Editor’s note: This commentary is by Don Schramm, who is the Progressive Party candidate for Vermont Treasurer.
Here in the Green Mountain State, Vermonters take pride in caring for the environment. Many people recycle, compost, use renewable energy, bike commute, or use other types of transportation in order to reduce their carbon footprint. Since scientists have determined that carbon emissions from burning fossil fuels are causing climate change, many people have sought to minimize their impact, most obviously through low-carbon transportation, clean heating fuel, and reducing consumption.
People have changed their behavior because of the extreme circumstances. The fact is, if we continue to release CO2 into the atmosphere as if there are no downstream effects, Earth’s temperature will rise by more than 2°C (3.8°F), land ice will melt, oceans will acidify, and storms will grow stronger. As Vermont’s own governor, Peter Shumlin, has said, “There is no greater responsibility that we have than getting off our addiction to oil … so that our kids and grandkids have a livable planet.”
Central characters in the issue are the major coal, oil and gas corporations that we call fossil fuel companies. These companies, many of which are household names including Exxon Mobil, BP, Royal Dutch Shell, Chevron, etc., have claimed vast quantities of underground carbon reserves totaling more than 3200 GtCO2; that is over 3,200 gigatons of carbon in the ground.
The severity of the climate crisis is directly linked with the amount of carbon that is extracted and released into the atmosphere. Currently, over 30 GtCO2 are released each year, leaving us around 100 years before we run out of fossil fuels altogether. Fossil fuel companies, driven solely by profit, will attempt to extract as much of these reserves as they can, regardless of the consequences.
Thankfully, due to advances in science and technology, we know exactly how much carbon can be released into the atmosphere before we surpass 2°C. As Bill McKibben’s “Do The Math” documentary explains, we can release another 565 GtCO2 into the atmosphere before we hit that tipping point. In other words, fossil fuel companies must leave more than 80 percent of their reserves in the ground, uncommercialized, or we will surpass the internationally agreed upon temperature-rise limit.
The state of Vermont has a $4.1 billion pension fund that includes more than $100 million invested in coal, oil and gas companies.
The idea of reserves remaining in the ground is a scary concept for investors in fossil fuel companies. In 2004, Royal Dutch Shell announced they overestimated their reserves by 20 percent and overnight their stock dropped by 10 percent. This concept is known as the “stranded assets” problem. Since carbon reserves are on the balance sheets of these companies as assets, they are directly tied to the value of the company. If these assets aren’t commercialized then the value of the company is reduced. The “Carbon Bubble” takes it a step further, and considers that many of these carbon reserves won’t be fully extracted due to overestimation, production difficulties and effects of climate change; when these assets aren’t realized, the value of the fossil fuel industry will tank.
The state of Vermont has a $4.1 billion pension fund that includes more than $100 million invested in coal, oil and gas companies. The state of Vermont does not invest in tobacco companies because of the known health impacts of smoking tobacco. Most would agree that it is morally corrupt to invest in companies that cause harm to society. This reasoning, along with concerns around stranded assets and the carbon bubble, is why many Vermonters, including state pension holders, are calling on Peter Shumlin, Beth Pearce and the Vermont Pension Investment Committee to divest from fossil fuel companies.
Fiduciary responsibility is the primary obligation of the state treasurer, and Beth Pearce claims that this responsibility prevents her from supporting fossil fuel divestment. While Pearce is surely considering the short-term profit and loss of such a move, she is failing to realize the long-term overall impact of these investments.
In the long run, the amount of carbon that fossil fuel companies extract will determine the severity of climate change. Shareholder engagement can be a meaningful way to influence the behavior of corporations, but it is a false solution when it comes to climate change. A shareholder proposal suggesting that Exxon Mobil keep 80 percent of its carbon reserves in the ground would never be considered.
The state of Vermont continues to profit off of climate change by investing in fossil fuel companies. Despite the past success of these investments, many people are choosing to align their investments with their values. Today, more than half of investment managers around the country have fossil-free options for investors. The new Fossil Free index (FFIUS) negatively screens the S&P 500 from the top-200 fossil fuel companies; its past performance shows that avoiding the worst fossil fuel companies can actually be more profitable than investing in them.
As I mentioned earlier, many individuals have changed their lifestyles in some way in order to reduce their carbon emissions. While it is very important for all of us to take steps to address the crisis, it must be met with even stronger action from corporations and governments as they have the most power to fix the problem. Keeping 80 percent of carbon reserves in the ground is a major challenge, but the urgency and scale of global climate change demands bold action now.
We have better uses for the money Vermont is currently investing in dirty energy. As citizens, we should all demand that our State Treasurer take the necessary steps to divest all state funds from fossil fuel companies by 2018.
