Help Divest Madison from Fossil Fuels

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ArturoBandini
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Re: Help Divest Madison from Fossil Fuels

Postby ArturoBandini » Tue Apr 16, 2013 11:46 am

I'm surprised by the near-complete lack of apparent understanding about what "divest" means in this context and why it might be an interesting topic for discussion. Stu and Sno almost put the thread back on topic, but then we slipped in some turkey guts.

Long-term investment funds should be very clear upfront about their purposes and goals. If the singular goal is to maximize returns (or hedge risk most effectively), then stable fossil fuel investments might be a reasonable choice. But I'm not sure about how stable fossil fuels are, so maybe that's a moot point. In my opinion, pensions should probably not be investing in energy technologies, or maybe not in technologies of any sort - these areas are very risky! It might be nice to think that a public pension fund could earn a nice return while also investing in the next big renewable energy breakthrough, but in the context of the history of few renewable energy technology successes and multiple company failures, such a risky move would be almost criminally stupid on the part of the fund managers. Fossil fuel extraction/processing industries are less volatile, but even those aren't really "blue chips" in my mind.

I think that divestiture of public funds in fossil fuel-related securities and funds should be considered separately from other issues mentioned in the petition, like more bike and bus infrastructure, and immediate local effects of climate change. It's unlikely that you'll kill two or more wildly different birds with the same stone.

In any case, the investment of city funds should not be treated as a political tool to wield against the grain of market forces - you're basically betting some fraction of the future financial well-being of Madison (and it's pensioners) against the movement of global energy trends. I think it's fine to put one's own money down on this sort of investment, but I'm not sure it's ethical or intelligent to do so with money that so many other people and institutions depend on.

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Re: Help Divest Madison from Fossil Fuels

Postby Galoot » Tue Apr 16, 2013 11:51 am

Interesting stuff, Henry. I wonder what the cost per kW-hr will be. Lockheed must be able to do it for a lot less than the guys in Hawaii. I read this article

http://www.bizjournals.com/pacific/prin ... l?page=all

That quotes a rate of 17 cents per kW-hr for the OTEC electricity, which is substantially cheaper than the 24 cents that Hawaiians currently pay.

But in China electricity is far cheaper, about 3 cents per kW-hr. I would be astounded if Lockheed can build a plant to beat that, since OTEC can only be about 6% efficient at maximum, due to the small temperature difference between the hot and cold side.

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Re: Help Divest Madison from Fossil Fuels

Postby DCB » Tue Apr 16, 2013 12:56 pm

Galoot wrote:wack and others, I certainly agree that we would have done much more good by spending a trillion dollars on alternative energy research, instead of the horrible Iraq invasion.

But as I have pointed out previously, fossil fuels are an incredibly dense and inexpensive source of energy.
Its only inexpensive if you exclude the external costs.

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Re: Help Divest Madison from Fossil Fuels

Postby ArturoBandini » Tue Apr 16, 2013 1:06 pm

DCB wrote:
But as I have pointed out previously, fossil fuels are an incredibly dense and inexpensive source of energy.
Its only inexpensive if you exclude the external costs.
I doubt it. There are definitely plenty of externalized costs that we don't pay for when we buy and use fossil fuels, but I'd wager that fossil fuels would still be tremendously useful and economical even after externalities had been reeled in.

Of course, in the long term some of the luxuries provided by fossil fuels become liabilities if we remain utterly dependent on them. These fuels are, of course, non-renewable, so by definition they cannot be used forever at any finite rate of consumption, but that doesn't mean that shouldn't use to our advantage them while they last (which could be for many more decades or centuries).
Last edited by ArturoBandini on Tue Apr 16, 2013 1:35 pm, edited 1 time in total.

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Re: Help Divest Madison from Fossil Fuels

Postby rabble » Tue Apr 16, 2013 1:31 pm

Some of those external costs are environmental damages so long lasting that they might as well be called permanent. Those costs are acceptable if you aren't damaged by them and if you share in the luxuries.

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Re: Help Divest Madison from Fossil Fuels

Postby ArturoBandini » Tue Apr 16, 2013 1:43 pm

rabble wrote:Some of those external costs are environmental damages so long lasting that they might as well be called permanent.
Yes, they are permanent.
Those costs are acceptable if you aren't damaged by them and if you share in the luxuries.
I'd argue that even if you are damaged by them to some degree, it might still represent an acceptable cost.

Regarding the equitable or fair distribution of costs and benefits/luxuries - this problem exists, but it is not exclusive to fossil fuels, or even energy sources more generally. Life is a messy process and things get broken, but there really isn't any other way. I want to draw an analogy to the second law of thermodynamics here, but I suppose it's not rigorously applicable - I hope it's theoretically possible to have a human society in which no one written off as "human entropy", but such a world is perhaps not likely.

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Re: Help Divest Madison from Fossil Fuels

Postby rabble » Tue Apr 16, 2013 1:58 pm

ArturoBandini wrote:I'd argue that even if you are damaged by them to some degree, it might still represent an acceptable cost.

Yeah, that's how most of us think. "As long as it's you that takes the damage, it's acceptable to me."

Even though we understand that we all pay for it in the long run, and the true damage is going to be felt by the ones who come after, we still hang onto that mindset like a life preserver.

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Re: Help Divest Madison from Fossil Fuels

Postby ArturoBandini » Tue Apr 16, 2013 2:16 pm

rabble wrote:
ArturoBandini wrote:I'd argue that even if you are damaged by them to some degree, it might still represent an acceptable cost.

Yeah, that's how most of us think. "As long as it's you that takes the damage, it's acceptable to me."

Even though we understand that we all pay for it in the long run, and the true damage is going to be felt by the ones who come after, we still hang onto that mindset like a life preserver.
This is not a moral quandary. We can provide those future people with a far-better world in other ways, even if we permanently damage parts of the environment. These others ways might be technological, cultural, built capital (e.g., infrastructure), etc. There is no guarantee that we'll follow through on this obligation, but it is possible.

I don't feel any particular animosity toward any of our forebears who conducted their business with little regard for environmental concerns (with the exception of few glaring examples, e.g., twenty-high piles of decomposing buffalo). I'm not a subscriber to the precautionary principle philosophy that seems to treat the natural world as a delicate, perfect, and precious thing that we have to baby. If there is any purpose to human life* (which is debatable), I don't think that it's first and foremost to protect the environment in perpetuity.

This conversation really went into abstraction quickly.

*This is just for argument's sake. The purpose of life is (to) rock and roll, of course.

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Re: Help Divest Madison from Fossil Fuels

Postby DCB » Tue Apr 16, 2013 11:34 pm

ArturoBandini wrote:
DCB wrote:Its only inexpensive if you exclude the external costs.
I doubt it. There are definitely plenty of externalized costs that we don't pay for when we buy and use fossil fuels, but I'd wager that fossil fuels would still be tremendously useful and economical even after externalities had been reeled in.

Really? Then you wouldn't mind if we included all the external costs in our energy prices?

Or, at a minimum, let's stop subsidizing the fossil fuel industry.

Until then, I'm sticking to my claim that fossil fuels are expensive.

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Re: Help Divest Madison from Fossil Fuels

Postby green union terrace chair » Tue Apr 16, 2013 11:59 pm

Help divest activists from wasting their energy on worthless online petitions.

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Re: Help Divest Madison from Fossil Fuels

Postby ArturoBandini » Wed Apr 17, 2013 12:04 am

DCB wrote:Really? Then you wouldn't mind if we included all the external costs in our energy prices?

I think that energy prices (all prices) should better reflect actual costs, as best as they can be determined. My issue with a tax scheme to accomplish this goal is that such systems are at risk of being mismanaged, or may artificially steer market participants into even more-perverse behaviors. But as far as taxes go (which I am generally against), use or consumption-based taxes are the best possible case.
DCB wrote:Until then, I'm sticking to my claim that fossil fuels are expensive.
Expensive relative to what? I'll wholeheartedly agree that they are in reality more expensive than their current market prices, but that doesn't prove anything about their cost relative to other energy sources (assuming similar human behavioral patterns).

Do the math. One of your articles states that the externalized costs of fossil fuel use are $120B annually - start from there. Let's assume that that amount is collected exclusively from gasoline and diesel taxes to pay for the damages. The US consumes 368 million gallons of gasoline+diesel daily, so, 134 billion gallons annually. Spread $120B in taxes across that 134B gallons of fuel and you get $0.89/gallon. That's a hefty tax, sure, but it's certainly not enough to stop people from using fossil fuels altogether.

And many of the high-externality sources are outdated coal plants, which could be retrofitted to be more efficient, or replaced with gas turbines. The problems being caused are real, but not all of those problems are not intrinsic to fossil fuel use. We could use fossil fuels more intelligently, no argument.

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Re: Help Divest Madison from Fossil Fuels

Postby DCB » Wed Apr 17, 2013 4:48 pm

ArturoBandini wrote:
DCB wrote:Until then, I'm sticking to my claim that fossil fuels are expensive.
Expensive relative to what?

I'm responding to the original comment that 'fossil fuels' are cheap. That's a vague and subjective statement. But I think it means "I'm willing to pay for it". I think if we included the external costs, people would be much less willing to pay for it.

ArturoBandini wrote:Do the math. ... Spread $120B in taxes across that 134B gallons of fuel and you get $0.89/gallon.

Thanks for doing the calculation. We can quibble over the details - should it include the cost the Iraq War? how do you put a number on the misery caused by tropical storm Sandy? But that's a good starting point for a conversation.

ArturoBandini wrote:That's a hefty tax, sure, but it's certainly not enough to stop people from using fossil fuels altogether.

Obviously that's a sraw man argument. A $.90 tax wouldn't eliminate gas-powered cars, but it would certainly alter behavior. We saw that the last time gas was over $4/gal.

And look at what happens any time someone suggests a carbon tax for addressing climate change - all the Republicans and many of the Democrats freak out that it would destroy the economy.

So, in the minds of consumers and politicians, the external costs are expensive.
ArturoBandini wrote: We could use fossil fuels more intelligently, no argument.

A carbon tax would driver that change.

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Re: Help Divest Madison from Fossil Fuels

Postby MPMay » Wed Apr 17, 2013 5:53 pm

ArturoBandini wrote:I'm surprised by the near-complete lack of apparent understanding about what "divest" means in this context and why it might be an interesting topic for discussion. Stu and Sno almost put the thread back on topic, but then we slipped in some turkey guts.

In my opinion, pensions should probably not be investing in energy technologies, or maybe not in technologies of any sort - these areas are very risky! It might be nice to think that a public pension fund could earn a nice return while also investing in the next big renewable energy breakthrough, but in the context of the history of few renewable energy technology successes and multiple company failures, such a risky move would be almost criminally stupid on the part of the fund managers. .



Just so folks know, the City's pension fund is through participation in the State of Wisconsin Retirement System (WRS), the investments over which the City has no control.

City Treasurer Dave Gawenda is responsible for investment of the City's other funds used for operations and capital projects, which he manages to be certain the City has enough cash to draw upon on a daily, weekly, monthly and annual basis, while at the same time earning some reasonable return. The Treasurer is limited in the types of investments by state law, designed primarily to force reliance on safe investments so that the taxpayers do not lose money which, of necessity, means less return than riskier investments. Without checking with Dave or looking it up, I'm not even sure the City could invest in the equities or bonds of a private corporation.

If somebody is more energetic than I am at the moment, that somebody could probably look up where the City does put its money, as shown in one of Gawenda's annual reports.

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Re: Help Divest Madison from Fossil Fuels

Postby Henry Vilas » Thu Apr 25, 2013 2:54 pm

Update: Soglin joins other mayors in push to divest fossil fuel holdings

I see the radicals up in Bayfield are also backing divestiture.


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