Environmental activists on Princeton’s campus have been ratcheting up their campaign to convince the University’s board of directors to divest the endowment of fossil fuel investments. This counterproductive effort prioritizes a political fad over economic and energy realities, and Princeton’s leadership has been wise to withstand this pressure.
From a financial perspective, divestment from fossil fuels would be a disaster, and would reduce the funds available for scholarships. Recent studies and actuarial reports highlight how ill-advised these divestment attempts are. The consulting firm Foster & Foster produced one such study, concluding that between 2008 and 2018, fossil-fuel investments delivered an average annual return of 2.6 percent, while the environmentalists’ green energy funds yielded an embarrassing -3.94 percent.
With a return like that, Princeton would be better off stuffing its endowment funds under a proverbial mattress and letting inflation erode the value of the funds. Daniel Fischel, Professor of Law and Business Emeritus at the University of Chicago Law School, makes exactly that point in his carefully detailed study of the effects of divestment. Over a 50-year period, a divested portfolio would be 23 percent lower than a portfolio that included fossil fuel investments.
Reduced returns on the endowment would directly impair Princeton’s ability to fund programs, notably scholarships. Citing the Association of American Universities, Professor Fischel shows that “[b]y far the most common categories of endowment expenditures are scholarships and financial aid, faculty chairs and salaries and academic support programs.” Those scholarships, funded through the endowment, make it possible for lower-income students to enjoy the benefits of a Princeton education.
Setting aside the negative returns on green energy funds, another reality is that fossil fuels play an enormous role in America’s energy usage. According to the U.S. Energy Information Administration, fossil fuels account for the largest share of U.S. energy — and it isn’t even a close contest. Fully 80 percent of American energy comes from fossil fuels. The activists’ war on fossil fuels is quickly identifiable for what it really is — a war on energy consumption.
The divestment advocates are also wrong on the science. Burning natural gas, which is an increasingly important fossil fuel, results in lower emissions of carbon dioxide (CO2), as well as almost every other form of air pollutant, than burning coal or petroleum to produce equal amounts of energy. Natural gas is recognized across numerous industries as a clean alternative to other forms of energy.
Our innovations in natural gas have led to this remarkable achievement: today, natural gas emits close to 60 percent less carbon dioxide than coal emits, even when considering the newest coal plants and technology.
The benefits of natural gas compared to other forms of energy are numerous. Natural gas is a much more reliable form of energy than either solar or wind. Natural gas also stands out among other sources of energy, notably wood and diesel, as a much cleaner alternative.
America’s success with natural gas is intentionally overlooked in the war on fossil fuels, as the divestment campaign treats all forms of fossil fuels as being equal.
One of the stated long-term goals of the divestment campaign is to end fossil fuels as an energy source, forcing American businesses and homes to use alternative energy sources. In reality, however, the free market and innovations in the fossil fuel field have led to a cleaner and much more reliable energy source than the environmentalists’ plans could ever produce. One such innovation has occurred with carbon capture, a process that captures the carbon dioxide before it reaches the air, resulting in zero carbon emissions. This is a success story any way you look at it.
The divestment advocates routinely misrepresent fossil fuels as a monolithic source of energy with only one outcome — high CO2 emissions. The constant improvements with natural gas, however, tell a different story.
Rather than focusing on divesting from fossil fuels, student activists could help usher in the next era of clean energy derived from fossil fuels, with an emphasis on even greater improvements in natural gas production. That undertaking, unlike the misguided divestment effort, would be a good use of their energy.
U.S. Rep. Ken Buck ’81 represents Colorado’s 4th district in Congress.
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