In this week’s New Yorker, Bill McKibben ups the ante in his efforts to ostracize the oil industry to protect climate, now suggesting pressure on banks that finance fossil fuel extraction projects. McKibben’s earlier appeals for fossil fuel divestment have been very successful politically in motivating climate activism. In the divestment campaign’s most recent victory, the University of California has determined to divest from fossil investments, citing investment risk. Whether the divestment campaign has had a perceptible effect of fossil fuel production or consumption is questionable, however – an economics working paper concludes that divestment has not appreciably affect fossil fuel stock prices or policies.
I have been skeptical of the effectiveness of fossil fuel divestment campaigns as a means to reduce greenhouse gas emissions. Even a significant decline in fossil stock prices does not seem likely to slow the rate at which oil producers pump fossil fuels out of the ground as long as global demand for their products remains high.
McKibben’s implicit call for a consumer boycott of banks that finance fossil fuel exploration is a form of a secondary boycott – a boycott of those who continue to do business with the entity that is the subject of the primary boycott. Secondary boycotts have had a long and noble history in the Civil Rights Movement (though they are banned under US labor law). But a bank boycott seems to skip right over the primary boycott and go straight to the secondary boycott. Wouldn’t a consumer boycott of the offenders themselves, the fossil fuel companies and their products, be a more effective way to put an end to this harmful industry?
The title of McKibben’s New Yorker piece, “Money is the Oxygen on Which the Fire of Global Warming Burns” is certainly true. But big oil gets far more cash from sales of petroleum products – $1.7 trillion – than it does from any bank financing of its exploration efforts — $196 billion from Chase over three years according to McKibben. And the industry gets to keep the money from oil sales, unlike the loans from Chase, which have to be paid back.
The average retail customer might generate about $200 per year to a bank’s profits. If about 7% percent gets recycled by the bank into fossil fuel loans, that’s about $14 of the retail customer’s money going to fossil fuel development in the form of a loan. Compare that to the $1,000 or so the average American spends on gasoline each year, or the ten percent of each airline ticket that pays for fuel – funds that fuel oil industry activities directly and don’t have to be paid back. Wouldn’t consumers have a bigger impact if they just stopped buying oil, or at least sharply reduced their purchases? One less $500 airline ticket is three times better than closing out your accounts at Chase bank.
Like the divestment campaign, the campaign to boycott the banks doesn’t have a direct path to reducing fossil fuel consumption and greenhouse gas emissions. But at least an indirect path can be discerned – 1) some banks stop lending for fossil fuel exploration and development because their interest in retail banking public relations and profits outweighs their interest in oil loans, 2) some oil exploration and development doesn’t happen that would have happened otherwise because there are no other sources of financing, 3) five to seven years later (when those projects might start producing) there is less oil on the global market, 4) gasoline prices go up and consumption of fossil fuels goes down incrementally. But this does nothing to slow the current flow of oil from existing wells and proven fields.
If all you want to do is raise the price of gasoline, why wait five years and let the oil companies collect the higher prices? Why not endorse a fee-and-dividend price on carbon, like Michael Mann did in his Time magazine essay, and get the benefits of the greenhouse gas reductions now? Fee and dividend has the added short term benefit of redistributing the higher price to those who can least afford the price increase, and since it has bipartisan support, has a much better chance of adoption in the next four years than the Green New Deal.
So if you really want to deprive the fossil fuel industry of oxygen, a primary boycott works better than a secondary boycott. Don’t buy it, don’t burn it, just keep it in the ground. And if that doesn’t work, then, yeah, by all means switch your checking account to another bank.