Why the UC Regents Should Divest from Fossil Fuel Companies

Sam Titelman
J.D. Candidate 2015, UCI Law

In the name of climate justice and fiscal responsibility, I urge the UCI Law School community to join the ranks of fellow UC faculty and students in calling upon the Regents of the University of California to divest the University’s portfolio of all investments in the 200 publicly traded fossil fuel companies with the largest oil, coal, and gas reserves.[1] These sources of carbon[2] emissions are fueling a catastrophic brand of climate change that threatens both present and future generations of humanity, along with many of our fellow living organisms. Continuing to fund fossil fuel operations is incongruous with the University’s stated commitment to both the public interest and sustainability. Furthermore, investing in the “carbon asset bubble” poses a serious financial risk to the UC’s investment portfolio. As stewards of the UC institution and its endowment, the UC Regents have both a moral and legal obligation to address these concerns. Divesting from fossil fuel companies will send the right message to the industry and political leaders, align the University’s investments with its values, and protect our endowment from systemic carbon asset risk. Given the unique role law plays in helping shape societal values and norms, it befits UCI Law to contribute to the discourse surrounding this important issue and lend its support to the UC Fossil Fuel Divestment Campaign.

As a result of steadily increasing greenhouse gas emissions from the burning of fossil fuels, average global air temperatures are rising, glaciers and sea ice are disappearing, and our oceans – which function as massive carbon sinks – are becoming warmer and more acidic. The global scientific community is virtually unanimous in its recognition that anthropogenic climate change poses serious threats to life on Earth. This consensus is evidenced, for example, by reports issued by the UN-affiliated Intergovernmental Panel on Climate Change.[3] The anecdotal evidence is equally strong, having manifested over the past several years in more frequent and severe weather events that have resulted in devastating human and economic losses –– ranging from the Millennium drought in Australia and record flooding in India and Pakistan, to devastating North Atlantic hurricanes and Western United States’ wildfires.

The connection between carbon reserves and climate change is both established and quantifiable. Simply put, if we burn all the known carbon reserves on the planet, we will increase earth’s average air temperature by roughly five times the amount of increase that the vast majority of scientists and nations agree is tolerable for sustaining life on earth as we have known it for the past 10,000 years: two degrees Celsius. In 2009, 167 countries accounting for roughly 87 percent of global carbon emissions signed the Copenhagen Accord, endorsing “the scientific view that the increase in global temperature should be below two degrees Celsius … [and] agree[ing] that deep cuts in global emissions are required” to achieve this objective.[4] Climate scientists from various nations have produced models estimating that in order to keep the increase in Earth’s temperature within two degrees Celsius, human emissions of carbon dioxide must not exceed an additional 565 gigatons[5]. 565 gigatons of carbon emissions is essentially humanity’s “carbon budget.” Unfortunately, known carbon reserves comprise almost five times that amount. A team of London financial analysts and environmentalists known as the Carbon Tracker Initiative issued a 2012 report which quantifies the amount of carbon contained in the fossil-fuel companies’ proven carbon reserves: 2,795 gigatons.[6] In other words, if fossil-fuel companies are allowed to burn all of their known carbon reserves, then Earth’s projected temperature increase would vastly exceed that which scientists believe to be the cutoff point for sustaining contemporary human societies; a result which would be problematic for everyone, to put it mildly. Acclaimed author and environmentalist Bill McKibben wrote an excellent article detailing this relationship between temperature change, carbon emissions, and carbon reserves that was published by Rolling Stone magazine in 2012 and is accessible online.[7]

It helps to put these numbers in temporal perspective. According to the International Energy Agency’s (IEA) most recent statistics, in 2012 the world emitted 31.7 gigatons of Carbon; up more than 3 percent from 2010 and a staggering increase of 51.3 percent since 1990.[8] The IEA study expects carbon emissions to continue rising annually by about three percent, which would exhaust our carbon budget in the next 15 years. Not only are we talking about our own expected lifetimes, but arguably the midpoint of current students’ careers and a time in which some of us may be raising our own young children. This reality begs the question not only of what duties of stewardship we owe to future generations, but also of the type of world in which we wish to live and raise our families. Given this narrow window of remaining opportunity to transition away from our unsustainable reliance on fossil fuels, we must immediately begin taking steps to facilitate this transition. But in order to do so, we find ourselves pitted against the interests of the richest and most powerful companies on the planet; companies who desire to continue enriching themselves at the expense of our survival. In the name of climate justice, we must call upon the Regents to condemn this immoral profiteering by withdrawing their financial support for fossil fuel companies, just as the Regents once divested from the beneficiaries of apartheid in South Africa.

Furthermore, as awareness of the risks of carbon emissions grows, so to does the risk of investing in companies whose primary asset is carbon. The value of known carbon reserves is included in fossil fuel companies’ balance sheets, factored into their share prices and budgets, and treated as an asset against which money is borrowed. According to the Carbon Tracker Initiative, “[t]he top 100 coal and top 100 oil & gas companies have a combined value of $7.42 trillion as at February 2011.” If we accepted the premise that four-fifths of carbon assets are unusable, this would devalue the top 100 fossil fuel companies’ balance sheets by approximately $5.96 trillion, representing an asset bubble that dwarfs the housing bubble that spawned the global economic crisis in 2008. Practically speaking, we are more likely to see some form of policy, such as a carbon tax or cap-and-trade system, that seeks to internalize the external costs of carbon emissions. This would cause the price of fossil fuel products to rise in accordance with the true cost of their emissions, leveling the economic playing field for alternative energy sources, the effects of which would significantly devalue carbon assets. Notwithstanding the fossil fuel industry’s enormous lobbying efforts to stymie meaningful carbon regulation, such regulation could result from exceedingly devastating weather events (for example, “a giant hurricane [that] swamps Manhattan [or] a megadrought [that] wipes out Midwest agriculture.”),[9] or in response to the demands of a strong majority of the electorate. Savvy institutional investors like the Investor Network on Climate Risk – which represents more than $13 trillion in assets – have sought to build low-carbon investment opportunities that insulate their portfolios from the carbon bubble along with other climate and sustainability risks.[10] Likewise, at the UN Secretary General’s Climate Summit this past September, the Rockefellers and other private sector investors made fossil fuel divestment commitments totaling over $50 billion.[11] The Regents should be thinking along similar lines with respect to protecting our endowment, and in this vein fossil fuel divestment represents a prudent and prescient investment decision.

In the words of Bill McKibben, “the cold, mathematical truth … [is] that the fossil-fuel industry is systematically undermining the planet’s physical systems. … This industry … holds the power to change the physics and chemistry of our planet, and they’re planning to use it.”[12] The financial stakes are staggering for fossil fuel companies, and the industry has spent accordingly on political lobbying and marketing efforts to maintain the status quo and reap record profits from climate change. But the status quo is literally unsustainable, and the University of California should cease supporting it financially. We must send a clear message that we demand a sustainable alternative to the virtually one-dimensional carbon-driven future that the fossil fuel industry is pursuing.

To put the UC Divestment Campaign in context, roughly 400 college campuses around the U.S. currently have active fossil fuel divestment campaigns. Fifteen colleges, along with various municipalities and faith-based organizations, have already divested from fossil fuels. Notably, this past May, Stanford University agreed to freeze direct investment, and divest of any existing direct holdings, in coal extraction companies.[13] Broadly speaking, the underlying goal of the divestment movement is to enhance the public discourse about the relationship between carbon emissions and climate change; to influence politicians to enact policies that will help speed an orderly transition from an energy economy based primarily on fossil fuels to one that is much more reliant on sustainable, non-polluting sources of energy; and to convince the fossil fuel industry that its long-term interests will be best served by making a serious voluntary commitment to this transition.

With the assistance of several non-profit organizations, a dedicated and growing network of students from across the UC system has been hard at work campaigning for the Regents to (1) freeze new investments in the 200 fossil fuel companies with the largest carbon reserves; (2) develop a plan to divest current holdings in these companies within five years; and (3) engage in a program of investing in climate solutions. In response, the Regents adopted an environmental, social, and governance (ESG) framework for investment decisions, signed onto the UN Principles on Responsible Investment, and committed to invest $1 billion in climate solutions. But it is unclear what effect the ESG framework will have or how the money allocated to climate solutions will be spent. Now is the time to tell the Regents that investing in fossil fuels is a political choice with global consequences, and the University’s investment policy should include fossil fuel divestment.

If you are a faculty member, please read and consider signing the following UC Faculty Open Letter to the Regents: http://www.fossilfreeuc.org/uc-faculty-open-letter-to-the-regents#fnref-824-8

If you are a student, please read and consider signing the following petition that will be delivered to the Regents: http://www.fossilfreeuc.org

The Campaign hopes to gather enough signatures to submit the letter and petition during the first Regents’ meeting in 2015. If anyone wishes to get involved in the campaign or has any inquiries, please email Sam at stitelma@lawnet.uci.edu.


[1] The Carbon Underground 200. Foss. Free Indexes LLC (2014). http://www.iea.org/publications/freepublications/publication/CO2EmissionsFromFuelCombustionHighlights2014.pdf

[2] For purposes of this article, “carbon” means carbon dioxide.

[3] PCC. Climate Change 2013: The Physical Basis. (2013). http://www.ipcc.ch/report/ar5/wg1/

[4] Unfortunately, the Copenhagen Accord is a voluntary, non-binding agreement whose stated goals will be virtually impossible to achieve without meaningful policy changes regarding carbon and other greenhouse gas emissions.

[5] One gigaton equals one billion metric tons.

[6] Carbon Tracker Initiative. Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble? (2012). http://www.carbontracker.org/wp-content/uploads/2014/09/Unburnable-Carbon-Full-rev2-1.pdf

[7] Bill McKibben. Global Warming’s Terrifying New Math: Three simple numbers that add up to the global catstrophe – and that make clear who the real enemy is. Rolling Stone. July 19, 2012.
http://www.rollingstone.com/politics/news/global-warmings-terrifying-new-math-20120719 (Last visited Nov. 30, 2014).

[8] International Energy Agency. CO2 Emissions From Fuel Combustion Highlights 2014 (2014). http://www.iea.org/publications/freepublications/publication/CO2EmissionsFromFuelCombustionHighlights2014.pdf

[9] Bill McKibben. Global Warming’s Terrifying New Math.

[10] Investor Network on Climate Risk. http://www.ceres.org/investor-network/incr (last visited Dec. 1, 2014).

[11] The Guardian. Heirs to Rockefeller oil fortune divest from fossil fuels over climate change. Sept. 22, 2014. http://www.theguardian.com/environment/2014/sep/22/rockefeller-heirs-divest-fossil-fuels-climate-change (last visited Dec. 1, 2014).

[12] Bill McKibben. Global Warming’s Terrifying New Math.

[13] Stanford News. Stanford to divest from coal companies.
http://news.stanford.edu/news/2014/may/divest-coal-trustees-050714.html (Last visited Dec. 1, 2014).