By Taylor Kuykendall

Stanford University's decision to divest coal companies from its endowment — worth $18.7 billion as of Aug. 31, 2013 — opened up a wave of debate about the divestment movement and the effect it could have on an ailing coal industry.

After the announcement, the industry quickly dismissed the effects of fossil fuels divestment as a means of mitigating carbon dioxide emissions, while those behind the divestment campaign cheered the move as a milestone in addressing climate change. One of the primary arguments emerging against the significance of the divestment movement is that economically, a college endowment's divestment does not cause enough pain to meaningfully affect coal operators.

"There is no evidence that this campaign has any significant effect whatsoever on investment decisions," National Mining Association spokesman Luke Popovich said.

Vic Svec, senior vice president of Peabody Energy Corp., the world's largest private-sector coal company, called Stanford's decision "wholly symbolic and political."

"And the symbolism itself is misguided," Svec told SNL Energy. "It has no effect on our investment level."

Ivo Welch, a professor of finance and economics at the University of California, said while he thinks "coal is a cancer," he believes that neither protesting nor prayer will kill cancer or coal. As for divestment, Welch says that for every investor or shareholder that steps out, "there are many others willing to jump in."

"The divestment efforts will continue," Welch said in an email to SNL Energy. "They will likely be ineffective economically, and they will cost little. They will have a modest moral influence. This is not necessarily bad. The lamentable aspect is that it would be better to direct the effort towards changes that are both effective and moral."

McKibben: Divestment about political, not economic damage

Bill McKibben, co-founder and chairman of the board at 350.org, is one of the leading voices in the fossil fuel divestment movement. He told SNL Energy that the goal of divestment is to weaken a company's political influence, if not necessarily their finances.

McKibben points to the anti-Apartheid in South Africa movement, where divestment efforts "didn't bankrupt the company's involved," but did apply enough pressure to force companies to change their practices. He said that the divestment movement will likely quickly move from colleges and universities to exchanges and larger investment funds.

"I think the logic of it will cascade upward and I think the speed of it is remarkable," McKibben said.

While the divestment movement has suffered some losses, including institutions such as Harvard University and Brown University declining divestment efforts, the movement has also accumulated numerous victories.

“Winning the fight of the expansion of these industries is not enough anymore. Playing defense is important, but we've got to play some offense — that's what divestment is about.”

 Bill McKibben, co-founder and chairman of 350.org

The Natural Resource Defense Council announced in late-April that it teamed up with BlackRock and FTSE Group to create an equity global index series that excludes companies linked to exploration, ownership or extraction of carbon-based fossil fuel reserves. In late January, a coalition of U.S. and international foundations called Divest-Invest Philanthropy announced they would not only remove fossil fuels from their collective $2 billion asset base, but would also actively campaign to get other organizations to join the effort.

Other entities, including cities, states, colleges and religious institutions have joined in various levels of fossil fuel divestment.

The coal industry, McKibben said, is "filthy" and the "low-hanging fruit" in the movement's broader fight against fossil fuels. While the coal industry has long faced environmental opposition, McKibben suggested those efforts will increase.

"Winning the fight of the expansion of these industries is not enough anymore," McKibben said. "Playing defense is important, but we've got to play some offense — that's what divestment is about."

Divestment campaign grows as coal markets remain weakened

In October 2013, the Smith School of Enterprise and the Environment at the University of Oxford released a study finding the coal industry is particularly threatened by fossil fuel divestment efforts due to sinking stock prices and an increasingly smaller pool of debt finance.

A recent analysis by SNL Energy found that as of late-April, publicly traded coal companies' cumulative market capitalization, though improved slightly, remained 63% lower than it was just three years ago. An annual report of the 12 largest U.S. banks by BankTrack and activist groups reported that banks continue to provide financing to coal companies, but some large financiers have committed to removing themselves from certain categories of coal mining activity.

McKibben said that while the movement has made progress, it may still have a long way to go.

"The only thing that worries me is that this is a movement with a time limit," McKibben said. "It's a real race and I'm not confident that we're going to win, but I'm confident that we're going to give the bad guys a real run for their money."

McKibben, echoing a point raised by Divest-Invest Philanthropy at the time of their announcement, said some investors may seek to divest from fossil fuels purely due to the financial risk of stranded assets.

Welch suggested a better way to address the issue of climate change is to approach the issue with technology, government regulations and lower-priced alternative energy sources instead of divestment.

"My biggest regret is not that we are divesting when it does not help; my regret is that we don't do more that is likely to have a real effect," Welch said.

Industry argues coal-fired power benefits deserve attention

Popovich told SNL Energy that a more appealing method for meeting the climate and energy goals that coal's opponents seek would be to propose more "responsible emissions standards" and to support the development of carbon capture and storage, or CCS, technologies.

The coal industry has been critical of emission standards for new power plants that essentially ban construction of coal-fired power plants without CCS technology, a technology most believe is still too cost-prohibitive to be practical. Greenhouse gas limits on existing power plants are expected to be released in early June.

"If the administration feels renewable fuels are worthy of massive public subsidy, then why shouldn't they socialize the cost of developing CCS that alone will address the growing use of coal in Asia and the rest of the developing world?" Popovich said. "If climate change is as important as the administration says it is, why then subsidize renewables that are a tiny fraction of power production and not subsidize the solution to the massive use of carbon fuels, including gas?"

“It is at best dubious and at worst immoral to take actions that consign billions to energy poverty.”

 Vic Svec, senior vice president, Peabody Energy

The coal industry has also been fighting back against opponents with a new focus on the benefits of electricity in underdeveloped regions. The industry asserts that in a hasty effort to limit carbon dioxide emissions, governments and environmentalists are ignoring issues of global energy poverty.

"There are 1.3 billion to 1.4 billion people in the world who have no access to electricity — and they won't have [electricity] in their lifetimes if coal is unavailable to build the large-scale and affordable grids required to provide the power they need," Popovich said. "How do these 'campaigns' propose to address this problem of energy poverty? To solve a future problem they are perpetuating a humanitarian problem that exists now."

Svec also challenged the morality of movements that seek to end a fuel that allows "millions of people around the world" access to electricity that will "help them live longer and better lives."

"It is at best dubious and at worst immoral to take actions that consign billions to energy poverty," Svec said.

Peabody recently launched a campaign centered on the issue of coal use to alleviate global energy poverty. Critics of the campaign, such as the Sierra Club, say the campaign improperly conflates the benefits of electricity with the benefits of coal and ignores the negative externalities of the industry.