A. Divestment

The 221st General Assembly (2014), in response to an overture from the Presbytery of Boston et al, referred to MRTI a proposal that the General Assembly declare our intention to categorically divest from fossil fuels within five years. This divestment proposal arises from a deep-seated concern about the effect of greenhouse gas emissions on climate change, and the effect of climate change on all God’s creation. We wish to express our gratitude to the overture proponents for catalyzing action on this issue. Our focus has been to identify faithful alternatives to the divestment proposal, and to assess the divestment proposal and these alternatives with respect to the dual criteria of (i) economic development and justice for all people and (ii) faithful and responsible stewardship of God’s creation. This section of the Consultation provides a brief summary of the rationale for the divestment proposal and our assessment of that proposal.

The proposal calls for divestment from fossil fuel companies, specifically, from approximately 200 publicly traded coal and petroleum firms.6 (This includes the major Organization for Economic Cooperation and Development oil companies, but notably does not include the national oil companies of the various oil-producing governments although these national oil companies hold the vast majority of global reserves). The overture Rationale states in part7:

Purpose

The realities of climate change require prophetic and strategic action by people of faith seeking to be faithful to the everlasting covenant God has made with us, with every living creature, and with all future generations. …

Biblical and Theological Rationale

The actions this resolution recommends are rooted in an expression of several of the most foundational theological and biblical principles of our Presbyterian identity. In Genesis 9, God makes a covenant not only with Noah, but with all of humanity; a covenant not only with all of humanity, but with every living creature; a covenant not only with all creatures alive today, but with all future generations. …

In Matthew 25: 31–46 Jesus calls us to care for the “least of these.” …

Because we are a covenant people and affirm Jesus’ call in Scripture to love our neighbors as ourselves, we recognize our obligation as people of faith to take into account how our decisions and activities affect all of creation now and into the future.

We are in substantial agreement with many aspects of this Rationale, and we believe this Rationale is closely consistent with the second of our two criteria for faithful alternatives – faithful and responsible stewardship of God’s creation. However, in assessing the divestment proposal against both of our criteria, we believe the proposal falls short.

First, the divestment proposal fails to consider the importance of economic development. Our first criterion of economic justice seems to have no analog in the divestment Rationale. That Rationale fails to recognize the importance of low-cost energy for economic development, and the divestment proposal – if it were effective in achieving its aims – would likely condemn to eternal poverty those poor who need access to low-cost energy to emerge from poverty.

Second, we believe the divestment proposal is highly unlikely to achieve its aims. We see no causal connection between the concern expressed – climate change – and the action proposed – sell certain stock investments. The contribution we as individuals and institutions make to the emission of greenhouse gases is the result of the consumption decisions we make, not the investments we own. Therefore, actions that alter investment portfolios but leave our consumption decisions unchanged should not be expected to change our contribution to greenhouse gas emissions. To be effective, a proposal must lead to changes in our behaviors.

Third, we are concerned that to divest is to abandon the field and thus to abrogate our duty to engage with political and corporate powers to find effective solutions to this problem. We cannot be part of the solution if we are not at the table.

In summary, we believe the church needs faithful alternatives to the divestment proposal because (i) divestment fails to recognize the continuing importance of economic development for the relief of poverty and the significant role low energy costs play in economic development and (ii) divestment is unlikely to achieve the result for which it aims because there is no causal link between the proposed action and that target. We believe the alternatives discussed below provide a more faithful response.

Image 6B. Motivating consumption and investment changes

As indicated in our review of Theological Foundations, an essential element of a faithful response is its potential to change human behaviors, because only by changing human behaviors, both corporate and individual, can we change the path of greenhouse gas emissions over the next 50 to 100 years. We need to change both how we consume energy, especially how we consume hydrocarbons, and how we invest in future energy sources, especially how we invest in carbon-free alternatives. In our economic system, our consumption and investment decisions are driven by prices. This works well when the price we pay fully reflects all the benefits and cost associated with the consumption or investment. If there are costs that are not reflected in the price but that do affect society in total, the market system doesn’t work properly. This problem is referred to as a “negative externality,” which simply means that our behavior imposes costs on society as a whole that are not reflected in the price we use to make our decisions.

Our consumption of hydrocarbons is increasing atmospheric greenhouse gases. However, in our market structure – the market structure that we applaud for its potential to provide wide-spread economic sufficiency – this contribution to greenhouse gases and associated problems is not reflected in the price charged for energy: there is a negative externality. Since the price we pay directly is too low (because it omits these broader social costs), we consume too much. If the price were to increase to include the full social cost, our consumption would go down, and our contribution to greenhouse gas emissions would go down. Similarly, if the price for energy from a particular source reflects the full social costs, investment incentives are reduced for high-emission sources of energy, and increased for low-emission or zero-emission sources. Getting the price right would lead us to shift investment away from hydrocarbons and toward low-carbon alternatives.8 (Section III.D below describes some of these alternatives.)

The simplest way to get the price right is to tax all sources of these emissions at a rate equal to the social cost of these emissions that is not captured in the price currently.9 Whatever mechanism may be chosen, and at whatever price, we note with urgency that this mechanism is inherently regressive, imposing hardship disproportionately upon the poor. We believe that such an inherently regressive measure is inherently unjust; it must therefore be accompanied by a mechanism to redress the regressive effect. One mechanism to achieve such correction would be to assure that the pricing mechanism is revenue neutral by rebating all funds collected through the mechanism in equal per capita shares to everyone.10

If a simple per capita rebate is deemed insufficient to offset the regressive nature of this tax or fee, there are additional steps that can be implemented. Perhaps the simplest additional mechanism would be to deem the rebate to be taxable as ordinary income, and then scale-up the rebate to reflect the collection of income tax revenues. This would allow the progressive nature of ordinary income tax rates to offset the regressive effect of the greenhouse gas tax.

No one should invest in fossil fuel companies who doesn’t wish to, but there is not a compelling moral imperative to refrain from such investment. Access to energy is necessary for human survival, and affordable energy is a driver of human economic advancement. Affordable energy is a source of net public good, and with current technologies hydrocarbons are the least expensive widely available source of energy. However, to the extent there is a negative externality, we have overstated this net contribution to the social good. Getting the carbon price right will address not only the economic problem of the over-consumption of hydrocarbons and under-investment in alternatives, but also the moral problem of knowing whether our consumption and investment behavior contributes to or detracts from the public good.

There are many details that must be addressed to implement a carbon tax proposal, including the size of the tax or fee (which should reflect the full social cost that is not captured in the private price).11 It is also necessary to consider how the mechanism in one country interacts with the approaches taken – or not taken – by other countries. Ideally, all the major economies would implement consistent approaches simultaneously. In the absence of such an ideal case, a carbon tax system should also have a provision for border adjustments – adding taxes to greenhouse gas-intensive imports from countries with systems that do not reflect the full social cost; rebating taxes for exports to countries without such a compatible system.12

The current low cost of hydrocarbons in the US provides the perfect opportunity to implement a tax and rebate system with minimal adverse effect. Industries from energy to airlines to banking to high tech already have a significant price of carbon included in their plans. Many segments of the oil industry including Chevron, ConocoPhillips, ExxonMobil, and Shell support a price on carbon as the best way to reduce our greenhouse gas emissions.

There are several specific steps that PC(USA) can and should take to support pricing carbon:

  1. Education – Facilitate education about carbon pricing as a solution.
  2. Member Lobbying – Encourage ethical engagement of our membership in organizations committed to implementation of a carbon pricing solution.
  3. PC(USA) Lobbying – Encourage Presbyterian (and other Christian) lobbyists to lobby for a carbon pricing solution.
  4. Corporate Advocacy – Vote shares at corporate annual meetings in favor of responsible steps to price of carbon rationally and introduce proposals to that effect as appropriate.

C. Reducing energy consumption as individuals and institutions

Rational pricing for greenhouse gas emissions creates the economic incentive for people to change behaviors and reduce emissions. We also have an incentive to change our behavior simply because that is the right thing to do. The Church is called to proclaim that our two-fold duty to the poor and to creation requires change, and we – individuals, congregations, and institutions – are called to change course. This is the literal meaning of repentance. This ministry of proclamation and repentance is not in place of the economic argument, but in addition to it. Change does not depend solely on repentance; neither does the economic argument operate in a theological vacuum. We are pleased to note signs of precisely this repentance in many different forms across our denomination.13 In the discussion that follows, we lift up a few of these examples, “first shoots” that may be emulated by others.

Huguenot Memorial Church, in Pelham, New York, has launched a program called Sustainable Huguenot (http://www.huguenotchurch.org/sustainable-huguenot.html). The initiative includes replacement of oil-fired boilers with geothermal heating and cooling. More generally, several certification programs have been offered to recognize congregations that have made substantial efforts related to environmental stewardship. PC(USA) Environmental Ministries started the Earth Care Congregations program in 2010. As of May 2015, 162 Presbyterian congregations have completed the Earth Care Congregations certification.

We within the Synod of the Sun (where this Consultation document originates) see examples close to home. Twenty churches in Arkansas and Texas are Earth Care Congregations. Ferncliff Camp and Conference Center (in Little Rock, Arkansas) has received a “Cool Congregation Award”. Ferncliff features a geothermal heating and cooling system for some buildings, as well as other energy saving features. It is home to “Solar under the Sun”, an award-winning mission of the synod, and includes a model “eco-center” guest facility for demonstrating environmentally sustainable energy use. Austin Presbyterian Theological Seminary (APTS) worked with an energy consulting company to conduct an energy audit and make substantial changes (at no up-front cost to APTS) that are projected to save $1.1 million over 30 years. The changes included replacement of existing light bulbs with LEDs and installation of a sophisticated thermostat/sensor system to reduce costs when the buildings are not in use. In the first six months after implementation of these changes, electricity consumption was reduced 38%.

Reducing energy consumption and increasing energy efficiency even in the absence of rational pricing of greenhouse gas emissions are important and faithful steps to combat climate change. However, the challenge of changing individual behaviors on the necessary scale likely requires establishment of rational market incentives in addition to these faithful responses.

D. Practical alternatives for a greener energy future

We have discussed above the need for behaviors to change and two strategies to motivate the required changes – economic incentives and faithfulness. It is also important that people know that practical alternatives exist, that these alternatives are implementable now, and that they have the potential to drive reductions in greenhouse gas emissions sufficient to address the problem.

We begin with some good news: the United States has been gradually reducing its greenhouse gas emissions in recent years. Between 2004 and 2013, emissions in total have declined nearly 9%, while per capita emissions are down more than 15%.14 Two major factors contributing to the reduction are the turnover in the vehicle fleet to newer models with better fuel efficiency, and an increase in the proportion of electricity generated from natural gas (displacing coal).15

This section discusses alternatives to select a cleaner mix of energy sources so that we can reduce emissions while we continue to grow our economy. We will highlight five sources of energy that we believe have the greatest potential to make a significant difference within the next 10 to 30 years. Two of these are established technologies with low to zero carbon footprint and substantial potential for broader deployment. The others are newer technologies, not yet mature but already a non-trivial contributor to our supply, each with arguably zero carbon footprint once installed, and each with huge potential for growth.16

1. Natural gas

Natural gas should play a significant role in the transition to a future where greenhouse gas emissions are constrained, displacing fuels that are more carbon intensive. It is plentiful, inexpensive (even with rational pricing of its carbon content), and flexible. It is an important fuel for electricity generation because the output of natural gas-powered generators can be readily adjusted to accommodate swings in demand and the variability of supply of wind or solar energy. Generating electricity by combusting natural gas generates about half as much CO2 per unit of electricity produced as coal-fired generation. A large number of gas-fired power plants are likely to be built in response to marketplace economics even without pricing emissions. Rational pricing of carbon would accelerate the transition from higher-carbon fuels to natural gas.

2. Nuclear energy

Nuclear energy is an amazing source of electricity because it is so dense and efficient. A quarter of one ounce of uranium has the same energy production capability as a ton of coal. Nuclear reactors have demonstrated the ability to operate consistently at 90% of capacity (compared to perhaps 25% of capacity for solar and 50% for wind). It has no greenhouse gas emissions, is highly scalable, and has a safety record better than that of other sources of electricity17. The biggest constraint to building new nuclear plants is the public perception of risks related to disposal of operating by-products, or due to acts of nature or terrorism. Reactions to the perceived risk vary widely across the globe. In Germany, the government is halting any plans for new capacity and seems to be moving toward shutting down existing plants, while France is expanding its already large fleet. The U.S. government has shown definite interest in encouraging more nuclear capacity and has permitted four projects on existing sites, but no producers have made commitments to move forward yet. Many experts believe that achieving a greener energy future will not be possible without a robust contribution from nuclear energy.

3. Wind energy

Wind accounted for 4% of U.S. electricity supply in 2013. Wind energy is technologically simple to generate, modular (one turbine at a time), clean, and much faster to permit and install than conventional power facilities. It suffers from intermittency since it can go zero to full output depending on wind conditions, and on average operates at less than 50% of its full capability. This means backup electricity supply must be available, either from alternative generation sources, improvements to the distribution grid that transmits power from one area to another, or electricity storage. Wind power is also perceived by the public to be somewhat unsightly, so it is unlikely to be installed in the more populated areas where most electricity is used. Wind electricity benefits from some subsidies, but is already cost competitive in areas where wind supply is sufficient, so economic incentives may not be as important to its growth. Wind energy seems to be making steady progress in the United States. Rational pricing of greenhouse gases (in place of existing scattered subsidies) would facilitate investment and encourage growth.

4. Direct Solar

Solar power is ubiquitous and free, if only we can capture it. Until recently, the process for direct conversion of solar to electric power has been uneconomic in anything other than highly specialized applications. Over the last 20 years, photovoltaic efficiencies have increased markedly, and full-cycle costs are now approaching power plant-generated costs. It is notable that this technical and economic progress has been achieved even in the absence of a consistent pricing of carbon, although there are subsidies for solar power. Solar power generation is obviously emission free, although the manufacture and installation of solar power plants or photovoltaic cells has a non-zero carbon footprint. Solar solutions are clearly beneficial, and a rational approach to pricing carbon would accelerate their rational economic adoption18.

5. Biofuels

The term “biofuels” refers to fuels made from organic material, including plants and animal waste. Biofuels are hydrocarbons, as are fossil fuels, the distinction being that fossil fuels are sourced from organic material deposited 100 million or more years ago, while biofuels are sourced contemporaneously. Biofuels may be consumed directly, or the material may be converted into ethanol, biodiesel, or other forms. While the four technologies discussed above are deployed almost entirely for generation of electricity, biofuels are often used as transportation fuels, including aviation. The recent use of biofuels originated as a means to increase supplies of hydrocarbons in response to concerns about reliable access to foreign sources of crude oil. As concerns about greenhouse gases have grown, biofuels have been put forward as part of a sustainable solution. The greenhouse gas argument for biofuels is mixed. Consumption of biofuels releases CO2 just as does the consumption of fossil fuels. In each case, the carbon thus released into the atmosphere is carbon that was removed from the atmosphere when the source organic material was created. The difference, of course, is that in the case of biofuels that source organic material was created quite recently, perhaps as recently as the previous growing season. Some therefore argue that biofuels are net zero carbon emissions (although that argument omits the environmental and greenhouse gas implications of the processing required to turn the source material into consumable fuel, and concerns about carbon that may be released if fallow or forest land is converted to grow the fuel).19 Biofuels at present benefit from a patchwork of subsidies that may or may not mimic the outcome that one would expect from consistent rational pricing of the carbon effects. Rational pricing of carbon would correctly value the net carbon emissions and accelerate the development, introduction, and growth of biofuels with very low net carbon emissions. Some biofuels, especially ethanol produced from corn, also have the negative effect of converting a product that could be used for food into fuel, disadvantaging those who are dependent upon affordable access to corn-based products for food. To date, this adverse effect has not been reflected in the pricing of biofuels.

6. Electricity storage and the intermittency problem

Wind and solar are nearly ideal technologies for generating electricity, but they suffer from the problem of intermittency – the wind doesn’t always blow, the sun doesn’t always shine, and neither may be available when you need electricity. In any other industry, this problem would be solved by using inventory. It is very hard, however, to hold inventories of electricity, and the technologies necessary to store electricity on the necessary scale are in general uneconomic. In the absence of economic storage, power systems that depend on wind or solar require a back-up generation source that can quickly come on stream. Those sources must keep the generators powered-up and spinning in order to supply “on demand” electricity. (Generation fueled by natural gas is well suited to this role.) Although industrial-scale power storage technologies are not currently economic, those technologies are advancing at a remarkable pace even without rational emissions pricing. A market with a consistent, rational price for carbon would greatly facilitate accelerating this pace. Practical industrial-scale power storage appears to be a critical enabler of adoption of wind and solar generation on the scale likely to be necessary.

7. Transportation, farming and other practices

Other reductions in society’s consumption of fossil fuels may play smaller roles, but collectively make a substantial difference. Adoption of efficient mass transit for goods and people will reduce our carbon footprint. These efforts will also foster community development as coordinated planning creates meaningful jobs for diverse social and economic groups. (The Blue-Green Alliance, http://www.bluegreenalliance.org/work/initiatives/transportation, provides an example illustrating this approach.) Sustainable farming practices such as no-till agriculture and polyculture will reduce reliance on synthetic fertilizers and pesticides, cut erosion, and produce agrosystems more resistant to drought and floods. While such efforts may not garner the publicity of new energy technologies, they encourage cooperative behaviors in addressing the threat of climate change, provide for local positive engagement, and more deeply connect us to our brothers and sisters in renewing God’s creation.

6 http://www.carbontracker.org/wp-content/uploads/2014/09/Unburnable-Carbon-Full-rev2-1.pdf at pages 13-14. Last visited April 24, 2015.
7 The overture, including the full Rationale, and the action by General Assembly may be found at http://pc-biz.org/PC-Biz.WebApp_deploy/(S(5u5o3nucdsz5ed2fjws3idn3))/Explorer.aspx?id=4587, last visited June 30, 2015.
8 A similar argument is made in The Power to Change: U.S. Energy Policy and Global Warming and in Hope for a Global Future: Toward Just and Sustainable Human Development; approved by the 208th General Assembly (1996) PC(USA). These are available at: http://www.pcusa.org/site_media/media/uploads/acswp/pdf/energyreport.pdf and
http://www.pcusa.org/site_media/media/uploads/acswp/pdf/hope-for-a-global-future.pdf, respectively.
9 A good summary of carbon tax issues may be found at http://www.carbontax.org/. A “cap and trade” system is an alternative that, if implemented properly, can have many of the market benefits of a carbon tax. A carbon tax is simpler, and less prone to government manipulation. Regulations can change behaviors without reliance on market mechanisms, but regulations are likely to have unintended consequences and are expensive to administer.
10 The Citizens Climate Lobby, https://citizensclimatelobby.org/, has defined and is actively promoting a “fee and dividend” system along these lines. This proposal is summarized in Appendix B.
11 Appendix C discusses in more detail the issues in setting the price.
12 These border adjustments are described more fully in the discussion of the Citizens Climate Lobby proposal in Appendix B. For a discussion of a European “climate club” approach to border adjustments, see http://www.nybooks.com/articles/archives/2015/jun/04/new-solution-climate-club/
13 And no doubt elsewhere as well, although our discussion here is limited to PC(USA).
14 Emissions data per EPA http://www.epa.gov/climatechange/Downloads/ghgemissions/US-GHG-Inventory-2015-Main-Text.pdf; population data per http://www.multpl.com/united-states-population/table.
15 Overall economic activity is a significant driver of total emissions, and the 2008 financial crisis and recession substantially reduced economic activity and emissions. By 2013, however, the economy had recovered to pre-crisis levels. GDP in 2013 was about 14% above 2004 levels. See https://research.stlouisfed.org/fred2/series/GDPA
16 We do not discuss here any emerging technologies, although these will surely play an important role over the next 50 to 100 years.
17 http://www.oecd-nea.org/ndd/reports/2010/nea6862-comparing-risks.pdf, Table 2 at page 35
18 A more thorough discussion of solar energy may be found at https://mitei.mit.edu/futureofsolar.
19 There are forms of biofuels under development, notably algae-produced biofuels and cellulosic ethanol, that have tremendous potentially to provide meaningful amounts of energy.