May 30, 2014
John Hennessy, President
450 Serra Mall
Stanford, California, 94305
Dear President Hennessy,
I am an Honors graduate of Stanford holding B.A. and M.A. degrees in the Humanities and served as Chairman of the Texas Commission on Environmental Quality (TCEQ) for six years. TCEQ is the second largest environmental regulatory agency in the world after the EPA. I have won many academic awards and, while at Stanford, I won a Danforth National Fellowship for doctoral work at Princeton and also held the Elizabeth Wheeler Lyman academic scholarship for an Outstanding Woman in the Humanities for several years.
I write to express my disappointment in the Stanford Board of Trustees’ decision to cease Stanford’s investments of endowment assets in coal. I regret that the Board has endorsed a highly politicized, dogmatic point of view that is not in the interest of maximizing returns on the endowment investments, the abject needs of billions of people across the world or, indeed, the environment.
I am disturbed that this decision reflects an indifference to the energy poverty affecting over three billion people in the world and now even middle- and low-income people in European countries whose governments have forced a rush to renewable energy sources. Ironically, but unavoidably, Germany, the U.K., and other European countries have recently increased their consumption of coal because of soaring electric prices caused by the cost of renewables, the inherent unreliability of renewables, and the growing geo-political risks in dependence on natural gas imported from Russia.
The May 6 Stanford Report notes that the Trustees’ primary obligation is to maximize the financial return on the endowment’s assets. As Bjorn Lomborg notes in the May 3 edition of Forbes Asia, investments in fossil fuels have dramatically out-performed investments in renewable energy over the last 12 years. Based on two key indices, $100 invested in fossil fuels in 2002 would be worth $252 today, while the same investment in renewables would be worth around $34.
Stanford minds should be capable of seeing through the many myths surrounding coal-myths perpetuated by political activists and special interests. Key emissions rates from coal-fired power plants have improved since 1970 by 90 percent. Greater deployment of advanced super-critical plants with an elaborate array of emission control technologies will continuously improve efficiency and lower emission rates. Stanford’s investment in the research, development, and technology transfer of current and next-generation emission control technologies could reduce conventional pollution, and even CO2, far more than the political symbol of divesting in coal.
Reduced emission of CO2 is a coincidental result of highly efficient industrial processes. Still dependent on fossil fuels for 80 percent of energy consumed, the U.S. is actually reducing emissions of CO2 more than many European countries which have imposed mandates to reduce CO2. On October 2013, the Energy Information Administration (EIA) announced that energy related emissions of CO2 in the U.S. had decreased to the lowest level since 1994. Although increased use of natural gas may account for some of that reduction, coal use in the U.S. has rebounded and now holds a 23 percent lead over natural gas. As a measure of the amount of CO2 generated per dollar of economic output, the carbon intensity of the U.S. has been declining since 1949.
Some 3.5 billion people live without adequate electricity and most depend on biomass or dung for cooking and heating. Indoor air pollution has been cited as the fourth leading cause of death globally. Pollution from burning wood or dung is responsible for more deaths than malaria and almost as many tuberculosis. Clean water requires electricity to allow treatment. There is a direct correlation between access to electricity and longevity. All people in the world deserve a chance to live with the same living conditions as those enjoyed in developed countries. Forcing high-cost and unreliable renewable energy on developing countries will consign the bulk of their populations to poverty.
Coal remains the lowest-cost fuel for electric generation and remains the mainstay of base load power in the U.S. and many countries. Access to affordable energy is essential in the U.S. at a time when 48 million Americans live in poverty and a record 115 million qualify for energy assistance. China and India will not forego low-cost coal for base load power in favor of high-cost, non-dispatchable electric generation from renewable energy sources.
Contrary to claims made in the Stanford Report, there are no fully comparable alternatives to coal as a low-cost source of base load power capable of deployment at scale for large urban areas. Germany’s aggressive deployment of renewables has led to electric prices three times higher than the average U.S. price. And Der Spiegel writes articles about how electricity in Germany has become a “luxury good.”
Stanford’s decision to divest in coal is a symbol for the elite that regrettably reflects indifference to the poor across the world who has never seen a light switch.
Kathleen Hartnett White
Distinguished Senior Fellow and Director
Armstrong Center for Energy and the Environment
Texas Public Policy Foundation