The public good is advanced when we are vigilant about bringing to light practices in business, investing and climate change mitigation that may be in conflict with ethical values of truth telling, transparency, care for others, and care for the planet.
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| Consider the balance |
When brought to light, these practices may be factually assessed to form the basis for our individual and communal response to ethical missteps. The Economist reports that even as concerns about global warming grow, energy firms are planning to increase fossil-fuel production. None more than ExxonMobil. The major oil companies are responding to incentives set by society. The financial returns from oil are higher than those from renewables.
It would be wrong to conclude that the energy firms must therefore be evil. They are responding to incentives set by society. The financial returns from oil are higher than those from renewables. For now, worldwide demand for oil is growing by 1-2% a year, similar to the average over the past five decades—and the typical major derives a minority of its stockmarket value from profits it will make after 2030. However much the majors are vilified by climate warriors, many of whom drive cars and take planes, it is not just legal for them to maximise profits, it is also a requirement that shareholders can enforce.
Some hope that the oil companies will gradually head in a new direction, but that looks optimistic. It would be rash to rely on brilliant innovations to save the day. Global investment in renewables, at $300bn a year, is dwarfed by what is being committed to fossil fuels. Even in the car industry, where scores of electric models are being launched, around 85% of vehicles are still expected to use internal-combustion engines in 2030.
So, too, the boom in ethical investing. Funds with $32trn of assets have joined to put pressure on the world’s biggest emitters. Fund managers, facing a collapse in their traditional business, are glad to sell green products which, helpfully, come with higher fees. But few big investment groups have dumped the shares of big energy firms. Despite much publicity, oil companies’ recent commitments to green investors remain modest.1
Asher Schechter, writer and editor of ProMarket, the blog of Chicago Booth’s George J. Stigler Center for the Study of the Economy and the State, writes that it is time to rethink Milton Friedman’s argument that corporate managers should “conduct the business in accordance with [shareholders’] desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”
While agreeing with Milton Friedman’s premise that managers should care only about shareholders’ interests, Nobel Laureate Oliver Hart of Harvard and Chicago Booth’s Luigi Zingales reject the view that shareholders care only about money. A company’s ultimate shareholders are ordinary people who, in addition to caring about money, are also concerned about a myriad of ethical and social issues: they purchase electric cars to lower their carbon footprint; they buy free-range chicken or fair-trade coffee because they view this as the ethical—albeit more expensive—choice. They are, in other words, prosocial in their day-to-day life—at least to some extent. “If consumers and owners of private companies take social factors into account and internalize externalities in their own behavior, why would they not want the public companies they invest in to do the same?” Hart and Zingales ask.2
The graphic below demonstrates some compatibility between conservative ethics democracy and carbon tax.
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| Conservative carbon tax |
On Earth Day 2019, faith leaders from across Canada came together to issue an urgent call to climate action.
“In October 2018, the United Nations Intergovernmental Panel on Climate Change released a landmark report indicating that our global community has until 2030 to dramatically change course and avoid serious climate consequences,” says Willard Metzger, Executive Director of Citizens for Public Justice (CPJ). “Now, more than ever, we believe that it is important to amplify our shared laments and shared commitments, as people of faith, to work towards climate justice.”
“Throughout scripture we read of repentance, community, compassion, and renewal: from the Genesis call ‘to work and take care of [the Earth]’ through to the Psalmist’s celebration of ‘God’s handiwork’ and the rejoicing too of the trees; recalling the prophets’ devastation at the destruction of the land, but also the Epistle message of renewal and life eternal,” continues Peter Noteboom, General Secretary of the Canadian Council of Churches. “Ever-present in the Gospels, and central to our faith is Jesus’ resurrection and promise of new life.”
“Young people from all over the world are leading the way, speaking passionately from their hearts about the state of emergency created by climate change and the need for immediate action,” says Jennifer Henry, Executive Director of KAIROS. “Inspired and challenged by their commitment, we add our voices and we commit our action, deeply aware of the spiritual crisis we face.”3
Their collective message is clear: the global climate crisis has reached a critical stage and requires an urgent moral and spiritual response.
A new peer-reviewed study by government scientists and others was published in April in the journal, Nature Communications. Based on airplane measurements of emissions, the research suggests that government officials need to revise guidelines currently used to measure carbon dioxide emissions from the oil and gas (O&G) sector. In their research, scientists collected data showing that four major oil sands facilities in northern Alberta emitted far more pollution than what they actually reported.
The study’s lead author, John Liggio, told National Observer that Environment and Climate Change Canada shared its findings with industry representatives over the course of several conference calls and they were receptive to working with the government to “get to the bottom of why there is this discrepancy."
The office of Environment and Climate Change Canada Minister Catherine McKenna said the federal government was working with emissions-intensive sectors like the oilsands to help them reduce pollution and operate more efficiently, while noting that the industry and government had previously been relying on internationally-accepted standards for measuring greenhouse gas emissions.
“While this is just one study, we are taking these findings seriously and will be reviewing them in light of Canada’s commitment to fight climate change and build a stronger economy,” McKenna’s spokeswoman Sabrina Kim told National Observer.
Kim added that Canada would continue to prepare its GHG inventory in accordance with the United Nations Framework Convention on Climate Change reporting guidelines in line with the international community.
While the oilsands industry — an economic driver for Canada — struggles to deal with selling a discounted product in an increasingly uneconomical landscape, it also faces stiff opposition from some Indigenous groups as well as municipalities, provinces and environmental groups to its efforts to promote the expansion of pipelines that would support growth.
Oilsands extraction is a costly process, requiring vast amounts of energy and water for each barrel of oil.
"The objective of limiting the increase in global temperature to <1.5 °C this century is dependent upon reducing anthropogenic greenhouse gas (GHG) emissions to net zero," said the study. "The large contribution of the O&G sector to global GHG emissions underscores the need for accurate sectoral GHG emissions in national inventories."
Canada's pledge to reduce greenhouse gas emissions that lead to global warming by 30 per cent from 2005 levels by 2030 will require a significant shift in the operations of the industry, which has also seen the retreat of global majors and a retrenchment in investment from those that remain amid stagnant prices, particularly for the heavy, sour crude oil of which Alberta has a surplus.4
Ethical standards are embraced by serious liberals, conservatives, people affiliated with religious organizations and most citizens of our countries. These ethical standards need to drive our actions in business, investing, and infrastructure transformation due to climate change.
References
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(2019, February 9). The truth about big oil and climate change - The Economist. Retrieved April 24, 2019, from https://www.economist.com/leaders/2019/02/09/the-truth-about-big-oil-and-climate-change
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(2017, December 7). It's time to rethink Milton Friedman's 'shareholder value' argument .... Retrieved April 24, 2019, from http://review.chicagobooth.edu/economics/2017/article/it-s-time-rethink-milton-friedman-s-shareholder-value-argument
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(2019, April 18). On Earth Day, Canadian faith leaders issue urgent plea for climate .... Retrieved April 23, 2019, from https://www.kairoscanada.org/canadian-faith-leaders-issue-urgent-plea-climate-action
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(2019, April 23). Oilsands lobby speechless as government scientists point to higher .... Retrieved April 24, 2019, from https://www.nationalobserver.com/2019/04/23/news/oilsands-lobby-speechless-government-scientists-point-higher-pollution
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