The final report from the President’s Commission on Carbon Neutrality, released March 18, states that the University of Michigan’s plans to become entirely carbon neutral across all three campuses by 2025 for Scope 1 and Scope 2 emissions, which would include all power purchased by the University and produced on sites like the Central Campus Power Plant. Slightly over a year ago, the University froze all future investments in the fossil fuel industry in order to reconsider its own contribution to climate change. Despite these commitments, the University’s reliance on fossil fuels trounces through investments and how energy is consumed on campus.
As our organizations waited for the final recommendations by the PCCN, we saw how other student and faculty groups have responded in strength. Climate Action Movement at the University calls for a five-year divestment from the fossil fuel industry. Voices for Carbon Neutrality urges revising of investment policies to align more closely with carbon neutrality goals. The Michigan Ross Energy Club supports implementing carbon pricing before 2025 and environmental, social and corporate governance metrics for endowment investment decisions.
As members of two sustainability-oriented clubs, we resonate with these requests. The ESG Sustainability Committee adopts and creates awareness of sustainable practices across the College of Engineering, and Citizens’ Climate Lobby at the University of Michigan seeks to create the political will for a national carbon fee and dividend. Coupling two of the many emerging strategies — divestment and internal carbon pricing — is an especially promising way to guide the transition and propel the University to the forefront of national leadership and commitment to carbon neutrality.
Despite the rapidly-increasing market for renewables, many institutions like ours are still stuck in the past. In 2019, the University’s investments in “natural resources” totaled roughly $1.3 billion, or about 9% of their total investments. Most of this investment is in fossil fuels, such as oil and gas.
We are all aware of the detrimental effects the burning of fossil fuels poses on the environment, public health, agriculture, national security and more. Although we hope the Board of Regents listens to the ethical arguments, divestment is often weighed more by today’s economic factors.
We couldn’t agree more with Regent Ron Weiser (R) when he acknowledged that “the long-term risk of investing in fossil fuels is substantial.” The University’s split from the industry would remove itself from the growing negative stigma surrounding fossil fuels, sending a signal to other universities that the industry is becoming a thing of the past. Widespread public stigmatization might change the behavior of our markets and governments. Fund managers and investors could start “negative screening” fossil fuel companies, and banks may even stop lending to fossil fuel companies. Moreover, the government may be pressured to place legislation on fossil fuel companies such as a carbon tax or outright ban. This, in itself, would have a more significant effect on fossil fuel companies than any other method.
If creating a stigma around the use of fossil fuels isn’t a good enough incentive, then consider the continuously decreasing price of solar and wind power. Renewables accounted for the newest United States electricity-generating capacity so far this year, and they’re only expected to grow. The University of California fully divested from fossil fuels in 2020 and is reinvesting in renewable energy over a five-year time span. It is absolutely possible for the University to divest from fossil fuels as well as continue this positive change in market norms.
Even if the University cannot fully divest within five years, there are many policy tools at our disposal to accelerate the transition. What especially caught our eye in the PCCN report was the mention of an internal carbon pricing system. This bipartisan, globally-supported policy has proven to be effective and scalable at many other universities, including Yale, Arizona State, Princeton and the University of California, Los Angeles. An internal carbon pricing system at the University, functioning in tandem with a Revolving Energy Fund (synonymous to a Revolving Loan Fund), could reduce utility expenses, raise revenue for sustainability projects and build the momentum for state and national carbon pricing.
Investing in the fossil fuel industry no longer corresponds to long-term growth. Oil and gas stocks have underperformed and are only expected to become increasingly volatile. By integrating internal carbon pricing with investment decisions, the University can avoid future losses from the fossil fuel industry and stay in line with the Paris Agreement while emerging as a climate leader.
Regent Mark Bernstein (D) stated so himself in the Wall Street Journal: “We have to do everything we possibly can to disrupt the flow of carbon into the atmosphere, and that includes disrupting the flow of capital to the fossil-fuel industry.”
We can leverage divestment to inspire new research across campus, increase shareholder power in up-and-coming technology and eliminate our dependence on and support for the fossil fuel industry. With the support of an internal carbon pricing initiative, the University can harness the power of market-based solutions to meet decarbonization goals and address climate change head-on. It’s time to prove that we are the high-caliber institute we claim to be.
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As we wait for the Regents to share “concrete next steps” in the planned transition to a low-carbon economy, let’s not slow our momentum. Until then, here are links to the CAM Petition, to the CCL Nationals and to ESG.
The authors are all members of ESG Sustainability or the Citizens’ Climate Lobby. Amelia Francisco is a junior in the College of Engineering and can be reached at framelia@umich.edu. Vivian Kim is a freshman in the College of Engineering and can be reached at vivkim@umich.edu. Lunia Oriol is a senior in the College of Engineering and can be reached at leorio@umich.edu. Rinny Singh is a sophomore in the College of Engineering and can be reached at rinnysi@umich.edu. Natasha Vatalaro is a junior in LSA and can be reached at vnatasha@umich.edu.