Fossils

If you have listened to the public comment sessions at Regents meetings posted on this blog, you will have heard statements from a student group pushing the Regents to divest its pension and other portfolios from “fossil fuels.”  By this demand, the group – which is part of a national movement – appears to mean not just oil-coal-gas producers but also at least some major utilities.  We have noted that there are problems with using other peoples’ money to favor or disfavor particular political/social causes, partly involving the esoteric elements of finance and returns to the portfolio, but also the questions it raise about whose causes get reflected in the decisions.  See

For the Regents, the issue is complicated especially by the fact that UC is a public institution.  Yes, the state has various policies trying to restrict emissions of greenhouse gases.  In fact, UCLA (and other campuses) have to buy “allowances” under the California “cap-and-trade” program.  UCLA generates about 70% of its electricity in its own $150 million natural gas plant (see the photo).  While the plant is said to be efficient, green, etc., it does burn fossil fuel.  We have posted about these emissions in the past:

An excerpt from that earlier posting:

The original posting cited a news article but the primary source of the data was:

There are some background issues.  One is that despite the state’s green leanings, California is a major oil producer and at one time was even more so. Clicking on the video link at the very bottom of this post and looking at the old photos will give you some idea of that history.  However, we don’t need to go back into deep history.  Here are latest (July 2013) monthly oil production figures by the top-4 producing states (barrels produced):

Texas: 81,362,000; North Dakota: 27,108,000; California: 16,818,000; Alaska: 15,282,000

Source: http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_m.htm

You have undoubtedly heard about “fracking” in which more oil can be squeezed out of seemingly used-up wells.  Gov. Brown very recently signed a bill – to the great displeasure of environmentalists – to permit fracking (under regulation).  He is undoubtedly thinking of what will happen to the state budget when the Prop 30 taxes expire.  Deals could be cut to tax what might be a renewed oil boom for the state.  Note that for the governor to get to sign a bill, the (heavily Democratic and liberal) state legislature had to pass it.  In short, taking an anti-fossil fuel position may not be where the political establishment – that provides funding for UC – is going.

Another background issue is the slippery slope problem.  The Regents have divested from tobacco and guns (after the Connecticut elementary school shooting).  Those moves were not out of step, however, with the state’s political establishment.  But the more you move toward divestment-for-political-reasons, the more you raise the possibility of other divestments which could collide with politics.  There was controversy not long ago about the election of the latest student regent (student-regent-elect) because of her activist position favoring anti-Israel divestment. [http://www.youtube.com/watch?v=3LxXT8ocax4]  That issue is a political landmine the Regents really don’t want to step on.

Finally, this past week Harvard University’s president announced that Harvard would not divest from fossil fuel.  Excerpt from media release:

Full release at http://www.harvard.edu/president/fossil-fuels