Economists say city’s status as financial and cultural giant means move to sever ties with fossil fuel will catalyze others in US and around the world to follow
Oliver MilmanLast modified on Fri 12 Jan 2018 09.50 GMT
New York City’s decision to sever ties with its fossil fuel investments is set to prove a catalyst to other cities in the face of the Trump administration’s staunch support for coal, oil and gas interests, according to several leading economists.
On Wednesday, city officials announced that New York was to divest its pension funds of about $5bn in fossil fuel-linked money over the next five years. New York’s total pension fund for its teachers, firefighters and other city workers is worth about $189bn.
Bill de Blasio, New York’s mayor, also revealed the city is suing the world’s largest oil and gas companies over their role in knowingly creating dangerous global warming in a two-pronged assault that he said is aimed at “standing up for future generations”.
Economists said the status of New York as a financial and cultural giant would probably spur other cities in the US and worldwide to divest and, more significantly, build momentum in the global shift required to reduce emissions and stave off the worst consequences of climate change.
“This is a really big deal,” said Jeffrey Sachs, an economist at New York’s Columbia University and special adviser to the UN secretary general. “Pension funds of other major US cities will follow, I think. New York is the neighborhood of the very big money managers. It’s a powerful, personal signal to them that they cannot keep funding the sorts of projects they have in the past.”
New York will be the first of the US’s largest cities to divest and has jostled to the forefront of a group of global metropolises that have committed to ridding themselves of fossil fuel stocks, including Paris, Berlin, Sydney and Stockholm.
In November, the Norwegian central bank, which runs the world’s largest sovereign wealth fund, proposed dumping shares in oil and gas companies. Dozens of other institutions, ranging from Oxford University to the Rockefeller Brothers Fund, have also joined a movement that activists say is worth $6tn in divestments or avoided investments.
“The divestment movement is active and growing and by its nature, New York will play a big leadership role,” said Sachs. “New York hosts Wall Street, the UN and the US media, it will now be the centre of climate action too. Even with Trump turning the keys over to the oil and gas industry, it’s clear that if you make egregious decisions you won’t get away with it.”
The divestment itself will be brushed off by major fossil fuel companies but could help galvanize political action even as the Trump administration peels away environmental regulations and throws open more US land and waters to drilling and mining.
“Divestment isn’t about economically punishing businesses, it’s a tool of collective action that can politically isolate companies,” said Paul Ferraro, an economist at John Hopkins University.
“New York is fabulous in this respect because it’s so visible and it gives others room to create change. But it will only work if everyone follows, much like how everyone has to reduce their electricity use collectively for it to have a consequence for climate change.”
New York’s move on climate isn’t without its critics – environmentalists have complained about De Blasio’s opposition to congestion charging for vehicles and his own frequent car trips to the gym.
Rightwing groups and business interests are also opposed. Linda Kelly, senior vice-president of the National Association of Manufacturers, said the plan was an “absurd attempt to politicize natural disasters, rather than a good-faith effort at securing meaningful change”.
The deep divisions over climate change in US politics, along with the continued strength of major fossil fuel companies, has tempered the enthusiasm even of those in favor of divestment and action to reduce emissions.
“The big oil and gas companies still have a long way to go and a lot of money to make,” said Ferraro. “When you look at the stock prices, it’s hard to believe that fossil fuels are facing imminent doom, as predicted by various environmentalists.”