergraduate in 1968. If you read the introduction carefully, it basically says, this came out of discussions with undergraduates in 1968 and 69 and then developed into a course that they taught in the Fall of 69 with John Simon and William Boener. I had already graduated when they started teaching it, but I got one of the Rhodes scholarships, so I was out of the country for seven years and that was when it became a book and a big deal. 

MC: Since you helped write The Ethical Investor and now Swenson says he takes influence from it, do you think Swenson takes the spirit of the text to heart? Since the text came from conversations with undergrads and right now undergrads are asking Swenson to divest, should he listen to them? Should he not listen to them? What do you think? 

TW: I can understand that he has a little bit of a stiff profile because the thing has moved on a bit from when he was first introduced to it. And anybody who thinks the same that they did 20, 30, 40, or in this case 50 years ago is automatically out of it. I don’t think his own thoughts have developed as fast as the problem and that’s a bit unfortunate because there is no reason why he should oppose what he’s been put in the position of opposing. If he examined his own early enthusiasm about it, I think he’d come back to a more reasonable suggestion. But I gather there have been some exchanges with various groups on campus about not doing enough or not doing things fast enough.

MC: I’m curious to hear your thoughts on what are like the criteria you think that must be met to divest from anything? 

TW: Well I think we can go from worst case to better cases and the worst case is where you’re profiting from something has known and predictable consequences that harm society. You know, that’s a pretty broad category, but it covers everything from mass incarceration to the use of fossil fuels. 

MC: In terms of defining profit, does that include anything beyond the risk-free rate of return or are you talking about absolute profit? 

TW: It’s not just because it’s making a higher rate of return than another asset that it’s objectionable. It’s objectionable because it’s supporting the wrong thing. I mean Morgan Chase at this point has supported since the Paris agreement fossil fuel ventures on a scale previously unimaginable and for that reason, on the 23rd of April, people are going to be in every Chase Bank demonstrating again the financing of the destruction of the ecosystem.  

MC: In past cases of divestment, there’s been a clear solution to the problems. When the tobacco companies targeted minors in advertisements, the solution was to stop targeting minors in tobacco ads. What do you think is the solution for climate change and would we need one to divest? 

TW: Well, I would pose it as a divest-invest question. We’re not asking Yale or anybody else to put the money in a pillow somewhere, but rather to take the money out of fossil fuels in order to reinvest it somewhere else. The reinvestment is equally important as divestment because if you get out of fossil fuels and put the money into land grabs in Africa, that’s not defensible either. You have got to look for the reinvestment opportunity that is sustainable and actually promoting the movement of the whole culture away from non-renewables towards renewables. There’s plenty of wind and plenty of solar to invest in. 

You’d be deaf, dumb and blind as a CIO if you didn’t realize that the biggest profit margins are being made in the alternate energies–not in fossil fuels. The only people that are stuck there are the people without the imagination to call up the investors and say, listen, take my money out of it. It’s not a question of just pulling back a little; it’s a question of taking it all out and putting it all into something that’s more sustainable.  

MC: Speaking of positive investment, do you think institutions like Yale should consider investing in like community development loan funds or CDFIs or things that would have smaller financial returns but potentially make New Haven a safer and better place to live? 

TW: Yes, well definitely. But again, they have to be very careful about where they’re putting the money, because all of New Haven is going to be underwater in 2075, meaning well-meaning projects in large parts of New Haven will be gone. There’s no question that sea levels will rise, just how fast they will rise…. Every student should be focused on how to move their culture towards a logic of sustainability. Whether that would include local community groups… of course it would at some point. All politics is local. 

MC: If Yale were to divest from carbon, do you think it should send a clear message to the government that they need to take really strong action on climate change? 

TW: Oh yeah. Well in part because that’s what businesses want. Businesses are not averse to paying taxes. They just need to know in terms of their own planning, how those taxes will be phased in and how they can work it into their own operating plan. They’re concerned about abrupt shifts of any kind. But also because the whole point of divestment is it’s pretty much symbolic. It’s only going to make a difference if you’re seen to be part of a trend and seem to be supporting a trend. At this point, it’s a little embarrassing for Yale to be behind the trend and it’s quite embarrassing that it has to come up at the Yale-Harvard game… and then there are these stupid kids who write editorials about, “Oh it’s isn’t it too bad to have interrupted this grand tradition….” Well, it’s too bad they’re interrupting the grand tradition so you might have a livable future. Right? Is that too bad? [pause] You know it’s already too late. That’s what’s not being told to the students at this point. The optimism of the divestment movement is a little overstayed. We’re not likely to be able to do anything that will be registrable in your lifetime or that of your children that will make any difference. And that’s the nature of the tragedy we’re up against. There’s no return on what it is that we’re asking you to do. 

If it were up to human beings, there would be no Sequoia trees. Not because we’d cut them all down but because we’d never plant them. Because they don’t grow fast enough to give us any return. And that’s the problem of working in an ecosystem. We depend upon a system whose regeneration we are oblivious to. And we still think that we can maximize an ecosystem for human benefit. If you come out of college thinking that humans are the center of the ecosystem, you might as well have not gone to school. You could have learned more by walking around in the park. If the total impact of all of that time, money and effort spent on higher education is the amplification of anthropocentric arrogance…. I mean just look at Harvard. Arrogance is their main product. That’s the one thing they’ve managed to convey to everybody through all their curriculum, through all their courses, across all departments. Every student comes out with this uniform level of arrogance towards everything and everybody. That’s not a desirable goal and in fact it’s a waste of the investment in your education.

MC: How do you approach this problem? Because it doesn’t seem like anything we do at this point is going to have a major impact because governments move slowly and like it’s always the next person’s problem. What do you say to conservative types similar to the one you’ll be debating today who are skeptical of divestments and even climate change’s potential impact. 

TW: Well I’ll be interested in how he defends the position. Because basically it’s a suicidal position. If he doesn’t understand why fossil fuels are putting the world in jeopardy, then he isn’t paying attention. What you have to combat is not any specific objection they’ve got but they’re over-arching assumptions about the way the world works. Because you’re not going to convince them. You have to go about it a different way. The question is not more evidence to convince but what’s going to convert them. It’s kind of like a funny thing happened to me on the way to Damascus sort of thing. In religious terms it’s talked about like the scales falling from your eyes. I presume that he’s going to argue something today about the maximum immediate return is not substantial… 

MC: Do you think people disagree on the math of climate change or divestment?

TW: Well I’d be interested to see what he’s disagreeing on. It seems to me that people at AEI are the front office of the Koch brothers and they’re basically trying to forestall any move away from fossil fuels because they’re making millions of dollars a day. It’s nothing more subtle than that. These guys are agents not to keep but to confuse the world. The fact is that they’ve got to look at themselves in the mirror eventually. I mean maybe not today, or tomorrow or in the time they have to pay off a mortgage, but once they do, they’ve got to confront a life of either willful lying or culpable ignorance. And culpable ignorance is pretty hard to live down. You realize you should’ve learned certain things and you didn’t and didn’t bother to find out.