Economics and Climate Justice Activism: Assessing the Fossil Fuel Divestment Movement

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Abstract

We present an economic analysis of fossil fuel divestment as a strategy for advancing an effective global climate stabilization project. The basic question we ask is: how effective are campaigns to force various entities to sell their fossil fuel stock holdings likely to be in driving down CO₂ emissions? We conclude that divestment campaigns, considered on their own, have not been especially effective as a means of significantly reducing CO₂ emissions, and they are not likely to become more effective over time. We reach this conclusion both through an analysis of the available descriptive data on global divestment patterns as well as an econometric modeling exercise that evaluates the impact of divestment events on the stock market prices of fossil fuel companies. We reach this conclusion while also recognizing that fossil fuel divestment campaigns have several important virtues. Nevertheless, we conclude that most efforts now devoted to divestment campaigns would be better spent on more direct efforts to drive down fossil fuel consumption and CO₂ emissions.