Princeton University’s announcement on September 29th to dissociate from the fossil fuel industry was inescapable. After major institutions like Harvard and Brown succumbed to public pressure, it was only a matter of time before Princeton would follow suit, eliminating fossil fuel holdings from its endowment and banning funding from hydrocarbon producing corporations. While the decision has many students celebrating, it has left others skeptical. After all, dissociation will not only be ineffective in its stated goal of tackling climate change, but it will also needlessly endanger the health of the endowment. Divestment is an attempt by the University to virtue signal to its students and faculty, all while ignoring the many ramifications that will undoubtedly stem from this decision.
While the University does not explicitly mention student pressure in its statement, the decision to dissociate from the fossil fuel industry was clearly the culmination of a decade-long effort led by Divest Princeton, a campus climate advocacy group. Nate Howard, co-coordinator of Divest Princeton, has praised the decision, saying the organization “is proud of what has been accomplished.” However, the war is not yet won. The press release continues: “Although they have taken a critical step, Princeton still falls short.” Howard reiterated his desire for a full dissociation from the industry and the elimination of all fossil fuel–funded research on campus, referring to the fact that companies like BP and Shell may still continue to fund research at Princeton.
These proposals by Divest Princeton not only lack merit but are a symptom of a broader climate hysteria which turns a blind eye to the facts. BP, the company in question, funds “environmental and sustainability-related projects such as Net-Zero America.” Rather than seeking to promote the development of alternative, commercially viable energy sources, the goal which Divest Princeton pursues with puritanical zeal seems to be to eliminate all ties with the fossil fuel industry, no matter their environmental benefit. For example, Princeton has received over $25 million in funding from eleven oil and gas companies over the past five years, much of which has been for research into green energy and carbon capture technology. Through Exxon Mobil’s partnership with the Andlinger Center for Energy and the Environment, researchers like Barry Rand have been able to discover key properties of renewable energy sources that currently pose barriers to commercialization. This partnership has enabled Rand to begin “developing strategies to stabilize [perovskite photovoltaics] for practical use” and is a prime example of what can be accomplished when scientists in the energy industry collaborate with researchers in academia. Now that Princeton has severed ties with over 90 fossil fuel companies, including Exxon Mobil, it remains to be seen how these research projects will continue to be funded. The University claims that it will “establish a new fund to support energy research at Princeton,” but offers no specifics.
Even without the loss of research funding, dissociation will still run contrary to the University’s interests. The trustees have a fiduciary obligation to oversee the management of the endowment and ensure that its purchasing power is maintained for future generations. Eliminating fossil fuels from the University’s endowment would be a violation of the trustees’ legal responsibility to prudently manage the school’s finances and generate the greatest return on its investments. This concern is even more relevant given the endowment’s 1.5 percent loss over the past fiscal year. While it is true that this depreciation is largely due to poor market conditions and occurred prior to the divestment decision, eliminating sound investment options like those of the fossil fuel industry will only further handicap the fund’s managers going forward.
Without fossil fuels, the health of the endowment may be in jeopardy. Exxon Mobil, which is one of the 90 companies the University dissociated from, has generated a staggering 72 percent return on investment in the past 12 months. Whereas the broader S&P market index declined by 11 percent, the oil and gas sector significantly overperformed, and has been one of the most profitable industries in 2022. Given that inflation is currently over 8 percent and the economy may be entering a recession, the University’s decision to restrict what assets the endowment can invest in is ill-timed, imprudent, and may expose Princeton to litigation. At the very least, the decision should have been postponed until its effects on the performance of the fund were more carefully considered.
Divestment will also fail in its environmentalist aims. Student activists often invoke the threat of climate change to support the University’s decision, but will divesting from the oil and gas industry be beneficial to the environment? The answer is no. Simply selling fossil fuel securities will have little to no impact on the amount of oil Exxon Mobil or any other energy company produces, because the amount of oil produced is determined most directly by consumer demand, not stock price.
The alternatives to fossil fuels, as they currently stand, are no silver bullet solution. Wind turbines and solar panels require significantly more land to generate the same amount of electricity as a conventional fossil fuel power plant. It would take roughly 2,500 acres of solar panels to produce the same amount of electricity as one natural gas plant operating at 500 MW capacity (assuming a solar capacity of 10 acres per megawatt). In addition, the lithium mining required for the production of batteries used in electric vehicles is incredibly destructive to the environment and there is currently no streamlined process for recycling these batteries.
While fossil fuels do emit harmful greenhouse gasses, it is important to contextualize their importance to society and recognize that the transition to green energy cannot happen overnight. Fossil fuels were responsible for the 19th century Industrial Revolution and are also linked to the rapid rise in standard of living and GDP per capita in the developed world. This form of energy powered the automobile, heated homes across the world, and provided millions with a reliable source of electricity. Today, fossil fuels are ubiquitous – they are used to pave roads, make plastic, and are even used in the production of cosmetics. While we all look forward to a future powered by clean energy, simply eliminating fossil fuels overnight would be infeasible. The transition to clean energy needs to be deliberate, commercially viable, and guided by reason and pragmatism, not emotion. Princeton’s belief that abrupt divestment could be a success is simply a pipe dream.
The above is an opinion contribution and reflects the authors’ views alone.
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