Sustainability | Environmental Law Institute

Protecting the U.S. Electric Vehicle Future, Meeting China EV Threat

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Author

Bob Sussman - Sussman and Associates

Sussman and Associates

Current Issue

July-August 2024

Issue

Electric vehicles have become a political punching bag for Donald Trump and his supporters. According to the former president, “this all-electric nonsense” will cause an economic “bloodbath” that benefits Chinese producers and harms American workers. Trump and his allies place the blame on Biden administration mandates and subsidies that they claim are strong-arming reluctant consumers and car companies to invest in an inferior technology that will be the downfall of the U.S. auto industry.

As a solution, Trump and like-minded members of Congress want to sweep away the many incentives for EV adoption in the Inflation Reduction Act—including consumer tax incentives for EV purchases, grants and tax breaks for building car and battery manufacturing plants, and tax breaks for expanding EV charging infrastructure. They also call for the repeal of EPA vehicle emission standards that would result in an increasing percentage of zero- and low-emission vehicles in the light-duty fleet.

Despite Trump’s broadsides, the real problem for the U.S. auto industry is not government overreach but surging Chinese production of low-cost EVs. The Biden policies that Trump seeks to jettison are in fact essential to meet this threat and enable the industry to remain a successful player in a global vehicle market that will be increasingly dominated by EVs.

Sustained by long-term government subsidies, Chinese manufacturers like CATL and BYD have achieved cost reductions and improvements in performance that surpass Western EVs. China’s goal is not just to satisfy rapidly growing domestic demand but to export heavily to developed countries in the West and Asia. BYD sells a compact electric car, the Seagull, for less than $12,000 in China, and its global EV sales now exceed Tesla’s. Elon Musk has warned that, without trade barriers, Chinese EV producers “will pretty much demolish most other car companies in the world."

President Biden has responded to this threat by quadrupling tariffs on EVs imported from China. The Trump campaign quickly dismissed this move as a “weak and futile attempt” to divert attention from Biden's misguided support for U.S. EV production. But withdrawing that support and encouraging the industry to abandon EVs is not a viable strategy, even with trade barriers to block foreign competition. U.S. car producers are a diverse mix of domestic and foreign-based companies who are leaders in a globally integrated industry and cannot afford to ignore worldwide technology trends. The United States is one of the largest car markets in the world, and many of its drivers are sophisticated consumers who demand state-of-the-art EV technology. Turning the United States into an EV-free zone is not possible or desirable.

The Biden solution to Chinese competition is to combine high tariffs with strong policies to create a U.S. manufacturing base and supply chain for production of EVs and their component parts. Reducing pressure from foreign suppliers will give the industry breathing space to develop a sustainable EV platform that can meet domestic demand and compete globally. The recent sluggishness in EV sales is a timely reminder that this transition will take time and proceed in fits and starts. But this is all the more reason to provide predictable long-term support for EV adoption while insulating U.S. producers from the destructive impact of low-cost imports as they build out EV manufacturing capacity.

The industry has recently been trimming EV production in response to a slowdown in sales and increasing its offerings of hybrids to entice consumers who want fuel efficiency without battery range uncertainty. But it has stood by its long-term commitment to EVs. A key signal was the industry’s support for the new EPA vehicle emission rule. While the agency moderated its targets for EV sales in response to industry concerns, the rule as adopted is still premised on EVs achieving a 56 percent market share by 2032. That the industry is not rejecting this goal and is defending the EPA rule from legal challenges by red states and petroleum producers shows that it is investing in EVs for the long-term.

For the Biden administration, the big payoff from broad EV adoption is decarbonization of the transportation sector, now the largest source of U.S. GHG emissions. Some might argue that the best climate policy for the United States is to open our markets to low-cost Chinese imports in order to accelerate EV purchases and the resulting emission reductions. But this would be impossible to justify given widespread suspicion of China’s trade practices, concern about the competitiveness of our core manufacturing sectors, and political pressure to protect American jobs.

Maintaining our climate goals without sacrificing these economic considerations is a tough balancing act. For now, the Biden team is getting it right.

Protecting the U.S. Electric Vehicle Future, Meeting China EV Threat.

How Much Could Government Spend on Clean Energy Investment?

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Author

Joseph E. Aldy - Harvard Kennedy School

Harvard Kennedy School

Current Issue

May-June 2023

Issue

Last year, President Biden signed into law the Inflation Reduction Act, the most ambitious climate change legislation in U.S. history. The Congressional Budget Office estimated that the law’s clean energy provisions would represent about $400 billion in federal government spending and tax expenditures over the next decade. Analyses by Credit Suisse and Goldman Sachs, however, suggest that total government spending could range from $800 billion up to $1.2 trillion. What can explain the large range of these estimates?

The IRA promotes clean energy through a broad array of policies, but they generally fall into one of two major categories: spending programs and tax expenditures. Spending programs, such as the Environmental Protection Agency’s Greenhouse Gas Reduction Fund, can allocate federal resources to projects and activities up to the amount of their funding. Congress appropriated $27 billion to the Greenhouse Gas Reduction Fund. This represents the maximum that the agency can spend through the program. EPA could spend less than this if it does not exhaust all of its appropriations before the program’s sunset date: September 30, 2024.

In contrast, tax expenditures, such as the production credit for wind power, typically have no limit on the amount that could be claimed by taxpayers. The Joint Committee on Taxation estimated that IRA clean energy tax provisions would represent about $270 billion in tax expenditures. In practice, clean energy spending through the tax code as amended by the IRA could be higher or lower than this estimate. There are several factors underpinning the uncertainty around tax expenditures.

Consider uncertainty in the value of tax credits for producing power at wind farms. Historically, a wind farm could receive a tax credit for every kilowatt-hour of power produced; in recent years, about 2.5¢/kWh. Under the IRA, a wind farm could receive a credit that ranges from 0.5 to nearly 3.5¢/kWh, depending on who built the wind farm, what materials were used in its construction, and where it is located. If a wind farm developer employs labor that satisfies local prevailing wages and apprenticeship requirements, the subsidy increases from its base level to 2.5¢/kWh. If the developer uses domestic content, that increases the subsidy by another 10 percent. If the wind farm is located in an energy-dependent community or in a low-income community, then it would receive another 10 percent bonus.

It is already challenging to project the quantity of investment and power output from renewable sources over a decade, but the new tax design illustrates how the who, what, and where of renewable power development could have a big impact on overall tax expenditures.

The IRA clean energy provisions support many novel, quickly evolving technologies. As progress results in more effective and lower-cost renewable power, hydrogen production, carbon capture, and more, then the commercial market for these technologies may grow faster than expected. Indeed, the dramatic increase in solar power deployment over the last decade reflects the benefits of innovation driving down panel costs, and also resulted in larger tax expenditures than expected.

In contrast to these upside risks, there are several factors that could limit federal tax expenditures on clean energy. First, some IRA provisions impose new conditions for qualifying for tax credits that may be difficult for clean energy developers to satisfy. For example, some automakers expressed concerns last year about the prospect that current battery manufacturing and sourcing of critical mineral inputs would not qualify for the IRA’s electric vehicle tax credits, which are conditioned on domestic production or sourcing from countries the United States has a free trade agreement with.

Second, generous subsidies may not be sufficient to overcome some barriers to rapid clean energy infrastructure investment. Siting energy facilities and the means to move energy—over transmission lines and through pipelines—can encounter challenges under federal, state, and local laws. Various processes for reviewing large project siting—such as under the National Environmental Policy Act, the Endangered Species Act, and state and local laws—create speed bumps and, in some cases, veto points for new clean energy development.

Many of these processes were originally designed to enhance public engagement and ensure careful consideration of the environmental impacts of development. In effect, they were intended as a brake on development. But now we need to accelerate clean energy development. Reforming these processes to enable quicker review—without undermining their primary objectives—will have a major impact on the expansion of clean energy and associated government expenditures over the next decade.

How Much Could Government Spend on Clean Energy Investment?

Powering a Clean Energy Future

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Author

Akielly Hu - Environmental Law Institute

Environmental Law Institute

Current Issue

January-February 2023

Issue

She remembers the moment she pressed send on one of California’s most ambitious energy proposals to date. “I turned to my advisor and said, ‘What’s the worst that can happen? It’s only the fifth largest economy in the world.’”

It was 2013, and Carla Peterman, now executive vice president of corporate affairs and chief sustainability officer at PG&E, was serving as a commissioner at the California Public Utilities Commission. Her proposal would require the state’s investor-owned utilities to procure 1,325 megawatts of battery storage by 2020.

Batteries are an essential component to a decarbonized grid, enabling access to clean energy sources even when the sun isn’t shining and wind isn’t blowing. The storage method “allows utilities to produce energy from renewables, store it, and use it at a different time,” Peterman says. Not only does the technology increase reliability and affordability of renewables, it also reduces the need for fossil fuels, especially in times of peak energy use.

At the time of Peterman’s proposal, California only held about 33 megawatts of battery storage. The new targets would expand current capacity by more than 40-fold within a decade. But a decade ago battery storage systems were still relatively new to the energy world. Given high costs, and the fact that the nascent technology had never been implemented at such a large scale before, “We knew that some people were not going to like the proposal,” says Peterman.

Even in the progressive state of California, her proposal received instant backlash. Peterman recalls receiving a call from someone “very influential,” who told her, “I read your proposal. I like you, but I’m going to kill it because this is too expensive.” Today, she says, “I remember taking that phone call and saying, ‘Well, I am going to show you all the information I have so you can see how I came to this proposal.’” Countering naysayers first required having a well-thought-out, systematic framework to back up her team’s claims. “We designed a proposal for targets that included backstops in it. For example, if the energy storage available was too expensive, utilities didn’t have to buy it. Our framework ensured transparency around the costs and allowed us to feel comfortable setting aggressive goals.”

To reach critical consensus, Peterman also needed to corral key stakeholder groups. “We brought together all the different stakeholders—the storage providers, the environmental groups—and said, ‘Look, my job as a policymaker is to set a policy signal, but you have to prove that this is real.’ And they did. They started meeting with people who were skeptical and shared their business models. By the end, there was widespread support for the proposal.”

On October 17, 2013, the nation’s first energy storage mandate was unanimously approved. A Bloomberg article from the time called the proposal “groundbreaking,” hailing Peterman as a “rising star” in energy. In 2018, Thomas Baker, a partner and managing director at Boston Consulting Group, told Reuters that prior to the mandate, “battery storage was barely on the map.” And in 2020, the Climate Group noted that the California mandate was not only the first nationwide target, but also “the first of its kind worldwide.”

Peterman's interest in energy policy began long before her time at the CPUC. In high school, she became motivated to work on environmental issues and disadvantaged communities after reading her older brother’s term paper on the Love Canal chemical waste disaster in New York. Later in college, Peterman began reading the work of influential environmental justice activists like Robert Bullard. Yet the more she learned about pollution and issues related to siting power plants, the more she traced the problems back to a common root: energy, and the powerful decisions made by a few about where and how power plants came to be sited. She wondered, “What if I worked on developing energy policies so that the right things got built at the beginning, instead of tearing power plants down after they’ve already caused harm?”

Peterman began studying the economic drivers, science, and history behind energy production. Her academic pursuits took her from Howard University, where she majored in history, to Oxford University as a Rhodes Scholar, where she completed M.S. and M.B.A. degrees. She later went on to pursue a Ph.D. in energy and resources at the University of California, Berkeley. In 2011, Peterman was appointed by Governor Jerry Brown to the California Energy Commission, where she served as the lead commissioner on renewable energy and transportation.

Her research and work were guided by a series of fundamental questions on why and how energy injustice persists. For instance, “How do we end up siting a power plant that creates significant air pollution and causes harm in a community?” As Peterman puts it, “These were choices that were made years before—choices that were often driven by other human needs, such as the desire for low-cost energy and the desire for jobs.”

There was a clear alternative to the human health toll posed by fossil fuels: renewable energy. But renewable energy projects were expensive to finance. “One of the reasons was the cost of the technology. Another was the lack of a market signal to build more,” says Peterman.

In response, she believed governments could step in to “support environmental technologies by creating demand,” Peterman says. Her decision to pursue a career in regulation stemmed from a conviction that the government could “set policies and market signals that companies and consumers would respond to.”

Immediately after her tenure at the California Energy Commission, Peterman was appointed and unanimously confirmed to the CPUC. As a regulator, Peterman focused on promulgating and supporting such policies to develop renewable energy. She served as a commissioner from 2012 to 2018, where she developed and implemented measures related to energy storage, electric vehicle charging infrastructure, energy efficiency, and California’s Renewables Portfolio Standard, which sets continually increasing thresholds for renewable energy procurement for state utilities.

Today, California has long since surpassed Peterman’s initial targets. According to the California Energy Commission, the state now holds over 4,000 megawatts of utility-scale battery storage capacity—more than triple the original 2013 mandate. As Peterman puts it, “Energy storage is now ubiquitous.” She adds that her own utility, PG&E, has installed more than the targets initially set for all of California.

For the past four years, Peterman has transitioned from creating policies as a regulator to implementing them as a utility, first at Southern California Edison and now at PG&E. At the utilities, “I became really interested in how to actually implement those policies on the ground,” she says. “I have seen the challenges with developing renewable energy at a lower cost, and then integrating that energy into the grid. So what I do now is think about how to complement those policies with technological development and a sound market structure, to deliver everything that customers and regulators need from utilities.”

Utility companies must now deliver pollution-free energy in a way that adapts to dangerous climate change. “Fundamentally, that means we have to change where we get our energy from, and how we deliver that energy,” she says. In short, how can we continue to receive the essential services we need to power our lives, without damaging the environment we depend upon?

Peterman’s life experiences prove that both government and utilities have major roles to play. In her current position as chief sustainability officer, one of Peterman’s primary focuses is making sure that the utility is doing its part to “provide decarbonized, safe resources, and providing them at the lowest cost.”

“Utilities have overall done a great job of decarbonizing the energy supply,” Peterman says, noting that 93 percent of the energy PG&E delivered last year was carbon-free, made up of a mix of nuclear, hydroelectric, and renewable energy. “Our role as we go forward is helping to decarbonize the rest of the economy.”

In terms of emerging climate strategies, Peterman is most excited about the battery storage potential of electric vehicles. In May, the CPUC approved three historic vehicle-grid integration pilots by PG&E. Vehicle-grid integration allows electric cars and trucks to charge at times of peak supply—for instance, in the middle of the day when there’s plenty of sunshine—and export electricity back to the grid during times of low supply. In this way, electric vehicles become “little power plants,” Peterman says. “There is so much electricity that we need as a society to reach our climate goals. We need to use every asset we have.”

Despite promising developments, California—like the rest of the world—is just getting started when it comes to the clean energy transition. For battery storage alone, the state estimates that “more than 48,000 MW of battery storage and 4,000 MW of long-duration storage will be needed by 2045” to hit climate targets—at least a 12-fold increase of its current capacity. Like many at the forefront of climate action, Peterman considers time our greatest challenge.

“When I started working in this field, my focus was on mitigating climate change. But now, because we have not made enough progress as a society, I have to spend a lot more of my time on adaptation, making sure our infrastructure can survive the dangers of climate change.”

One of these dangers is wildfire, which has become a seasonal devastation in much of the West. About a decade ago, 15 percent of PG&E’s service area was at high wildfire risk. Now, that number has risen to over 50 percent. “We now need to focus on making sure that the wires delivering electricity aren’t causing wildfires, and that they can survive wildfires,” Peterman says. Part of this work includes an initiative launched last year by PG&E to move underground wires in areas of high fire risk.

Another issue at the front of mind for Peterman is affordability and equity. In meetings with advisory councils representing community members, it’s become clear that “the transition to clean energy has to be equitable, just, and affordable,” she says. “Residents want a clean energy future, especially because their communities are the most harmed by climate change, but not at the price of not being able to afford the service,” Peterman says. “That is something I’m personally spending more time working on: understanding what we are delivering to our customers, where the costs are going up, and how we can reduce them.”

Peterman emphasizes that one of the most important things utilities and policymakers can do is to consider the impact on people in all communities—and design equity into programs—from the very beginning. “That’s hard to do after the fact,” she says. At PG&E, these policies look like instituting a minimum percentage of low-income electric vehicle fund recipients, providing assistance for electric bills, negotiating contracts to drive down costs for consumers, and investing in energy efficiency.

Another important forum to incorporate justice considerations is public discussions, where communities can voice concerns and weigh in on decisions. It’s a complicated process that Peterman herself has grown to better understand. “I realized their job isn’t to understand how complex it is to deliver reliable, safe energy. That’s my job. Their job is to tell me what they need to represent their community,” she says. “I adopted a servant-leader mindset, in which I have the great fortune to take in their perspective, treat it with care, and make it an important factor in my decisionmaking.”

In reflecting on her career successes, Peterman still considers passing the energy storage mandate as her proudest achievement. The experience taught her the importance of bravery in working in this field. “You have to take chances,” she says.

That doesn’t mean it’s going to be easy. “I think sometimes new things don’t get done because people expect everything to go smoothly, just like what they’ve always done. But you have to roll up your sleeves, and commit to the work.” TEF

PROFILE Utility executive Carla Peterman, chief sustainability officer for PG&E, says that the transition to a carbon-free economy needs to be equitable, just, and affordable.

With the IRA’s Passage, an Uphill Journey to Clean Energy Begins

Read more about With the IRA’s Passage, an Uphill Journey to Clean Energy Begins

Author

David P. Clarke - Writer & Editor

Writer & Editor

Current Issue

November-December 2022

Issue

In signing the Inflation Reduction Act into law last August, President Biden said its $369 billion clean energy and climate provisions will fund “the most aggressive action ever—ever, ever, ever—in confronting the climate crisis.” That’s true. But keeping the historic accomplishment in perspective, let’s not forget that up till now Congress has never passed any climate legislation, despite numerous attempts and decades of science since Al Gore’s first climate hearings in 1976.

That’s not to deny the IRA’s remarkable achievement in a Congress where uncompromising divisions have rendered impracticable a carbon tax or other, even more audacious policies. Jubilant supporters of prompt action say that the law’s investments will put the United States on a path to reducing our greenhouse gas emissions roughly 40 percent below 2005 levels by 2030, almost meeting Biden’s 50 percent goal (or, as others see it, falling short by 10 percent). But perhaps that gap can be closed or exceeded through Biden’s 2021 executive order aiming to make the federal government carbon-neutral by 2050, which the IRA will accelerate with $3 billion for the U.S. Postal Service to electrify its fleet of more than 200,000 vehicles. And billions in Energy Department programs and other clean energy spending is on the table.

Clearly, the IRA aims to galvanize an economy-wide shift toward clean technologies in the power sector, manufacturing, and transportation with its much-extolled provision of more than $60 billion in clean energy incentives. They include $30 billion in production tax credits to boost U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals, as well as another $10 billion in tax credits for electric vehicle and other clean technology manufacturing facilities. Separately, the IRA provides up to $20 billion in loans for new clean vehicle manufacturing plants nationwide. To bolster its goals, the IRA includes $27 billion for “green banks” to offer competitive grants supporting projects that target GHG reductions and $25 billion for conservation initiatives on farmlands, forested lands, and ecologically sensitive habitats.

Consistent with Biden’s environmental justice priorities, the IRA offers an array of investments to help disadvantaged populations. The law includes three separate grant programs, totaling $9 billion. In all, according to the Senate’s summary, the law directs some $60 billion in tax credits and other measures to help disproportionately impacted environmental justice communities.

Provisions directed at EPA include $27 billion to leverage private investments in projects to fight climate change. In addition, the law provides EPA with $1 billion for grants and rebates to consumers who replace polluting medium- and heavy-duty vehicles with zero-emissions vehicles. With another $3 billion, EPA can give grants and rebates for recipients to buy or install zero-emissions equipment and technology at ports, a significant GHG source. Also, the IRA’s single stick, amid billions in carrots, provides the agency with $1.5 billion to establish a new program that will charge a fee for methane emissions from oil and gas facilities.

But the law contains several provisions progressives condemn. It mandates that federal land leases for wind and solar projects must be accompanied by oil and gas lease offers, including in the Gulf of Mexico and Alaska, as Senator Joe Manchin (D-WV) demanded for his support. Manchin also made a permitting reform “side deal” aimed at hastening fossil fuel and clean energy project approvals, a promise that is already drawing fierce criticism. And opponents argue that the IRA’s generous new carbon capture and sequestration tax credits will keep fossil fuels going strong, likely thwarting clean energy goals.

It’s not just the IRA’s controversial provisions that are problematic. According to Rice University Associate Professor and author Daniel Cohan, significant obstacles to achieving the law’s clean energy goals lie ahead. “The biggest obstacle will be building out the infrastructure—especially power lines, charging stations, and hydrogen systems—needed for a clean energy economy.” The United States has gotten “better at blocking infrastructure” than building it, and “that will need to change for people and businesses to be able to seize the incentives that this bill provides.”

As the IRA drive to 2030 begins, the question remains open: Will the law put this country onto an accelerated, inexorable path toward a clean energy future? Or will domestic and international forces that have impeded vital cultural and economic changes continue to hobble the climate fight, even as rivers dry up, forests burn down, and cities flood? Although the IRA is cheered as the “single biggest climate investment” ever, it is only a first step, as many have noted, in a miles-long journey.

With the IRA’s Passage, an Uphill Journey to Clean Energy Begins.

Climate Justice

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Author

Josephine Balzac - Rollins College

Rollins College

Current Issue

July-August 2018

Issue

People of conscience need to break their ties . . . it makes no sense to invest in companies that undermine our future.

—Desmond Tutu

The perpetuation of business as usual in the climate change era endangers the future of human existence and, consequently, imperils the realization of human rights.1 The recent signing and adoption of the Paris Agreement signifies a global consensus that climate change is an urgent threat and common concern of humankind that needs ambitious mitigation and adaptation efforts to solve the problem.2 The Agreement requires holding the increase in global temperature to well below 2°C while pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.3 The Paris Agreement is undergirded by principles of equity, common but differentiated responsibilities, sustainable development, and poverty eradication.4

Protecting the environment and eradicating poverty are an “indispensable requirement and integral part of achieving sustainable development.”5 Sustainable development incorporates three components: environmental protection, social development, and economic development. On January 1, 2016, the 17 Sustainable Development Goals of the 2030 Agenda for Sustainable Development officially became effective.6 The goals include women’s rights, eradicating poverty, climate action, food security, environmental protection, health, education, equality, and job opportunities.7 The Sustainable Development Goals promote equitable economic growth, equitable social development, and integrated and sustainable management of natural resources and ecosystems.8

Sustainable development is rooted in equitably meeting the developmental and environmental needs of present and future generations.9 This concept of intergenerational equity was first emphasized in the Stockholm Declaration preamble, stating that “[t]o defend and improve the human environment for present and future generations has become an imperative goal of humankind.”10 Furthermore, the United Nations Framework Convention on Climate Change (UNFCCC) requires countries to protect the climate system for the benefit of present and future generations of humankind on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities.11

Viewing the scientific evidence and impacts of climate change through a human rights lens, climate change impacts endanger the effective enjoyment of a range of human rights. The connection between human rights and climate change has been recognized by the United Nations in a variety of documents by the Human Rights Council and the Office of the High Commissioner for Human Rights.12 In 2000, at the UNFCCC Sixth Conference of the Parties (COP6), the summit’s mission stated: “We affirm that climate change is a rights issue. It affects our livelihoods, our health, our children and our natural resources.”

The Mary Robinson Foundation is a leading climate justice organization that seeks to put justice and equity at the heart of climate change responses and identifies the strong connection between human rights and climate change.13 In its Principles of Climate Justice, the Foundation observed that “[c]limate justice links human rights and development to achieve a human-centered approach safeguarding the rights of the most vulnerable and sharing the burdens and benefits of climate change and its resolution equitably and fairly.”14 The climate “injustice” is that the people most vulnerable and marginalized are the ones that have had little to do with generating the greenhouse gas (GHG) emissions that cause climate change. Climate justice affirms the need to significantly reduce the emission of GHGs and associated local pollutants.15 The Bali Principles identified the 27 principles of climate justice.16

The business community is now recognizing this connection between human rights and climate change.17 Businesses play a role in addressing climate change impacts on human rights.18 Until recently, businesses addressed these two subjects independently of the other. Due to the growing awareness and recognition of the nexus between the two, however, businesses are now addressing climate change and human rights concerns holistically.19 Recent actions in the business and investment sectors reflect a new focus on protecting human rights in the face of climate change impacts.

This heightened awareness of climate change has inspired various institutional investors to divest from fossil fuels.20 Investors have embraced the same thinking by pushing for a new sustainable energy economy with socially and environmentally responsible investments.21 This fossil fuel divestment and investment in sustainable and socially responsible businesses will become a powerful driver of change.22 This transition will promote climate justice by taking a human-centered approach to climate change and safeguarding the rights of present and future generations in the investment decisionmaking process.

This chapter examines the ethical motivations behind the movement to divest from dirty energy in order to protect our planet and present and future generations. Part I of this chapter discusses the moral origins of the fossil fuel divestment movement, the litigation that has ensued, and the movement’s reach beyond its college campus origins. Part II identifies the sustainable business model through a corporate social responsibility (CSR) framework and discusses how CSR voluntary initiatives undertaken by companies can help promote climate justice. It addresses how climate change impacts are driving responsible investments and prompting investors to consider environmental, social, and governance criteria in the investment decisionmaking process.

The Fossil Fuel Divestment Movement

Movements seeking ecological equity for future generations and rights of nature have been gaining momentum in the 21st century.23 Divestment is a social responsibility campaign in which owners can decide to withhold their capital by selling investments in reprehensible activity.24 It is the process of removing investments that are unethical or morally ambiguous.25 Divesting is a form of social investing, defined as “the systematic incorporation of ethical values and objectives in the investment decision-making process.”26 The objective of divestment is to promote a certain behavior or policy.27

In the 20th century, reprehensible activity subject to divestment campaigns included tobacco, munitions, corporations in apartheid South Africa, adult services, and gaming.28 These divestment campaigns have been successful, but the largest and most impactful was the South African apartheid context.29 Divesting in multinationals doing business in South Africa helped break the back of the apartheid government and usher in a new era of democracy and equality.30 The success of this campaign is the inspiration for the current fossil fuel divestment movement.31

The fossil fuel divestment movement has quickly become the fastest growing divestment corporate campaign in history, surpassing the South Africa apartheid divestment movement.32 The spark began in August 2012 when Rolling Stone Magazine published an article by Bill McKibben, founder of the organization 350.org, which detailed the risk of increasing the global temperatures above 2°C.33 A tour called Do the Math was launched by 350.org explaining the need to limit the release of fossil fuels and keep the fossil fuels in the ground.34 The tour led to the 350.org Fossil Free Divesture Movement, “a network of independent campaigns petitioning institutions and investors to divest from fossil fuels.”35

The first major victory was in May 2014 when Stanford University agreed to divest its $18.7 billion endowment from coal companies.36 By December 2015, 500 institutions representing $3.4 trillion in assets committed to divesting.37

Moral Dimensions of the Fossil Fuel Divestment Movement

The fossil fuel divestment campaign focuses on the moral dimensions of climate change by spotlighting the immoral actions and impacts of the polluting fossil fuel industry.38 It is a climate justice initiative that seeks to stand in solidarity with vulnerable frontline communities and those already experiencing the impacts of climate change.39 The students of the campaign make a further plea that their futures are at stake because they are inheriting the consequences of global warming beyond 2°C.40 They emphasize the injustice in this reality because they did not create the crisis but have a responsibility to fix it.41 This intergenerational equity focus of the campaign seeks to ensure that future generations are not worse off by our choices.42 It requires utilizing resources sustainably to avoid irreversible damage to the environment.43

The movement focuses on “living up to our values, changing the business as usual mentality, and redefining our future.”44 Our values as humans are what determine how we will behave in certain situations.45 In order to have integrity, there must be consistency in what we say we value and what our actions say we value.46 Ethical decisions involve self-restraint: (1) not doing what you have the power to do and (2) not doing what you have the right to do.47

The goal of divesting from fossil fuels is to “diminish the influence and power of the fossil fuel industry in the market, our political system, and in the social conscience overall.”48 Fossil fuel divestment has three aims:

(i) “force the hand” of the fossil fuel companies and pressure government to leave the fossil fuels “down there”; (ii) pressure fossil fuel companies to undergo “transformative change” that can cause a drastic reduction in carbon emissions; [and] (iii) pressure governments to enact legislation such as a ban on further drilling or a carbon tax.49

It demands institutions and investors to eradicate the environmental and social injustices created by “dirty energy” by adopting sustainable investment policies.50

The Bali Principles on Climate Justice intended to shift “the discursive framework of climate change from a scientific-technical debate to one about ethics focused on human rights and justice.”51 “Divesting is a form of social investing . . . incorporating ethical values and objectives in the investment decision making process.”52 The campaign is not just to fight climate change “but to fight the racism, classism, and imperialism that the fossil fuel industries perpetuate.”53 This future generation is shifting the way of thinking “business as usual” and propelling change. This shift is necessary to change these social and political realities and have a meaningful response to climate change impacts on the environment and human rights.54

College Campus Future Generations Lead Divestment Campaigns

The Fossil Free Divestment Movement mobilized and trained thousands of students and young people to organize against the threats of climate change.55 Social movements use confrontational strategies, including media protests, to emphasize the negative social and environmental practices of highly visible corporations.56 With social media commanding the public’s attention, these corporations realize they are not immune to “naming and shaming” strategies when their valuable brands and reputation are linked to objectionable and social practices.57 Social movements have emerged as key forces in mobilizing political consumers to address their concerns through the market.58

The students are demanding full divestment of fossil fuels and are doing it in the name of “climate justice.” Students and graduates are making campaign pledges such as: “[M]illennials, we must rise to our historic moment and lead the call for climate justice. This is truly the fight of our lives.”; “[W]e will not stop until we confront, dismantle and ultimately transform oppressive structures that perpetuate climate injustice, gender violence, and economic equality”; and “[B]ecause I want a more just and sustainable world that protects humanity over profits, environment over exploitation.”59 The “fossil fuel divestment [movement] is a moral campaign at its core.”60 In an open publication, Divest Harvard students criticized the Harvard Management Company (HMC) for betraying its moral obligations to its students by investing new capital in oil and gas exploration and refusing to divest.61

Most of the divestments to which colleges, universities, or schools have committed are only partial, such as only divesting in coal or tar sands, and are mostly from smaller private colleges.62 Students are being advocates by writing and signing petitions, scheduling meetings, and conducting protests, week-long blockades, and sit-ins.63

Recently, this type of social activism generated real change on a university campus. On May 25, 2016, the University of Massachusetts became the first major public university to fully divest its endowment from fossil fuels.64 Divestment of coal at UMass first began last year in response to a petition from the Student Fossil Fuel Divestment Campaign at UMass.65 In April 2016, in efforts to call for full divestment of fossil fuels, the Campaign staged a series of protests that led to student arrests at UMass Amherst.66 This student activism resulted in a unanimous decision by the board of directors of the UMass Foundation to fully divest from fossil fuels.67 The board of trustees chairman stated that he will endorse the Foundation’s decision, “because members of the UMass community have urged us to consider divestment in moral terms . . . and we acknowledge the moral imperative.”68 The UMass Amherst chancellor stated in regards to the decision to divest, “[T]he Foundation’s action today . . . speaks volumes about our students’ passionate commitment to social justice and the environment. It is largely due to their advocacy that this important issue has received the attention that it deserves.”69

Although the divestment movement started on university campuses, it has spread beyond campuses and reached diverse institutions and cities throughout the world.70 Of the more than 500 institutions divesting, only 13% are universities, colleges, and schools.71 Other institutions divesting include faith-based organizations (26%), foundations (24%), governmental agencies (14%), pension funds (13%), nongovernmental organizations (6%), and for-profit corporations (3%).72

More than 70 cities worldwide have divested from fossil fuels, including Oslo, Norway; Paris, France; Newcastle, Australia; Muenster, Germany; Copenhagen, Denmark; San Francisco, California; Boulder, Colorado; and Minneapolis, Minnesota.73 In addition, Stockholm, Sweden, and Berlin, Germany, are reviewing their fossil fuel investments.74 Copenhagen’s mayor stated in his proposal to divest that it would be wrong to continue investing in fossil fuels when Copenhagen is leading the world in the transition to a green economy.75 Similarly, in deciding to divest from fossil fuels, the UMass board of trustees chairman shared a similar vision in stating, “[D]ivestment from fossil fuel companies is in keeping with our status as a national leader in environmental sustainability with cutting-edge programs in alternative energy research, sustainable agriculture, and sustainable built environment.”76 The decisionmakers deciding to divest are recognizing that their investments must align with their values to convey the proper message and uphold integrity in promoting their goals.

Fossil Fuel Divestment Litigation

Social activism in the fossil fuel divestment movement has been taken to the courts, as students demand climate justice.77 The litigation arose out of Harvard students’ frustration with the university’s refusal to divest from fossil fuels after demanding divestment from the university endowment through their campaigns and petitions.78 The students decided to take their advocacy to another level.

On November 19, 2014, the Harvard Climate Justice Coalition filed a complaint against the Harvard president and fellows of Harvard College, the HMC, and the attorney general of Massachusetts.79 The plaintiffs are a group of seven students, consisting of law, graduate, and undergraduate students.80 The students are bringing this suit seeking climate justice on behalf of future generations.81 The complaint names “individuals not yet born or too young to assert their rights but whose future health, safety, and welfare depend on slowing the pace of climate change.”82

The innovative causes of action listed in the complaint are twofold: (1) mismanagement of charitable funds and (2) intentional investment in abnormally dangerous activity.83 The statement of facts describes the vesting of responsibility in the “President and Fellows” by the charter of the Harvard Corporation to further the goals of “the advancement and education of youth.”84 They are suing the attorney general of Massachusetts by citing the duty of Massachusetts “‘legislatures and magistrates’ to ensure the charitable operation of schools . . . [by] acting in the public interest, furthering the education and welfare of the students, and refraining from actions known to cause harm to the public and students.”85

The lawsuit identified $79 million in direct holdings in publicly traded fossil fuel companies in Harvard’s endowment.86 The endowment also contains additional indirect holdings in fossil fuels, but the amount is not listed.87 The plaintiffs connect investing in fossil fuels with creating environmental and social harms because the universities are helping finance the fossil fuel industry’s business activities.88 The complaint identifies the catastrophic consequences that endanger the health, safety, and welfare of present and future generations if businesses continue to burn fossil fuels and emit GHGs.89The complaint is supported by significant evidence labeled as exhibits, including reports from scientists (James Hansen) and international organizations (the Intergovernmental Panel on Climate Change), federal agencies (U.S. Environmental Protection Agency), Harvard’s U.S. Securities and Exchange Commission (SEC) filing, Harvard’s charter, the Massachusetts Constitution, news articles, and academic studies.90

The mismanagement of charitable funds cause of action stems from Harvard Corporation’s breach of fiduciary and charitable duties as a public charity and nonprofit.91 The complaint asserts that investing in fossil fuels damages Harvard’s reputation, and the students’ and graduates’ reputations.92 The students are unable to be free of the threats of climate change, and the future damage to the university’s physical campus as a result of sea-level rise.93 The second count—intentional investment in abnormally dangerous activities—identifies the fossil fuel industries’ business activities as abnormally dangerous “because they inevitably contribute to climate change, causing serious harm to Plaintiff’s Future Generations’ persons and property.”94 The argument continues that there is no amount of reasonable care that can be taken by a fossil fuel company to substantially reduce the risk of harm.95 The complaint alleges that Harvard has knowledge or should have known that fossil fuel companies contribute to climate change and cause harm, and that these harms are well understood among institutions of higher education.96

The Harvard Climate Justice Coalition complaint requests “an injunction ordering Defendants to immediately withdraw Defendant Harvard Corporation’s direct holdings in fossil fuel companies and an injunction for Defendants to take immediate steps to begin withdrawing indirect holdings and to complete withdrawal within a reasonable period of time.”97 The plaintiffs also request a declaration that Harvard breached its obligations contained in its charter.98

The plaintiffs acknowledged the difficulty of meeting the “special interest” requirement to have standing to sue.99 The lawsuit was ultimately dismissed on the ground that the plaintiffs lacked standing because they claimed the threat was to “future generations.”100 The court reasoned that the plaintiffs’ status as Harvard students did not give them personal rights enough to have standing to charge Harvard with the mismanagement of its charitable assets.101

The Harvard students appealed the dismissal of the divestment lawsuit.102 The appellate brief was supported by amicus curiae briefs by Dr. James E. Hansen and the Animal Legal Defense Fund.103 The brief from the Animal Legal Defense Fund supported the moral obligation for the protection of future generations, as a recognized principle in international and domestic law.104 The city of Cambridge, Massachusetts, also supported the lawsuit.105 Dr. Hansen’s amicus brief also cites the moral obligation to protect future generations by phasing out fossil fuels.106 The appeal focuses on the same arguments that Harvard mismanaged its endowment by investing in “abnormally dangerous activities.”107 On June 7, 2016, the Harvard Climate Justice Coalition appeared for oral arguments in the Massachusetts Appeals Court and the appeal is pending as of this writing.108

Even in the face of this social activism and litigation, the HMC still decided not to divest but instead became the first university endowment in the United States to join the Principles for Responsible Investment (PRI) and the Carbon Disclosure Project (CDP).109 The HMC has dedicated a web page to their sustainable investments, reporting their focus on investments based on environmental, social, and governance (ESG) factors.110 The HMC assesses and manages ESG risks, and documents and considers risk before making a decision on the investment.111 The faculty members in support of divestment responded by saying that the PRI and CDP are “utterly ineffective.”112 These voluntary measures are not as effective in mitigating climate change as mandatory legal standards or full divestment; however, in lieu of full divestment, these initiatives can be seen as steps in the right direction toward a more sustainable future within businesses. If the intent behind the initiative is purely for public relations reasons, however, it would be deemed to be merely “greenwashing.”113 A sustainable business model “should not be a discretionary preference, to follow only if corporate leaders perceive an economic benefit.”114 What is necessary is the acceptance of an ethical responsibility to do what is right and act for environmental and social well-being, regardless of financial gain.115

Corporate Social Responsibility and Responsible Investment

Divestment of fossil fuels is promoting climate justice by bringing awareness to the moral obligation of corporations, wealth owners, and investors, and to the duty to protect the interest of society, future generations, and the environment. The campaign creates stigma and advocates for more socially responsible investment practices. Divestment of fossil fuels is the “people demanding institutions and corporations to adopt comprehensive sustainable investment policies that eliminate the environmental and social injustices that the fossil fuel industry is creating.”116 Climate justice will be achieved not just by divesting from fossil fuels, but also by businesses incorporating sustainable policies, practices, and standards into everyday business activities. Since divestment is the opposite of investment, sustainable and socially responsible investments are also needed to promote climate justice.

Achieving a sustainable future does not occur in a vacuum, however. Although often the primary source of environmental pollution, business must be part of the long-term solution.117 Compared to government, business has greater capital, research, development capacity, and influence in the market to push towards sustainable development and climate justice.118 The United Nations acknowledged the significant role of business in mitigating and adapting to climate change.119 Caring for Climate is a joint initiative convened by the United Nations Global Compact, the United Nations Environment Programme (UNEP), and UNFCCC and recognizes that “only through a critical mass of engaged companies can the private sector be an effective part of the climate solution.”120 The initiative calls on all companies to commit to corporate responsibility policies on climate action.121

Since the Earth Summit in 1992, the field of CSR has evolved to become part of mainstream thinking in corporate compliance with environmental and human rights principles.122 CSR is premised on the idea that businesses have a responsibility to society and all its stakeholders, not just to their shareholders or their bottom line profits.123 The World Business Council for Sustainable Development defines CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”124 CSR encompasses the sustainability agenda by thinking in terms of the “triple bottom line,” focusing on economic prosperity, environmental quality, and social justice.125 John Elkington wrote, “[t]o refuse the challenge implied by the triple bottom line is to risk extinction.”126 This shift in thinking for business priorities stems from a reshaping of society’s expectations.127

The severe financial crisis and climate change risks have underscored the need for businesses to incorporate ESG factors into their financial statements, policies, and disclosures.128 Businesses feel pressure from all stakeholders, customers, investors, financial institutions, and shareholders.129 Lenders and investors, of course, want the best return on their investments with the least amount of risks.130 Moreover, investors today understand that financial success and good corporate citizenship are connected.131

Therefore, investing in fossil fuels is a risky business not only because of the financial risks, but also because of the environmental and social risks. Al Gore made a comparison of the risks of investing in fossil fuels to the meltdown in the market for subprime mortgages: “The assumption that you can safely invest in assets that come from business models that assume carbon is free is an assumption that is about to go splat. Many companies have lots of assets in your portfolios that are chock full of ‘subprime’ carbon assets.”132

ESG issues have a material impact on those risks and fulfill fiduciary duties.133 These ESG practices and considerations are evident across the spectrum of business entities including financial institutions, institutional investors, individual investors, corporations engaging in CSR practices, and consumers. CSR and ESG performance, monitoring, and improvement provide the greater transparency that all sectors are demanding.134 After the financial crisis and the looming threat of climate change, consumers, investors, stakeholders, and suppliers are demanding greater transparency.135 This pressure caused an increase in CSR reporting to publicize companies’ ESG data.136

Corporate Social Responsibility Reporting and Disclosures

It is becoming the norm in corporate practice to submit sustainability reports or CSR reports using at least one voluntary initiative.137 CSR disclosure focuses on the paradigm of sustainability reporting, with the information reported being relative to the triple bottom line of social, environmental, and economic impacts of a corporation’s activities.138 Executives are now considering the environmental issues, such as climate change, to be among the most important issues affecting business.139 The Governance and Accountability Institute reported that in 2015, 75% of the Standard & Poor’s 500 Index produced sustainability reports, an increase from 20% in 2011.140

There are many voluntary initiatives and providers of CSR reporting, but the major providers offering sustainability reporting include: the Global Reporting Initiative (GRI) (GRI’s Sustainability Reporting Standards), the Organisation for Economic Co-operation and Development (OECD) (OECD Guidelines for Multinational Enterprises), the United Nations Global Compact (the Communication on Progress), the International Organization for Standardization (ISO) (ISO 26000, International Standard for social responsibility), and the Carbon Disclosure Project.141 The GRI is the best example of the CSR reporting trends.142 It was launched in 1997 by the Coalition for Environmentally Responsible Economies (CERES)143 and it included the participation of organizations such as CEP, UNEP, and the World Business Council for Sustainable Development.144 The GRI’s mission is “to elevate the comparability and credibility of sustainability reporting practices worldwide.”145 Currently, 92% of the 250 largest corporations in the world report on their sustainability performance utilizing the GRI.146 The GRI’s goal is to make sustainability reporting as commonplace as financial reporting.147

True sustainability reporting allows for greater transparency into corporate practices that either achieve CSR or impede its achievement. Sustainability reporting is valuable because it ensures that the organizations reporting consider their impacts on environmental and social issues and allows them to be transparent about the risks and opportunities that they encounter.148 A trusting relationship amongst stakeholders is necessary to receive good support.149 Transparency builds and maintains trust and credibility150 in businesses because it shows honesty, openness, and self-criticism.151 CSR reporting on ESG issues promotes better decisionmaking because it informs the decisions of investors, consumers, local communities, and civil society.152 Reporting in a transparent manner is an essential part of committing to sustainability.153

Businesses need to make sure that they report the good, the bad, and the ugly of their companies. Voluntary self-reporting can tempt companies to only reveal the greatest achievements and omit negative information.154 This type of reporting is seen as greenwashing and is only concerned with image and not with accurate reporting.155 This practice causes distrust in stakeholders because they fear a cover up and, therefore, are unable to be fully informed of the risks and benefits of the company.156 To avoid creating suspicion, companies should report achievements and weaknesses and identify the steps to fix the problems.157

International Voluntary ESG and CSR Initiatives

The growing public awareness of environmental performance is driving companies to adopt voluntary or self-imposed standards, guidelines, and codes.158Those supporting ESG and CSR considerations in any sector must rely on international voluntary corporate standards because transnational corporate activities are minimally governed by international law.159 These voluntary standards or initiatives usually do not have any verification methods or enforcement measures.160 The only enforcement mechanism available is to “name and shame” the companies that fail to meet these standards.161 These standards also lack explicit performance benchmarks.162 Some companies become signatories to these third-party initiatives committing to standards and codes of conducts to improve their public image.163 Others view these initiatives as attempts to prevent more stringent regulations through preemptive measures by the market.164 Others do it out of a commitment to true sustainability. Although there is no substitute for legally binding standards, these voluntary initiatives signify a change of consciousness, a change in values, a change in priorities, and a commitment across the globe to create a more sustainable and just future for our present and future generations in the face of climate change. The “business as usual” model is no longer mainstream, it is no longer popular, and the market has responded.

CSR voluntary corporate codes of conduct are becoming the norm as companies want to convey their core values and ethical business practices to all stakeholders. This shift in thinking to employ CSR has caused an increase in the majority of corporations dedicated to addressing larger social problems.165 The United Nations Global Compact is the world’s largest voluntary corporate sustainability initiative.166 More than 8,000 companies and 4,000 non-businesses have become signatories to the compact.167 The mission of the compact is for businesses to be responsible by aligning their strategies and operations with principles on human rights, labor, environment, and anti-corruption.168 The United Nations Global Compact’s General Assembly mandate is to “promote responsible business practices and UN values among the global business community and the UN System.”169

The 10 principles of the United Nations Global Compact are derived from the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption.170 The Compact principles have been endorsed by the Human Rights Council, which has confirmed the interconnectedness between climate change and human rights.171 The Global Compact institutes these principles as the core values to be shared among businesses, trade unions, and civil society.172 The United Nations Guiding Principles on Human Rights have been incorporated into the Compact commitments for the past four years.173 The Compact requires businesses to make a policy commitment to respect human rights and take proactive steps to prevent violations and remediate any adverse human rights impacts.174

Commitments to the Compact also include taking action to advance societal goals, such as the United Nations Sustainable Development Goals 2030.175 Through the Global Compact, businesses have played an important role in the process of shaping the Sustainable Development Goals and helping companies implement them.176 The efforts through partnerships created by the Compact include the Post-2015 Business Engagement Architecture, Rio+20 Corporate Sustainability Forum, Global Compact Local Networks, SDG Industry Matrix, Caring for Climate, and Global Compact LEAD.177

Opportunities for Responsible Investment

While CSR reporting has been on the rise within corporations, investors have been able to use this information to determine in which sectors of the stock market they want to invest. Socially responsible investing (SRI) is “an investment discipline that considers environmental, social, and governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.”178 The motivations for SRI investing include personal goals, institutional missions, and the demands of clients and stakeholders.179 Investors also are seeking strong financial performance in their investments to contribute to advancement in ESG practices.180 SRI allows investors to match financial investments with ethical and moral values.181 These SRI investments focus on considering ESG criteria.182 SRI investments were more than $6.57 trillion in 2014, a 76% increase compared to 2012 figures.183

The SRI practice used to focus on weeding out companies from specific industries that investors did not want to support, such as natural resource extraction and nuclear energy.184 This approach is a negative screen; positive screens focus on promoting positive change and rewarding good behavior by investing in companies that promote positive social and environmental impacts.185 This section discusses three important SRI opportunities to promote climate justice.

United Nations Principles for Responsible Investment: The United Nations Principles for Responsible Investment (PRI) is a voluntary set of guidelines for investors that seek to combine financial return with a moral and ethical obligation by giving consideration to the ESG issues of companies in which parties choose to invest.186 Ethical values are the essence of climate justice and instilling these principles into investment decisions allows for greater protection of the rights of vulnerable communities. The goal was to incorporate “ESG issues into mainstream investment decision-making and ownership practices.”187 This momentum is driven by recognizing that ESG factors play a material role in determining risk and return within the financial community.188 Investors understand that part of their fiduciary duty is incorporating ESG factors and that beneficiaries are demanding more transparency.189 Responsible investment is also grounded in the fact that companies could face serious reputational risk by destroying value on environmental (climate change and pollution), social (employee diversity and working conditions), and economic issues (aggressive tax strategies).190 The PRI has nearly 1,500 signatories that represent $60 trillion from more than 50 countries.191

Shareholder Resolutions; An important aspect of SRI is shareholder advocacy. Through shareholder resolutions, investors are given the opportunity to file resolutions to raise ESG issues.192 These resolutions involve human rights, working conditions, and climate change issues.193 In 2007, only 43 climate shareholder resolutions were filed with U.S. companies.194 That number increased in 2009, with 68 shareholder proposals on climate change.195 In the 2015 proxy season, a record-breaking 433 social and environmental shareholder resolutions were filed with climate change as one of the leading drivers of the uptick in activity.196 By filing shareholder resolutions, active shareholders are able to bring important issues to the attention of company management.197 Filing these resolutions gains media attention and educates the public.198 The mere process of filing resolutions prompts productive discussions and agreements, and the receipt of the shareholders’ majority vote further pressures action by the corporation’s management.199

Recently, an Exxon climate justice shareholder resolution, “Acknowledge Moral Imperative to Limit Global Warming to 2° Celsius,” was filed.200 It stated that the poor and most vulnerable are the first to suffer, while future generations, holding no responsibility, will live with greater impacts of global warming.201 Shareholders called on the board of directors to act by adopting a policy acknowledging the imperative to limit global average temperature increases to 2°C above pre-industrial levels.202 Exxon challenged the proposal as “vague” to exclude the climate justice proposal from this year’s proxy ballot so that the shareholders would not be allowed to vote, fearing a majority in favor of the resolution.203 The SEC reviewed the resolution and denied Exxon’s challenge.204 This outcome is a significant victory, as shareholders will have the opportunity to vote on Exxon’s moral responsibilities regarding climate change.205 These moral and ESG considerations are continuing to take center stage in the investment decisionmaking process in seeking to promote climate justice.

Equator Principles ESG Guidelines for Financial Institutions: This framework sets out minimum standards for institutions to implement to ensure due diligence in determining, assessing, and managing environmental and social risks when determining whether to finance projects.206 Financing of the project is conditioned on complying with the Equator Principles (EP). If companies will not or are unable to comply with the EP, then no project finance or project-related corporate loans will be provided.207 Borrowers must categorize and fully disclose environmental and social risks and provide a mitigation plan to manage the risks to obtain loans from these Equator Principles Financial Institutions (EPFIs).208

Currently, 83 EPFIs209 in 36 countries have adopted the EP.210 This number of institutions covers more than 70% of international project finance debt in emerging markets.211 The EPs incorporate principles of climate justice by including comprehensive standards for indigenous peoples and consultation with locally affected communities within the project.212 Borrowers must also disclose to affected communities “a mechanism for addressing grievances, and third-party verified review, monitoring, and annual public reporting.”213 Studies show that after the financial crisis of 2008, only four of the largest financial institutions—Bank of America, Wells Fargo, JP Morgan Chase, and Citibank—survived and they were all signatories to the EPs.214 This outcome is further proof that incorporating ESG principles into lending practices helps manage and identify risks and opportunities.

Conclusion

The impacts of climate change are the biggest threat of our time, imperiling both natural resources and human rights. This connection between climate change and human rights has significantly impacted decisionmaking in financial markets from divesting to investing. Companies, consumers, and investors are prioritizing ESG considerations and responsible business practices. The detrimental impacts of climate change have prompted the recognition that there is an ethical and moral obligation to invest responsibly by choosing to divest from morally reprehensible activities such as fossil fuel extraction.

These actions promote climate justice via the financial investment markets. Investors are recognizing not only the financial incentives of considering ESG factors, but most importantly the ethical need to invest in sustainable and socially responsible companies to protect the needs of present and future generations. Investors now understand and recognize climate change risks and social injustices and do not want to invest in or support companies that are not concerned with their moral duty to be good citizens of the world. The businesses that survive are the ones that have a genuine interest in caring about the people and the planet while also making a profit.

Divesting from fossil fuels and SRI reduces GHG emissions, helps eradicate poverty, promotes sustainability, and protects future generations. Although the actions undertaken are voluntary in nature, they represent an important shift in thinking necessary for a sustainable future. Therefore, these actions promote the goal of climate justice for the most vulnerable communities of the world. TEF

1. Webinar: Business and Climate Justice: What Role Can Business Play in Tackling the Human Rights of Impacts of Climate Change? (U.N. Global Compact and Mary Robinson Foundation 2015), https://www.unglobalcompact.org/library/1231.

2. Adoption of the Paris Agreement, UNFCCC Conference of the Parties, 21st Sess., U.N. Doc. FCCC/CP/2015/10/Add.1 (Dec. 12, 2015), http://unfccc.int/files/home/application/pdf/paris_agreement.pdf.

3. Id.

4. Id.

5. Rio Declaration on Environment and Development, U.N. Conference on Environment and Development, Rio de Janeiro, Brazil, June 3–14, 1992, Annex 1, U.N. Doc. A/CONF.151/26 (Vol. I) (1992), http://www.un.org/documents/ga/conf151/aconf15126-1annex1.htm [hereinafter Rio Declaration].

6. United Nations, The Sustainable Development Agenda, http://www.un.org/sustainabledevelopment/development-agenda/ (last visited Aug. 21, 2016).

7. Id.

8. Id.

9. Rio Declaration, supra note 5, at Annex I, Princ. 3 (noting that the “right to development must be fulfilled so as to equitably meet developmental and environmental needs of present and future generations”).

10. Declaration of the United Nations Conference on the Human Environment, U.N. Conference on the Human Environment, Stockholm, Sweden, June 5–16, 1972, U.N. Doc. A/CONF.48/14 (1972), revised by U.N. Doc. A/CONF.48/14/Corr.1 (1972), reprinted in 11 I.L.M. 1416 (1972); see also David Hunter et al., International Environmental Law and Policy 492 (3d ed. 2007).

11. United Nations Framework Convention on Climate Change, May 9, 1992, 1771 U.N.T.S. 107 (entered into force Mar. 21, 1994).

12. Webinar, supra note 1; see also John H. Knox, U.N. Special Rapporteur, Mapping Report on Climate Change and Human Rights (2014), http://srenvironment.org/wp-content/uploads/2014/08/Climate-Change-mapping-report-15-August-final.docx; United Nations Human Rights Office of the High Commissioner, Key Messages on Human Rights and Climate Change 2 (2015), http://www.ohchr.org/Documents/Issues/ClimateChange/KeyMessages_on_HR_CC.pdf.

13. Mary Robinson Foundation-Climate Justice, Mission and Vision, http://www.mrfcj.org/about/mission-and-vision/ (last visited Aug. 21, 2016).

14. Mary Robinson Foundation-Climate Justice, Principles of Climate Justice (n.d.), http://www.mrfcj.org/pdf/Principles-of-Climate-Justice.pdf.

15. Bali Principles of Climate Justice (2002), http://www.ejnet.org/ej/bali.pdf.

16. Id.

17. Webinar, supra note 1.

18. Id.

19. Id.

20. Divestor.org, Reinvest: Your Home, https://divestor.org/YHreinvesting.html (last visited Aug. 21, 2016).

21. Id.

22. Id.

23. Judith E. Koons, At the Tipping Point: Defining an Earth Jurisprudence for Social and Ecological Justice, 58 Loy. L. Rev. 349, 349 (2012).

24. Atif Ansar et al., Stranded Assets and the Fossil Fuel Divestment Campaign: What Does Divestment Mean for the Valuation of Fossil Fuel Assets? (Smith School of Enterprise and the Environment 2013), http://www.smithschool.ox.ac.uk/research-programmes/stranded-assets/SAP-divestment-report-final.pdf.

25. Fossil Free, What Is Fossil Fuel Divestment?, http://gofossilfree.org/what-is-fossil-fuel-divestment/ (last visited Aug. 21, 2016).

26. Surbhi Sarang, Note, Combating Climate Change Through a Duty to Divest, 49 Colum. J.L. & Soc. Probs. 295, 300 (2016).

27. What Is Fossil Fuel Divestment?, supra note 25.

28. Ansar et al., supra note 24, at 9 (noting that the private wealth owners making the decision to divest typically are university endowments, public pension funds, or their appointed asset managers).

29. What Is Fossil Fuel Divestment?, supra note 25.

30. Id.

31. Ansar et al., supra note 24.

32. Marc Gunther, Why the Fossil Fuel Divestment Movement May Ultimately Win, Yale Env’t 360, July 26, 2015, http://e360.yale.edu/feature/why_the_fossil_fuel_divestment_movement_may_ultimately_win/2898; Desmond Tutu, We Need an Apartheid-Style Boycott to Save the Planet, The Guardian, Apr. 10, 2014, http://www.theguardian.com/commentisfree/2014/apr/10/divest-fossil-fuels-climate-change-keystone-xl.

33. Sarang, supra note 26, at 298.

34. Id.

35. Id. at 299.

36. Id.

37. Fossil Free, Divestment Commitments, http://gofossilfree.org/commitments/ (last visited Aug. 21, 2016).

38. Brett Fleishman, The Decarbonizer and the Moral Case for Divestment, 350, Feb. 5, 2016, https://350.org/the-decarbonizer-and-the-moral-case-for-divestment/.

39. We Are Power Shift, Fossil Fuel Divestment, http://www.wearepowershift.org/campaigns/divest (last visited Aug. 21, 2016).

40. Id.

41. Id.

42. Hunter et al., supra note 10, at 491.

43. Id.

44. Fleishman, supra note 38.

45. Michael Josephson, Making Ethical Decisions 5–6 (Josephson Inst. of Ethics n.d.), http://www.sfjohnson.com/acad/ethics/making_ethical_decisions.pdf.

46. Id.

47. Id. (explaining that an act is not proper simply because it is permissible or you can get away with it. There is a big difference between what you have the right to do and what is right to do.).

48. Fossil Fuel Divestment, supra note 39.

49. Ansar et al., supra note 24.

50. What Is Fossil Fuel Divestment?, supra note 25.

51. Bali Principles of Climate Justice, supra note 15; Robert Cox, Environmental Communication and the Public Sphere 121 (3d. ed. 2013) (citing J. Agyeman et al., The Climate-Justice Link: Communicating Risk With Low-Income and Minority Audiences, in Communicating a Climate for Change: Communicating Climate Change and Facilitating Social Change (S.C. Moser & L. Dillings eds., 2007).

52. Sarang, supra note 26, at 300–01.

53. Fossil Fuel Divestment, supra note 39.

54. Koons, supra note 23, at 351.

55. Fossil Fuel Divestment Student Network, Organizing Pledge Project, http://www.studentsdivest.org/organizing_pledge (last visited Aug. 21, 2016).

56. Carmen Bain & Tamera Dandachi, Governing GMOs: The (Counter) Movement for Mandatory and Voluntary Non-GMO Labels, 6 Sustainability 9456, 9459 (2014).

57. Id.

58. Id.

59. Organizing Pledge Project, supra note 55.

60. 350, In the Space of Just 10 Weeks . . . , https://350.org/in-the-space-of-just-10-weeks/ (last visited Aug. 21, 2016).

61. Open Publication: Divest Harvard Requests Meeting With Stephen Blyth, Divest Harv., Mar. 9, 2016 (stating that “[a]bsent strong action, those of us who are young will likely see some of the world’s great cities begin to be submerged underwater and millions of people displaced or killed by droughts, floods and famines. In our view, this crisis calls for new intergenerational accountability entailing drastic reductions in fossil fuel investment, production, and use.” In order to reach the goal of 2°C, Divest Harvard states that “at least half of current reserves must remain in the ground, and investments in fossil fuel production must decrease considerably”), http://divestharvard.com/updates/.

62. Divestment Commitments, supra note 37.

63. Mariel A. Klein, Student Protesters Appeal Dismissal of Divestment Lawsuit, Harv. Crimson, Oct. 13, 2015, http://www.thecrimson.com/article/2015/10/13/divestment-appeal-lawsuit-dismiss/.

64. Robert P. Connolly, UMass Becomes First Major Public University to Divest From Direct Fossil Fuel Holdings, UMass Amherst, May 25, 2016, http://www.umass.edu/newsoffice/article/umass-becomes-first-major-public.

65. Id.

66. Id.

67. Id.

68. Id.

69. Id.

70. Fossil Fuel Divestment, supra note 39.

71. Divestment Commitments, supra note 37.

72. Id.

73. Fossil Fuel Divestment, supra note 39.

74. Melanie Mattauch, Mayor Wants to Rid Copenhagen of “Totally Wrong” Investments in Coal, Oil, and Gas, Fossil Free, Feb. 3, 2016, http://gofossilfree.org/mayor-wants-to-rid-copenhagen-of-totally-wrong-investments-in-coal-oil-and-gas/; In the Space of Just 10 Weeks, supra note 60.

75. Mattauch, supra note 74.

76. Connolly, supra note 64 (quoting Kumble Subbaswamy, UMass Amherst chancellor).

77. John Schwartz, Harvard Students Move Fossil Fuel Stock Fight to Court, N.Y. Times, Nov. 19, 2014, http://www.nytimes.com/2014/11/20/us/harvard-students-move-fossil-fuel-divestment-fight-to-court.html?ref=us&_r=1.

78. Id.

79. Harvard Complaint (Nov. 19, 2014), http://www.divestproject.org/wp-content/uploads/2014/10/Read-the-Complaint.pdf.

80. Harvard Climate Justice Coalition v. President and Fellows of Harvard College, About The Plaintiffs, http://www.divestproject.org/about-the-plaintiffs/ (last visited Aug. 21, 2016).

81. See Harvard Complaint, supra note 79.

82. Id. para. 2.

83. See id. paras. 41, 63.

84. Id. para. 29.

85. Id. paras. 29–31.

86. Id. para. 32.

87. Id.

88. Id. para. 33.

89. Id. paras. 21–28.

90. Harvard Climate Justice Coalition v. President and Fellows of Harvard College, The Evidence, http://www.divestproject.org/the-evidence/ (last visited Aug. 21 2016).

91. Harvard Complaint, supra note 79, para. 47.

92. Id.

93. Id.

94. Id. para. 66.

95. Id.

96. Id. para. 67.

97. Id.

98. Id.

99. Schwartz, supra note 77.

100. Theodore R. Delwiche & Mariel A Klein, Judge Dismisses Divestment Lawsuit, Harv. Crimson, Mar. 24, 2015, http://www.thecrimson.com/article/2015/3/24/judge-dismisses-divestment-lawsuit/.

101. Id.

102. Klein, supra note 63; Brief for Petitioner-Appellant Harvard Climate Justice Coalition v. President & Fellows of Harvard Coll., No. 2015-P-0905 (Nov. 19 2014), http://www.divestproject.org/wp-content/uploads/2015/10/HCJC-Appellants-Brief.pdf.

103. Klein, supra note 63; Harvard Climate Justice Coalition v. President and Fellows of Harvard College, Court Documents, http://www.divestproject.org/documents-2/ (last visited Aug. 21, 2016).

104. Animal Legal Defense Fund Amicus Brief, 36-9, http://www.divestproject.org/wp-content/uploads/2015/10/ALDF-Amicus.pdf.

105. Klein, supra note 63.

106. Dr. James Hansen Amicus Brief, 2015-P-0905 (Oct. 23, 2015), http://www.divestproject.org/wp-content/uploads/2015/10/Hansen-Amicus.pdf.

107. Klein, supra note 63.

108. Appellant Harvard Climate Justice Coalition v. President & Fellows of Harvard Coll., No. 2015-p-0905, Appeals Court, Full Case Panel Court Docket http://www.ma-appellatecourts.org/search_number.php?dno=2015-P-0905&get=Search (last visited Sept. 20, 2016).

109. Press Release, Harvard, Harvard to Sign on to United Nations-Supported Principles for Responsible Investment (Apr. 7, 2014), http://news.harvard.edu/gazette/story/2014/04/harvard-to-sign-
on-to-united-nations-supported-principles-for-responsible-investment/.

110. Harvard Management Co., Investing for the Long-Term: Integrating ESG Factors, http://www.hmc.harvard.edu/investment-management/sustainable_investment.html (last visited Aug. 21, 2016).

111. Id.

112. The Divestment Debate, Harv. Mag., July–Aug. 2014, http://harvardmagazine.com/2014/07/the-divestment-debate.

113. Thomas P. Lyon & John W. Maxwell, Greenwash: Corporate Environmental Disclosure Under Threat of Audit, 20 J. Econ. Mgmt. Strategy 3, 4 (2011) (defining greenwashing as “the selective disclosure of positive information about a company’s environmental or social performance, while withholding negative information on these dimensions”).

114. Beate Sjafjell & Benjamin J. Richardson, Company Law and Sustainability: Legal Barriers and Sustainability 2 (2015).

115. Id. at 2.

116. What Is Fossil Fuel Divestment?, supra note 25; Fleishman, supra note 38.

117. Sjafjell & Richardson, supra note 114, at 35–36.

118. Id.

119. Caring for Climate, Homepage, http://caringforclimate.org/ (last visited Aug. 21, 2016).

120. Id.

121. Caring for Climate, Responsible Corporate Engagement in Climate Policy, http://caringforclimate.org/workstreams/climate-policy-engagement/ (last visited Aug. 21, 2016).

122. Hunter et al., supra note 10, at 1489.

123. Donal Crilly et al., The Grammar of Decoupling: A Cognitive-linguistic Perspective on Firms’ Sustainability Claims and Stakeholders’ Interpretation, 59 Acad. Mgmt. J. 705 (2016).

124. Sjafjell & Richardson, supra note 114, at 3.

125. John Elkington, Cannibals With Forks: The Triple Bottom Line of 21st Century Business 22 (1998).

126. Id.

127. Id.

128. Kevin Wilhelm, Return on Sustainability: How Business Can Increase Profitability and Address Climate Change in an Uncertain Economy 105 (2013).

129. Id.

130. Id.

131. Id.

132. Id.

133. US SIF: The Forum for Sustainable and Responsible Investment, SRI Basics, http://www.ussif.org/sribasics (last visited Aug. 21, 2016).

134. Wilhelm, supra note 128, at 166.

135. Id.

136. Hunter et al., supra note 10, at 1490.

137. David W. Case, Corporate Environmental Reporting as Informational Regulation: A Law and Economics Perspective, 76 U. Colo. L. Rev. 379, 389 (2005).

138. Id.

139. Wilhelm, supra note 128, at 166.

140. Emily Chasan, Investors Want More From Sustainability Reporting, Says Former SEC Head, Wall St. J., Nov. 12, 2015 (citing Governance & Accountability Institute, Flash Report—Seventy-Five Percent (75%) of the S&P 500 Index Published Corporate Sustainability Reports in 2014, http://www.ga-institute.com/nc/issue-master-system/news-details/article/flash-report-seventy-five-percent-75-of-the-sp-index-published-corporate-sustainability-rep.html), http://blogs.wsj.com/cfo/2015/11/12/investors-want-more-from-sustainability-reporting-says-former-sec-head/.

141. Wilhelm, supra note 128, at 161; Carbon Disclosure Project, Homepage, https://www.cdp.net/en-US/Pages/HomePage.aspx (last visited Aug. 21, 2016).

142. Case, supra note 137, at 389; see also GRI, Homepage, https://www.globalreporting.org/Pages/default.aspx (last visited Aug. 21, 2016).

143. The organization describes itself as follows: “CERES is a non-profit organization advocating for sustainability leadership. We mobilize a powerful network of investors, companies and public interest groups to accelerate and expand the adoption of sustainable business practices and solutions to build a healthy global economy.” http://www.ceres.org/ (last visited Aug. 31, 2016). CERES established a 10-point code of conduct that companies voluntarily commit to reporting on corporate environmental activities. Id.

144. Case, supra note 137, at 389; see also GRI, supra note 142.

145. Hunter et al., supra note 10, at 1491; see also GRI, Homepage, https://www.globalreporting.org/Pages/default.aspx (last visited Aug. 21, 2016).

146. GRI, Homepage, supra note 145.

147. Hunter et al., supra note 10, at 1491.

148. GRI, About Sustainability Reporting, https://www.globalreporting.org/information/sustainability-reporting/Pages/default.aspx (last visited Aug. 21, 2016).

149. William R. Blackburn, The Sustainability Handbook: The Complete Management Guide to Achieving Social, Economic, and Environmental Responsibility 285 (2d ed. 2015).

150. Id.

151. Id.; About Sustainability Reporting, supra note 148.

152. United Nations Global Impact, Participation, https://www.unglobalcompact.org/participation/report (last visited Aug. 21, 2016).

153. Id.

154. Case, supra note 137, at 389.

155. Id.

156. Blackburn, supra note 149, at 285.

157. Id. at 285–86.

158. Hunter et al., supra note 10, at 1488.

159. Id. at 1493.

160. Id. at 1501.

161. Id. at 1488.

162. Sjafjell & Richardson, supra note 114, at 4.

163. Hunter et al., supra note 10, at 1501.

164. Sjafjell & Richardson, supra note 114, at 18.

165. Crilly et al., supra note 123.

166. United Nations Global Impact, What Is U.N. Global Impact?, https://www.unglobalcompact.org/what-is-gc (last visited Aug. 21, 2016).

167. Id.

168. United Nations Global Impact, Our Mission, https://www.unglobalcompact.org/what-is-gc/mission (last visited Aug. 21, 2016).

169. United Nations Global Impact, Our Governance, https://www.unglobalcompact.org/about/governance (last visited Aug. 21, 2016); G.A. Res. 70/224, U.N. GAOR, 70th Sess., at 2, U.N. Doc. A/RES/70/224 (2016).

170. United Nations Global Impact, The Ten Principles of the UN Global Compact, https://www.unglobalcompact.org/what-is-gc/mission/principles (last visited Aug. 21, 2016).

171. See E. Cameron et al., Business in a Climate-Constrained World: Catalyzing a Climate-Resilient Future Through the Power of the Private Sector 6 (2014), http://www.bsr.org/reports/BSR_Business_in_a_Climate_Constrained_World_Report.pdf.

172. United Nations Global Impact, Global Compact +15: General Assembly Session, https://www.unglobalcompact.org/library/3861 (last visited Aug. 21, 2016); Video: GC + 15: General Assembly Session (U.N. Global Compact 2016), https://www.youtube.com/watch?v=DFMaTKadtfs.

173. Id.

174. Id.

175. United Nations Global Impact, Our Mission, supra note 168.

176. United Nations Global Impact, UN Global Compact and the Sustainable Development Goals, https://www.unglobalcompact.org/what-is-gc/our-work/sustainable-development/background (last visited Aug. 21, 2016).

177. Id.

178. US SIF, supra note 133.

179. Id.

180. Id.

181. Wilhelm, supra note 128, at 166.

182. US SIF, supra note 133.

183. Id.

184. Id.

185. Wilhelm, supra note 128, at 115.

186. Principles for Responsible Investment, About the PRI, https://www.unpri.org/about (last visited Aug. 21, 2016); Wilhelm, supra note 128, at 161 (The six principles are: (1) Incorporate ESG issues into investment analysis and decisionmaking process;
(2) Incorporate ESG issues into ownership policies and practices;
(3) Seek appropriate disclosure on ESG issues by the entities invested; (4) Promote acceptance and implementation of the Principles within the investment industry; (5) Work together to enhance effectiveness in implementing the Principles; and (6) Report on activities and progress toward implementing the Principles).

187. Wilhelm, supra note 128, at 107.

188. Principles for Responsible Investment, What Is Responsible Investment?, https://www.unpri.org/about/what-is-responsible-investment (last visited Aug. 21, 2016).

189. Id.

190. Id.

191. Principles for Responsible Investment, About the PRI, supra note 186.

192. US SIF, supra note 133.

193. Id.

194. Wilhelm, supra note 128, at 116.

195. Lawrence P. Schanpf, Environmental Issues in Business Transactions 461 (2014).

196. Caitlin Kauffman, Proxy Preview 2015 Examines Record-Breaking Number of Sustainability-Related Shareholder Resolutions, Sustainable Brands, Mar. 11, 2015, http://www.sustainablebrands.com/news_and_views/marketing_comms/caitlin_kauffman/proxy_preview_2015_examines_record-breaking_
number_s.

197. US SIF: The Forum for Sustainable and Responsible Investment, SRI Basics, http://www.ussif.org/sribasics (last visited Aug. 21, 2016).

198. Id.

199. Id.

200. Acknowledge Moral Imperative to Limit Global Warming to 2°C, 2016—Exxon Mobil Corporation (Feb. 1, 2016), http://www.iccr.org/sites/default/files/resources_attachments/exxonreso.pdf.

201. Id.

202. Id.

203. Id.

204. Press Release, Interfaith Center on Corporate Responsibility, ExxonMobil Seeks to Deny Shareholders a Vote on Climate Justice Proposal (Feb. 1, 2015), http://www.iccr.org/sites/default/files/blog_attachments/pr_exxon_-_moral_reso_1-31-15_final_3.pdf.

205. See Press Release, Interfaith Center on Corporate Responsibility, ExxonMobil Fails to Block Climate Justice Proposal at the SEC (Mar. 24, 2016), http://www.iccr.org/sites/default/files/blog_attachments/exxon_pr_sec-moral_reso_3-24-16final.pdf.

206. Wilhelm, supra note 128, at 106.

207. The Equator Principles Association, About the Equator Principles, http://www.equator-principles.com/index.php/about-ep (last visited Aug. 21, 2016).

208. Wilhelm, supra note 128, at 106.

209. The Equator Principles Association, Equator Principles Association Members & Reporting, http://www.equator-principles.com/index.php/members-reporting (last visited Aug. 21, 2016).

210. The Equator Principles Association, Homepage, http://www.equator-principles.com/ (last visited Aug. 21, 2016).

211. Id.

212. The Equator Principles Association, About the Equator Principles, supra note 207.

213. Wilhelm, supra 128, at 106.

214. Id.

This chapter appears in Climate Justice: Case Studies in Global and Regional Governance Challenges, Randal S. Abate, editor. 700 pages. $79.95. The collection is published by ELI Press, the book publishing arm of the Environmental Law Institute.

Josephine Balzac is an assistant professor in the Department of Social Entrepreneurship at Rollins College.

ELI PRESS ❧ Promoting corporate responsibility through the divestment of fossil fuels and socially conscious investment.

Clean Energy Progress Is Trumping Trump’s Fossil Fuels Promo Agenda

Read more about Clean Energy Progress Is Trumping Trump’s Fossil Fuels Promo Agenda

Author

David P. Clark

Current Issue

May-June 2018

Issue

As the Trump administration persists in its agenda of shrinking federal clean energy commitments and boosting fossil fuels, the leading U.S. electricity industry trade group and a national environmental organization have some not-fake news for the president: “A clean energy transition is underway and accelerating.”

That conclusion stands despite Trump’s many actions aimed at tilting the United States toward more coal and other fossil fuel use and less renewable energy. Under the president’s proposed 2019 budget proposal, the Department of Energy’s Office of Energy Efficiency and Renewable Energy would be cut by $1.3 billion to $696 million. The Advanced Research Projects Agency-Energy would be zeroed out. At the same time, fossil energy research and development would receive $502 million, an $81 million increase over 2017. Astonishingly, DOE even delayed four energy-efficiency standards, leading a federal court to rule the delay was illegal.

What these and similar actions demonstrate is that the Trump administration doesn’t understand that “a clean energy transition is irrevocably underway and making extraordinary progress,” says Ralph Cavanagh, co-director of the Natural Resources Defense Council’s energy program. It is gratifying to see the electricity sector’s leadership “taking ownership of that transition” and “doubling down” on clean energy, he adds.

Recently, the doubling down took the form of an NRDC and Edison Electric Institute joint statement released at the meeting of the National Association of Regulatory Utility Commissioners. The statement sets forth 21 policy recommendations that will “continue to accelerate the clean energy transition” and that EEI and NRDC will work together on implementing.

Philip D. Moeller, an EEI executive vice president, also underscores that “the trend lines are pretty clear” as to the direction of the U.S. electricity system, which by 2050 will be far different from today, as coal plants expire after normal years of service and clean energy builds out. Moeller says clean energy progress will continue without disruption despite the budget cuts.

For EEI, the priority issues are electricity infrastructure siting and permitting, not funding. If the right policy signals were adopted to eliminate some of the uncertainties, “the capital is out there” for transmission lines and clean energy, Moeller adds. For example, if a potential project crosses federal lands, it is unclear who is in charge as different resources agencies weigh in, sometimes without distinct timelines and a resulting lack of accountability for making decisions. States use the Clean Water Act to deny permits, mainly for pipelines but also for transmission lines.

The joint statement notes that opportunities exist to reduce the cost and contentiousness of permitting and NRDC agrees with that, says Cavanagh. “We’re not agreeing on some kind of wholesale evasion or removal of federal environmental standards,” he says. But environmentalists are realizing that “we can do a better job in permitting essential infrastructure,” and NRDC is prepared to work with EEI to do that, he adds.

As an example, Cavanagh cites the Desert Renewable Energy Conservation Plan. The DRECP is a 22.5 million acre zone of public and private lands in California, including 10.8 million federal acres, on which streamlined renewable energy permitting can occur while conserving desert ecosystems. In February, the Department of the Interior announced that it was exploring significant changes to DRECP federal acreage, which Cavanagh says is worrisome. But, he adds, neither DOI nor any other federal agency can stop the momentum described in the joint statement, the fourth NRDC and EEI have issued starting in 2003 but “by far the most comprehensive and ambitious.”

Accelerating progress notwithstanding, barriers remain that EEI and NRDC address with recommendations on how states can improve utilities’ clean energy incentives. Moeller notes that there is uncertainty about ensuring adequate returns for long-term transmission investments, an issue the Federal Energy Regulatory Commission by court order must act on and whose resolution will impact clean energy.

For Cavanagh, a critical issue is that too many states continue regulating electricity companies as a commodity business where kilowatt-hour sales dominate all other considerations. As the joint statement makes clear, electricity should be seen as a service industry whose companies need earning opportunities associated with energy efficiency, renewable energy integration, and maintaining a reliable grid.

Don’t look to the Trump infrastructure plan for any help. The words renewable, solar, and wind are not in the plan, unlike oil and gas. But, as Cavanagh sees it, while the federal government can do damage, or be a partner, the most important partner is the electricity sector’s leadership itself and NARUC, trumping even Trump.

Clean energy progress is trumping Trump’s fossil fuels promo agenda.

Recent Cold Weather Shows Grid’s Reliance on Oil, Upping Emissions

Read more about Recent Cold Weather Shows Grid’s Reliance on Oil, Upping Emissions

Author

Kathleen Barrón - Exelon Corporation

Exelon Corporation

Current Issue

March-April 2018

Issue

The extreme cold weather in the Northeast and Mid-Atlantic this winter severely tested the performance of the power grid, which has come to increasingly rely on natural gas for generation in a way that may have unforeseen consequences on air emissions.

The electric system relies on natural gas to fuel both baseload and peaking power plants. Baseload refers to the minimum level of everyday demand for electricity. Peaking refers to rapid, short-term demand such as that which occurs in the early evening as people return home at sunset.

Baseload plants powered by natural gas are generally highly fuel-efficient combined-cycle plants that emit a fraction of the pollutants of coal. To the extent that combined-cycle natural gas units operate instead of coal-fired units, there is an environmental benefit due to reduced emissions and waste. This shift has occurred intentionally, to reduce emissions, as well as naturally, due to the rapid and sustained drop in natural gas prices over the last decade. The use of natural gas for electricity production in the United States has grown since 2001 from approximately 10 percent to over one-third of total generation.

Natural gas has long been valued as a cleaner peaking fuel for turbines, which provide the ability to ramp up electricity output within minutes. But because natural gas supply can sometimes be constrained or otherwise restricted, many gas units have the ability to operate in dual-fuel mode: they can burn either natural gas or fuel oil. Fuel oil releases more pollution and is generally more expensive than natural gas, and therefore is not used for normal operations. However, it is stored much more easily and serves as a hedge against natural gas delivery interruptions or price challenges.

Since many operators of natural gas plants maintain an ability to burn fuel oil, in some areas, such as New York City, there are requirements that operators burn oil under certain grid or weather conditions to preserve natural gas supply and affordability, particularly for residential customers who may rely on gas for heating. In other instances, an operator may be forced to burn oil because natural gas has been diverted to residential heating or supply was otherwise disrupted, including due to weather-related malfunction.

During cold weather such as we saw in January, natural gas prices may in fact spike high enough that oil becomes the more economical fuel. Indeed, the Energy Information Administration reports that average peak power prices in the Northeast and Mid-Atlantic for January 5 reached over $250 per megawatt-hour, compared with an average between $30-50/MWh in the previous six weeks.

As a result, the eastern grid burned a substantial amount of oil. In fact, preliminary data suggest New England burned more oil during this year’s two-week cold snap than the previous two years combined. During the cold weather, 35 percent of power generation in New England was from oil. In the Mid-Atlantic, oil-fired generation hit 10 percent. On a typical winter day, four percent of power generation is oil-fired.

This reliance on fuel oil to fill gaps in natural gas supply brings a staggering environmental cost. With regard to greenhouse gases, fuel oil has approximately 75 to 80 percent of the CO2 emissions of coal, as compared to roughly half for natural gas. Fuel oils also emit toxic metals and other hazardous pollutants. Finally, oil units emit sulfur dioxide at the same rate as coal and nitrogen oxides at three times the rate.

According to Massachusetts Energy and Environment Secretary Matthew Beaton, in January’s 15 days of cold weather, what New England “used in oil is the equivalent of approximately five percent of the total emissions reduction we need between 2014 and 2020,” referring to the requirement that the state achieve greenhouse gas emissions reductions of 25 percent below 1990 emissions levels by 2020. “Economically, this is a disaster for us in New England. Equally as important, environmentally the emissions and the profiles of what occurred in this timeframe are nothing but a disaster.”

To address these environmental impacts, many jurisdictions have imposed emission-rate limits, annual run-time limits, or are engaged in phasing out the use of these fuels altogether. Following the extreme cold this year, grid operators have become worried about units needed for reliability reaching emissions limits and thus being unavailable if there is another cold snap.

As Senator Lisa Murkowski (R-AK) put it, this experience will serve as an important stress test of the evolving grid. Important vulnerabilities were identified and their potential solutions have a range of implications that we cannot ignore.

The author is grateful for the assistance of Kathy Robertson in developing this column.

Recent cold weather shows grid’s reliance on oil, upping emissions.

Turkey's Ill-Considered Rush to Coal Undercuts Emissions Progress

Read more about Turkey's Ill-Considered Rush to Coal Undercuts Emissions Progress

Author

Bruce Rich - Environmental Law Institute

Environmental Law Institute

Current Issue

January/February 2016

Issue

Turkey's ill-considered rush to coal undercuts climate change emissions progress.

Environmentalists Battling Against Trans-Pacific Partnership Agreement

Read more about Environmentalists Battling Against Trans-Pacific Partnership Agreement

Author

David P. Clarke

Current Issue

January/February 2016

Issue

Environmentalists are battling against the Trans-Pacific Partnership agreement.

Solar Power's American Ascent

Read more about Solar Power's American Ascent

Author

Philip Warburg - Beacon Press

Beacon Press

Current Issue

January/February 2016

Issue

Power from the sun is surging in the United States. Realizing its vast potential invites us to make creative but careful use of our built environment and open lands.

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The Fossil Fuel Divestment Movement

Moral Dimensions of the Fossil Fuel Divestment Movement

College Campus Future Generations Lead Divestment Campaigns

Fossil Fuel Divestment Litigation

Corporate Social Responsibility and Responsible Investment

Corporate Social Responsibility Reporting and Disclosures

International Voluntary ESG and CSR Initiatives

Opportunities for Responsible Investment

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