Climate 411

As Congress makes big budget decisions, new polling shows bipartisan support for climate innovation investment

Every Spring, Congress starts the process of deciding on next year’s federal budget, which contains funding for agencies and departments that help drive climate and clean energy progress.

Stepping up investment in climate innovation – the creation of new or enhanced climate solutions that lower pollution, create jobs and cut energy costs – should be a priority for next year’s budget. The bipartisan Infrastructure Investment and Jobs Act injected new funding for climate innovation this year, including for projects to pilot carbon removal technology, battery storage and low carbon fuels, but we need innovation funding to continue growing in the coming years.

Despite the escalating challenges brought on by climate change, recent EDF analysis found that the U.S. is still under-funding key climate solutions and technologies, including clean transportation, clean industry and manufacturing, and some renewable energy programs in the Department of Energy. Meanwhile, other countries have raced to increase the pace and scale of their innovation investments, competing with American leadership in clean energy technology.

Lawmakers have an opportunity to help get the country on track by ramping up U.S. investment in climate innovation in next year’s budget. And recent national polling by Morning Consult, commissioned by EDF, makes clear that a bipartisan majority of voters support bolstering federal funding.

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Governor Sisolak set the stage for strong climate action. Now, Nevada must deliver.

Lake Mead

Lake Mead. PC: Pixabay

The latest report from the Intergovernmental Panel on Climate Change (IPCC) issued a stark warning: societies have not done enough to mitigate and adapt to the effects of climate change, endangering millions of lives, and must take urgent, “transformational” action to avert the worst outcomes of human-caused climate change.

Nevada is already feeling a range of climate change impacts – from Lake Mead’s falling water levels and declining spring snowpacks threatening critical water supplies to rising summer temperatures in Las Vegas and Reno threatening public health. In fact, without strong action to curb climate change, the state could see more than triple the number of heat wave days, which are projected to rise from 15 days to nearly 55 annually by 2050. All of these impacts have a disproportionate effect on the health of low-income communities, communities of color and tribal communities because they often lack the community infrastructure, such as quality health care and housing, to cope with these impacts as a result of decades of disinvestment.

Governor Sisolak directly addressed the climate threats bearing down on communities across the state in his 2022 State of the State speech, highlighting strategic climate investments, clean energy development and heat mitigation as priorities. While these are crucial actions that signal Gov Sisolak’s continued commitment to climate action, they will not be enough to meet the accelerating climate challenge head-on. Nevada will have to go further and faster with strong policy that directly targets – and limits – climate pollution. 

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How a proposed Department of Labor rule would help protect retirement savings from climate risk

Source: pxhere

(This post was co-authored by Alex Song at the Institute for Policy Integrity at at NYU School of Law. You can also read it here.) 

Should retirement plan managers be able to consider climate change and other financially relevant environmental, social, and governance (ESG) factors in their decisions? A recent analysis of public comments found overwhelming support for a proposed rule from the Department of Labor (DOL) affirming their ability to consider these factors.

ESG factors, including climate change, can affect risk and return for all types of investments, not just ESG-labeled funds. For example, a company may have crucial assets that are particularly vulnerable to physical risks from climate-amplified extreme weather or may face transition risks from climate-driven policy or technology changes.

The Trump administration, however, limited retirement plan managers’ ability to consider ESG factors when selecting plan offerings and making other decisions. The DOL proposal would remove these irrational constraints, which would enable plan managers to better protect Americans’ savings.

DOL administers the Employee Retirement Income Security Act (ERISA), which sets forth fiduciary duties of prudence and loyalty for employers who sponsor retirement plans and anyone they contract with to help manage or advise those plans (collectively, “retirement plan managers”). Prudence requires that retirement plan managers carry out their duties with care, skill, and diligence. Loyalty requires that they act solely to benefit participants (the people invested in the plan). DOL’s proposal does not change or conflict with these core fiduciary duties, as some have misleadingly argued. Rather, it ensures that fiduciaries can fulfill their duties effectively in the context of the pervasive financial impacts of climate change. DOL’s proposal explains why retirement plan managers may often need to consider climate risk and other ESG factors and affirms their ability and responsibility to do so.

Environmental Defense Fund, the Institute for Policy Integrity at NYU School of Law, and the Initiative on Climate Risk and Resilience Law jointly submitted comments supporting the proposal, as did the overwhelming majority of the more than 100 other institutions and 20,000 individuals who commented.

Here’s why DOL’s proposal is so important:

  1. Climate change is a risk-return factor for retirement investments.

Climate change is already affecting companies’ bottom lines, and its effects on business operations are projected to accelerate over the next several decades. The National Oceanic and Atmospheric Administration reports that in 2021 alone there were 20 separate billion-dollar weather and climate change disasters in the U.S., causing $145 billion in damages. A wide range of industries will experience large climate-related losses. For example, climate change is expected to decrease labor productivity and agricultural yields, especially in the Southwest, and the real estate brokerage site Redfin estimates that climate-intensified wildfires could wipe out up to $2 trillion in property values in California alone.

These effects are relevant to financial risk-return analyses, especially for retirement investing. Because many retirement funds invest in a diversified portfolio representative of much of the economy, the overall impact of climate change on the economy is relevant to the interests of plan participants, especially in light of the long time horizons inherent in retirement investing. A systematic review of the economic literature on sustainable investing and climate finance found an “encouraging relationship between ESG and financial performance,” observing that ESG funds often outperform regular funds over longer time horizons and provide downside protection during social or economic crises.

  1. The Trump administration’s rules impede retirement plan managers’ consideration of climate risk.

In 2020, under the Trump administration, DOL issued new rules that targeted ESG investment strategies and departed from established ERISA practices. These rules amended longstanding regulations under Section 404(a) of ERISA, and imposed new procedural and documentation requirements that have, in practice, limited the ability of retirement plan managers to consider climate-related risks and other ESG factors in their decisions. As we noted in our July 2020 comment letter to DOL, such interference with fiduciaries’ prudent decision-making processes ultimately harms plan participants whose savings are at stake. In 2021, the Biden administration’s DOL announced that it would not enforce the Trump administration rules, but plan managers still need the clarity and certainty of a new rule.

  1. DOL’s proposal affirms that retirement plan managers should consider all factors relevant to investment risk and return, including climate impacts.

If finalized, the proposal would eliminate the Trump administration’s harmful limitations on fiduciaries’ ability to consider climate impacts when making investment decisions. The proposal affirms that fiduciaries should treat climate and other ESG factors like any other risk-return factor where relevant. Fiduciaries still “may not subordinate the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan to other objectives.” In other words, fiduciaries should consider the financial impacts of climate and other ESG factors, but not their personal policy preferences. Retirement plan managers still have to work in the best interests of their clients, and current and future retirees can rest assured that their financial security is the sole objective.

  1. DOL’s proposal applies the same rational principles to default investments as to investment options generally.

The proposal also reverses a Trump-era bar on designating funds that consider climate or other ESG factors as default investments for plan participants who don’t otherwise specify how to allocate their contributions. Approximately 80% of new ERISA plan contributions are invested in such default funds, known as Qualified Default Investment Alternatives (QDIAs), which only underscores the importance of allowing fiduciaries to consider all relevant risk-return factors when selecting them. By restoring fiduciaries’ discretion to consider climate and ESG factors in QDIA selection where relevant to the risk-return analysis, the proposal will ensure that participants are not unnecessarily deprived of access to financially prudent investment options.

  1. DOL’s proposal reminds retirement plan managers of the potential value of exercising shareholder rights.

Lastly, the proposal corrects distortions to fiduciary decision-making that were introduced by the Trump administration’s proxy voting rule, which included several provisions that discouraged fiduciaries from exercising shareholder rights. Specifically, that rule included a statement that fiduciary duty “does not require the voting of every proxy or the exercise of every shareholder right,” and a “safe harbor” provision for voting on issues “substantially related to the issuer’s business activities or . . . expected to have a material effect on the value of the investment.” This language created incentives for fiduciaries to err on the side of waiving their right to vote on shareholder proposals and board elections. In other words, retirement plans would be less likely to have a say in the management of the companies in which they invest, despite the fact that shareholder voting can be an important tool for managing risk. The proposal correctly recognizes the value of shareholder rights and removes the statements that would have discouraged fiduciaries from exercising these rights to the most beneficial extent.

In sum, DOL’s proposal would protect Americans’ retirement savings by:

  • highlighting the financial relevance of climate change
  • undoing harmful Trump administration rules
  • affirming that fiduciaries should consider ESG factors like climate change when relevant to investment risk-return analysis
  • applying the same rational principles to selection of default investments
  • acknowledging the value of exercising shareholder rights
Also posted in Economics, Policy / Comments are closed

How ports can use the Bipartisan Infrastructure Law to protect public health and act on climate

Aerial view of business port with Shore crane loading containers in freight ship.

Most Americans hadn’t thought about the importance of ports until pandemic-driven disruptions in the global supply chain created delays and uncertainty about the delivery of the goods we count on in our homes, schools, businesses and beyond. But people who live in the communities near ports, where last century’s fossil fuel-powered equipment belches out harmful air pollution, know better. They’ve been burdened with the very real costs of infrastructure that’s stuck in the past.

President Biden’s Bipartisan Infrastructure Law represents an unprecedented investment in the future. The deal advances something for everyone, promising to deliver clean, reliable energy, create good manufacturing jobs, expand public transit, and provide a national network of chargers for electric vehicles. And of course it specifically sets aside $17 billion to improve ports, with $450 million dedicated to replacing the outdated equipment that often creates the largest emissions harming our climate and our health. The Biden administration, including Department of Transportation Secretary Pete Buttigeg and Environmental Protection Agency Administrator Michael Regan, has consistently committed to taking the necessary action on climate change and environmental injustice, prioritizing equity for those communities denied the full protections of our clean air and water laws.

Ports are poised to reimagine vital parts of our infrastructure and position themselves as solutions-oriented leaders. Here’s how they can do it.

Ports can do their part to meet our shared climate goals

The latest report from expert scientists with the Intergovernmental Panel on Climate Change shows that many of the harms caused by the pollution warming our atmosphere are already here. Worse, more warming makes it more likely that we will suffer more frequently from severe weather events. Recovery will cost more, and it will be more unequal. Our health, safety, and livelihoods stand to be threatened by more floods, droughts, wildfires, diseases, crop failures, and the collapse of ecosystems. We must not only do all we can to eliminate climate pollution, but adapt our systems to a new reality.

That includes how we move goods around the globe. Diesel-fueled cargo ships are responsible for a billion tons of climate pollution every year. When these ships arrive at ports, their containers are transported between terminals, warehouses, and railyards with other diesel-fueled equipment that creates even more carbon dioxide, as well as PM 2.5, NOx, and other harmful pollutants. Our transportation system is the largest source of the pollution changing our climate; 90 percent of ships, trucks, trains, and other vehicles are powered by fossil fuels.

Ports have influence here, with the ability to accelerate the retirement of these less-efficient ships, drayage trucks, switcher trains, dredges, and other diesel-powered cargo-handling equipment in favor of zero-emissions ones on their way to full electrification. The shorter distances and fixed routes that trucks and trains travel make them ideal to electrify, for one. Such older equipment represents the largest sources of the emissions at Port Houston, for another, underscoring just how significant the benefit that replacing it would have. Port Houston and the country’s 19 other largest ports should commit to moving 100 percent of container traffic along zero-emissions supply routes by 2035.

Ports can rebuild their relationships with nearby communities

It’s not only about eliminating climate pollution. Ports’ emissions and environmental impacts have been hard to track. Ports must now commit to being good neighbors — and that starts with protecting public health.

Investing in zero-emissions supply routes would create near- and long-term benefits for the health and safety of people who live, work, and go to school in portside communities, many of which are overburdened with disproportionate amounts of pollution. Children living within two miles of the Houston Ship Channel, for example, are 56 percent more likely to develop a kind of leukemia than children living 10 miles away. Cancer rates in Manchester, a portside community in the city’s East End, are 22 percent higher than the city overall.

Infrastructure doesn’t have to divide us. Repairing it must mean more than expanding freeways or dredging waterways; it means improving outcomes for people in communities with equity disparities. With ports, this could mean making funding contingent on increased local enforcement of anti-idling regulations, for example. Listening to the specific aspirations of nearby communities, port leadership should work to redraw truck routes, redesign intersections for safety, and relocate their parking lots away from people’s homes.

Ports can change how they make decisions and commit to a solutions-oriented public engagement process that brings many stakeholders — both industry and community — to the table. Together, with state and federal departments of transportation, ports can retool their decision-making process to ensure that 40 percent of the new infrastructure funds, promised in the Biden administration’s Justice 40 initiative, create benefits for the communities that have been overlooked historically.

Ports must see themselves as parts of our cities

For too long, ports have been thought of as the delivery entrances to our cities, but they are the front doors in a global economy. I saw this firsthand. In late February 2022, I gathered with shipping and logistics experts at the Trans-Pacific Maritime Conference in Long Beach, California. It was an invigorated, spirited atmosphere. The nearby Port of Long Beach had approved a Clean Air Plan with a pledge to get to the zero-emissions movement of goods by 2035. The neighboring Port of Los Angeles has the same goal. The Port of San Diego intends to approve a plan this summer to guide their transition to a fleet of zero-emissions trucks by 2030. I’ve since returned home to Texas, where the Port of Corpus Christi and Port Houston on the 50-mile-long Ship Channel talk publicly and proudly about their ambitions to expand. With the Biden administration’s investment, they have the opportunity to join forward-looking peers and steer themselves – and all of us, too – toward a cleaner, healthier future.

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Mercury pollution from coal plants is still a danger to Americans. We need stronger standards to protect us.

Mercury pollution from coal-fired power plants is extremely dangerous — it causes brain damage in babies and is associated with heart disease and many other serious health issues.

Fortunately, mercury pollution has fallen significantly since EPA finalized the Mercury and Air Toxics Standards in 2012. However, despite the success of the standards in reducing pollution as a significantly lower than projected cost, many power plants continue to emit mercury and other dangerous air pollutants in large quantities. That means stronger safeguards are needed to protect the health of Americans across the country.

The top 30 power plants for mercury pollution

Coal-fired power plants continue to be the largest source of mercury pollution in the United States, accounting for approximately 8,800 pounds of mercury emissions in 2017 alone. Mercury is emitted in the combustion process of coal and other fossil fuels. Coal has much higher mercury concentrations than other fossil fuels, which explains why coal-fired power plants often emit larger quantities of mercury pollution than do power plants that burn other fossil fuels.

Mercury pollution from coal plants is particularly severe in certain parts of the country. EDF just published the above map, based on estimates calculated using publicly available data from 2020. It shows the top 30 power plants emitting the highest amount of mercury pollution in the country.

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Also posted in Cities and states, Clean Air Act, Health, Policy / Comments are closed

New study shows federal agencies must consider climate risk in environmental reviews under NEPA

(This post was co-authored by Romany Webb of the Sabin Center for Climate Change Law at Columbia Law School and EDF’s Michael Panfil. It is also posted on the Sabin Center’s website.)

From pipelines destabilized by melting permafrost to powerline-sparked wildfires exacerbated by drought, the impacts of climate change are affecting infrastructure across the U.S. and heightening the risks posed to the environment and communities.

A new study, undertaken jointly by Environmental Defense Fund and Columbia Law School’s Sabin Center for Climate Change Law, finds that federal agencies are not adequately considering climate change impacts in energy project reviews conducted under the National Environmental Policy Act (NEPA).

The finding stands at odds with NEPA’s requirement that federal agencies take a “hard look” at the environmental effects of proposed actions, including considering ways to mitigate adverse effects and alternative courses of action, before proceeding.

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Also posted in Clean Air Act, Energy, Greenhouse Gas Emissions, Partners for Change, Policy / Comments are closed