The United States Environmental Protection Agency (EPA) has proposed new standards for the sulfur content in gasoline, a move designed to cut harmful smog produced by cars and trucks. The EPA wants fossil fuel companies to reduce the amount of sulfur in gasoline to a maximum of 10 parts per million, down from the current standard of 30 parts per million. The State of California already has such a standard, so in a sense this is the rest of the country catching up to California’s standard. The gasoline with lower sulfur content is called “ultra low sulfur” gasoline and is currently available in Europe, South Korea, and Japan, in addition to California. The global auto industry supports the EPA’s move, "We have been anxiously awaiting this rulemaking because it is good for the environment and will help harmonize the federal and California programs for both vehicles and fuels," said Michael J. Stanton, president and CEO of Global Automakers, as reported by PR Newswire. The EPA estimates that the reduction in smog from lowering the sulfur content nationwide would be the equivalent of taking 33 million cars off the road.

However, the U.S. fossil fuel industry is fighting the EPA’s proposal through its trade association, the American Petroleum Institute (API), as well as efforts by Republican politicians. Responding to the EPA’s proposal, the API said in its press release: “There is a tsunami of federal regulations coming out of the EPA that could put upward pressure on gasoline prices.” They go on to say that gasoline prices could be increased by up to nine cents per gallon because of the increased costs to produce lower sulfur content gasoline.

The U.S. fossil fuel industry is producing ultra low sulfur gasoline for the California market now, but they are selling the higher sulfur gasoline to the rest of the country. They seem to be putting their profits above considerations of your health. They do not want to upgrade their refineries to produce cleaner burning fuel. And their response to the EPA proposal is closer to a lie than a half truth. They are basing their argument to delay or avoid the new regulations on the concept that this would cause the price of gasoline to rise. In reality, they have a choice: increase the price of gasoline or earn a slightly lower profit.

This is a great but tragic example of an “externality,” where a company or industry produces a product that causes harm but is able to lay the cost of the damage off onto society at large. I am somewhat amazed that the fossil fuel industry is so brazen in their position.

Smog contributes to thousands of premature deaths each year and makes respiratory ailments more severe for tens of thousands of people. The fossil fuel industry can improve their product and reduce these health problems, but they prefer the higher profits over your health. And of course you do not have to be a consumer of gasoline to suffer these ill effects; people who do not own a vehicle have to breathe the same air as drivers.

The EPA states that over 158 million Americans are currently experiencing unhealthy levels of air pollution, which are linked with adverse health impacts such as hospital admissions, emergency room visits, and premature mortality. Motor vehicle emissions are a particularly significant source of air pollution, especially in urban areas. Further, the EPA states that if implemented, the new standards would prevent by 2030 annually: between 820 and 2400 premature deaths; 3200 hospital admissions and asthma related emergency room visits; 22,000 asthma exacerbations; 23,000 upper and lower respiratory symptoms in children, and 1.8 million lost school and work days.

The EPA also provides a cost benefit analysis of implementing the regulation and suggests that in 2030 the annual cost of the program would be about $3.4 billion, or $130 per vehicle and 1 penny per gallon of gasoline. The economic benefit is between $8 billion and $23 billion in monetized health benefits to the country.

The fossil fuel industry views this expense as detrimental to its profits and against the interests of its corporate shareholders. It prefers the higher profits of the existing higher sulfur gasoline to the health benefits of the country.

Portfolio 21 does not invest in the stocks of fossil fuel exploration and production companies. The fossil fuel industry’s response to the EPA’s proposed new standards on sulfur content for gasoline is just another of many, many reasons for our fossil fuel free position.

John Streur is President of Portfolio 21 Investments. He has 25 years of experience in the field of investment management. 

The 1997 conference produced the Kyoto Protocol, a greenhouse gas reduction agreement, which most industrialized countries signed.  President Bill Clinton signed the Protocol, but Congress did not ratify it. In 2005, President George W. Bush rejected the agreement.  The Kyoto Protocol was set to expire this month; however, it has now been extended to 2020.  The Protocol actually set binding targets for most industrialized countries to reduce greenhouse gas emissions.

In 2009, there was agreement that the UNFCC should take actions necessary to keep the average global temperature from rising more than 3.6 degrees Fahrenheit from the temperatures recorded just before the start of the Industrial Revolution.  Today the average global temperature is 59 degrees and the temperature not to be exceeded is 60.3 degrees. Emissions are increasing rapidly, especially among developing countries using coal, and the feasibility of the international goal to control the global temperature is questionable.

At this year’s conference, there was agreement that the richest countries should provide financial aid to the poorest nations for the “loss and damage” of climate change since the poorest countries have contributed the least to the problem and are also the most vulnerable.  However, the process for determining the amount of aid and how it will be distributed is yet to be decided.

Delegates also decided that a new international agreement will be developed by 2015 and take effect in 2020.  China and the U.S., the world’s two largest emitters of greenhouse gases, will figure prominently in the new agreement.  Although China is classified as a developing country, it is the largest emitter and soon will be the world’s largest economy.

Global emissions of carbon dioxide are at a record high and developed countries are principally responsible as a result of more than 150 years of industrial activity.  The pace and scale of actions by the international community to reduce emissions and concentrations of greenhouse gases is of great concern.

Carsten is Portfolio 21 Investments' founder and Chairman. He has 30 years of experience in socially and environmentally responsible investing.

According to Jeffrey Hollender, co-founder and Board Chair of ASBC and co-founder of household product company Seventh Generation, “The White House summit was a unique opportunity for the American Sustainable Business Council to collaborate with the administration to develop the innovative strategies that will lead to a healthy, just and sustainable economy.”

ASBC believes that only through “responsible and comprehensive change” can we as a society “continue to enjoy the benefits of market capitalism.”  For change to occur, ASBC boosts that five core principles must be upheld.

1.  Market Economy:  ASBC believes that a market-based business system must remain; however, it needs to be adjusted to account for externalities, including human health and environmental costs.

2.  Broad Prosperity:  Education is a fundamental right.  Also, business development should anchor living wage jobs.

3.  Sustainability:  Managing our economy to meet the needs of the current generation without impairing the ability of future generations to meet their needs.

4.  Sensible Measures and Regulations:  Regulations have the ability to limit the power of harmful companies and technologies and by doing so they promote fair competition, innovation, and change.

5.  Democratic Control:  According to ASBC a “sustainable market should be structured and managed to be fair, transparent, well regulated, and fully accountable to all participants.”

I applaud ASBC for bringing together the business community, thought leaders, and politicians.  Although I do not believe that adherence to these principles alone will make for a sustainable global economy, I am encouraged by the high level of discussion.  It is my hope that the summit brings attention to the fact that our current market-based economy is flawed and in need of new paradigm thinking.  Only when the market embraces the business opportunities that environmental stewardship and equitable economy can have, will change occur.

Beth is a Senior Research Analyst with Portfolio 21 Investments.  She has 8 years of environmental and social investing research experience. 

As we all recall, on April 20, 2010 the Deepwater Horizon oil drilling rig exploded.  Eleven men were killed and a seabed well ruptured, which allowed approximately 210 million gallons of oil to enter the Gulf’s saltwater churn.   In addition to the oil leaked from the well, an additional 2 million gallons of chemical dispersants were introduced into the coast’s ecosystem to break up the heavy crude oil.*

Two years later, monitoring and research on the Gulf coast have yet to make clear scientific links between health concerns, food safety, and the oil spill.  The U.S. Environmental Protection Agency reports that it monitored for a range of air pollutants during the oil spill and cleanup.  The EPA states that its analysis “did not detect levels of air pollution higher than what is normal on the Gulf coastline for that time of year.”  However, critics question whether the government has gathered enough data to be able to declare the air safe, and noted that poly-aromatic hydrocarbon levels were not measured for days after the spill.  There is also concern that the health effects of the chemical dispersants are understood even less, and may have magnified in toxicity when combined with the crude oil.  Residents, specifically those involved in the clean up efforts, have reported exhaustion, headaches, stomach pains, and chronic coughs.

In addition to human health impacts, many scientists believe that the chemicals used to clean up the spill have induced ecosystem-wide changes, such as an increase in toxic algal blooms or interference in the absorption of arsenic by oil-coated marine rocks, which has increased the levels of this toxin in seafood.  According to a survey led by the University of South Florida, after the spill between two and five percent of fish in the Gulf have skin lesions or sores, compared with data from before the spill, when just one-tenth of one percent of fish had any growths or sores.

Meanwhile, the U.S. Food and Drug Administration officially deemed Gulf seafood safe for eating.   Yet the FDA’s findings assume that the average adult eats the equivalent of about three jumbo shrimp per week.  After spending a significant amount of time in New Orleans, I can say with confidence that locals’ diets traditionally rely on Gulf fish, in an amount much greater than three shrimp per week.  Today, however this reliance on local foods is changing.   I understand that many Gulf residents are refusing to eat the fish from their local waterways, choosing instead imported or farm raised fish, or other protein sources altogether.

Despite the repeated safety claims by federal agencies and BP, on April 18, 2012 (two days shy of the second anniversary of the spill) BP sealed an out of court settlement for $7.8 billion, representing thousands of individuals and businesses. Of this sum, the Gulf seafood industry is slated to receive over $2 billion for economic loss.  Needless to say, even this significant monetary compensation is a long way from addressing the true economic costs of the disaster’s damage to the Gulf region’s ecosystem and cultural food traditions.

Last month, the Environmental Protection Agency (EPA) issued its first ever rule on carbon dioxide emissions from new power plants, which was met with applause and some skepticism.   Currently the U.S. has no limits on the amount of carbon pollution that future power plants can emit.  The new rule states that any new power plant will be allowed to emit no more than 1000 pounds of carbon dioxide per megawatt-hour.  To offer some perspective on this number--natural gas plants currently average 800 pounds per megawatt-hour, while coal plants can average upward of 1800.  This makes it impossible for any new U.S.-based coal fired power plants to be built unless they capture and store their own carbon emissions, which is a technology that is currently not commercially viable.  With the low cost of natural gas, increased consumer awareness on climate change, preference for low carbon alternatives, declining costs of renewables, and now the new EPA ruling, many consider coal outdated and uneconomical.  From an environmental perspective, this rule is positive.  It also provides assurance to investors and businesses alike that we will not be returning to coal.

The EPA is also crafting carbon regulations for oil refineries and other stationary pollution sources.  According to the World Resources Institute, when the EPA’s carbon rules are fully deployed they could cover approximately three-quarters of the country’s greenhouse gas sources and could reduce U.S. carbon emissions anywhere from 5% to 12% by 2020 (using 2005 as a baseline).  We encourage the EPA to continue its regulatory work and we believe investors would be well served by comprehensive climate legislation.

Beth is a Senior Research Analyst with Portfolio 21 Investments.  She has 8 years of environmental and social investing research experience. 

Environmental investing is not something that can be done from afar, or by reading a company’s annual report or website, nor by screening some database. For environmental investors, there is no herd to follow. It requires in-depth fundamental research, hands-on engagement with companies and many other sources of information, combined with experience and independent thinking. This is trailblazing work, requiring courage and creativity. That’s what Portfolio 21 Investments does and that’s why I am so enthusiastic about our future.

The need for excellence in environmental investing exists because many of the environmental costs and risks being created by companies may not be accurately reflected in stock prices. These costs have historically been pushed off onto society at large, even though they rightly belong to the companies that create them. At some point, these costs may come back to the companies that actually took the risks, and that can impact shareholders.  As March is the one-year anniversary of the tsunami that triggered a disaster waiting to happen at Tokyo Electric Power Company’s (TEPCO) Fukushima reactor, I need not reach for examples.  Good investment analysts who choose to do the work required can assess these risks and factor them into investment decisions.

To me, TEPCO illustrates that the risks to stockholders associated with a company’s environmental interaction may not currently be reflected in its stock or bond price. It literally took a tsunami and a nuclear meltdown for investors to react to the risks that were all there prior to the disaster.  And in the year since the disaster at Fukushima TEPCO stock has declined by over 88%.

But environmental investing is not all about risk avoidance. There are many companies doing excellent work and moving their products and business models forward in order to thrive in an ecologically constrained world. These are the companies that Portfolio 21’s investment strategy seeks out worldwide—the leaders and innovators.

That is what drew me into the field, my perception of the needs and the opportunities. Portfolio 21 Investments’ unique position as the leading environmental investor is what drew us together. One other point, I do hope to leave the world a better place in whatever large or small way possible. That is, of course, one other characteristic that I share with each of the people at Portfolio 21 Investments and I suspect with all of you reading this blog post.  Perhaps that will be the topic of a future posting…

The information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security.

John Streur is non-executive Chairman of Portfolio 21 Investments. He has 25 years experience in the field of investment management.