a, Opinion

Putting alternative energy plans in context


The ongoing debate on campus divestment stems in part from advocacy for the large-scale production of renewable sources. However, a full transition from fossil fuels to renewable energy sources while sustaining current levels of energy consumption is not a viable option to cope with future demand.

Many existing renewable platforms are not ready for full deployment, and encounter obstacles such as research constraints in the domains of storage and production, and subsidy issues. Uncertainty also looms regarding the potential of fusion fuel as a reliable long-term energy source. The estimated expense of constructing fusion reactors, and economic trade-offs regarding the public cost pose challenges to fusion as a competitive resource.

With added scale, renewable fuel providers could maximize profitability and deliver value to shareholders, yet the importance of fossil fuels as a key economic pillar cannot be understated.  The Divest McGill movement, and the greater Divest movement from which it originates, oppose investment holdings in companies involved in the Plan Nord mining development, as well as fossil fuel and Oil Sands’ extraction. To date, four U.S. universities have divested, and reviews are pending for the University of New Brunswick-Fredericton and McGill. However, no campus with endowment exceeding $1 billion has agreed to implement the divestment initiative. Currently, 5.7 per cent of McGill’s $978.4 million university endowment fund is concentrated in businesses operating under the fossil fuel extraction model. A core issue at the forefront of the Divest movement is that financial effects on energy producers’ bottom lines will be minimal, if any. The argument, then, boils down to social capital—making a harmful impact on the reputations of energy producers involved in the Oil Sands’ operations.

In the past year, over $260 billion were invested in the global green energy landscape. By re-allocating university endowments from fossil fuels to renewable sources, the shift towards alternative energy will be advanced. However, a fine line must be drawn between the viability of short and long-term investment prospects. University endowments must exhibit competitive returns in a short time horizon, while criteria for the longer term differs. Full divestment from fossil fuels may not be financially viable, although incremented divestment may be beneficial once renewable energy producers accumulate a more stable operational base.

The divestment criteria occupy a grey area; following the same logic, educational institutions should divest from companies that utilize fossil fuels as an input in their operations, as this contributes significantly to climate change. Furthermore, a hypocritical element arises because crude oil-based petroleum is a key input in consumer products frequently used by students, ranging from plastics to electronics and medical products. Ultimately, major players in the oil industry are primarily sustained by operating cash flow, not investment. The sale of oil and related products constitute the majority of these companies’ profits. As long as consumer demand exists, energy firms will continue to flourish with no desire to decrease production.

With uncertainty surrounding the execution of renewable energy platforms on a large-scale basis, the importance of exploring divestment on a partial, long-term basis emerges as a priority. Perhaps this should not be viewed solely as a market-regulated issue, overlooking governmental influence. In order to further develop alternative sources, governmental purchasing power could be re-aligned with clean energy technologies. As a result, private investment would be encouraged, creating a new marketplace for clean energy sources. While the essence of the divest movement is noble, its criteria should be better aligned with target investment objectives, and governmental implications towards the current energy landscape.



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