Leading Wall Street Banks Establish The Carbon Principles

Guidelines to strengthen environmental and economic risk management in the financing and construction of electricity generation.

Three of the world's leading financial institutions announced the formation of The Carbon Principles, climate change guidelines for advisors and lenders to power companies in the United States. The need for these Principles is driven by the risks faced by the power industry as utilities, independent producers, regulators, lenders and investors deal with the uncertainties around regional and national climate change policy.

The Principles were developed in partnership by Citi, JPMorgan Chase and Morgan Stanley, and in consultation with leading power companies American Electric Power, CMS Energy, DTE Energy, NRG Energy, PSEG, Sempra and Southern Company. Environmental Defense and the Natural Resources Defense Council, environmental non-governmental organizations, also advised on the creation of the Principles.

Citi, JPMorgan Chase and Morgan Stanley have pledged their commitment to the Principles to use as a framework when talking about these issues with clients. This effort creates a consistent approach among major lenders and advisors in evaluating climate change risks and opportunities in the US electric power industry. The Principles and associated Enhanced Diligence represent a first step in a process aimed at providing banks and their power industry clients with a consistent roadmap for reducing the regulatory and financial risks associated with greenhouse gas emissions.

The Principles are:

Energy efficiency. An effective way to limit CO₂ emissions is to not produce them. The signatory financial institutions will encourage clients to invest in cost-effective demand reduction, taking into consideration the value of avoided CO₂ emissions. We will also encourage regulatory and legislative changes that increase efficiency in electricity consumption including the removal of barriers to investment in cost-effective demand reduction. The institutions will consider demand reduction caused by increased energy efficiency (or other means) as part of the Enhanced Diligence Process and assess its impact on proposed financings of certain new fossil fuel generation.

Renewable and low carbon distributed energy technologies. Renewable energy and low carbon distributed energy technologies hold considerable promise for meeting the electricity needs of the US while also leveraging American technology and creating jobs. We will encourage clients to invest in cost-effective renewables and distributed technologies, taking into consideration the value of avoided CO₂ emissions. We will also encourage legislative and regulatory changes that remove barriers to, and promote such investments (including related investments in infrastructure and equipment needed to support the connection of renewable sources to the system). We will consider production increases from renewable and low carbon generation as part of the Enhanced Diligence process and assess their impact on proposed financings of certain new fossil fuel generation.

Conventional and advanced generation. In addition to cost effective energy efficiency, renewables and low carbon distributed generation, investments in conventional or advanced generating facilities will be needed to supply reliable electric power to the US market. This may include power from natural gas, coal and nuclear technologies. Due to evolving climate policy, investing in CO₂-emitting fossil fuel generation entails uncertain financial, regulatory and certain environmental liability risks. It is the purpose of the Enhanced Diligence process to assess and reflect these risks in the financing considerations for certain fossil fuel generation. We will encourage regulatory and legislative changes that facilitate carbon capture and storage (CCS) to further reduce CO₂ emissions from the electric sector.

This could be an important first step in promoting energy efficiency and requiring the use of more renewable energy and coal plants with CCS. If power companies can't get financing for their projects without agreeing to these principles, it effectively requires the use of these technologies.  If it results in effectively requiring that all power companies adopt these principles, it means that the companies cannot claim that they will become uncompetitive by adopting them. By seven large power companies being involved with development of these principles there is, as it has been previously reported, a desire by some power companies, to adopt more environmentally friendly process, if only a way could be found to implement these processes across the entire industry. Private industry at work again!

Comments

[GreyFlcn]

It's interesting to point out, that the Nuclear Industry can't get financing from Wall Street either.

http://gristmill.grist.org/story/2008/2/4/121316/2398/#2

[GreenPlease]

An interesting lesson to learn:

My dad worked at the CBOT
His dad worked on Wall Street
They both taught me the same thing:

"Corporate America will win even if they have to rig the game."

In this case, I see utilities such as AEP and Southern Company rigging the game. A preemptive strike if you will. They obviously see a carbon tax or cap and trade system coming down the pipeline and they obviously see the threat that solar and wind poses to their veritable mints (coal fired plants).

They are obviously aware of the fact that tremendous CO2 eimision reductions can be had by simply addressing the demand side of the equation. Simple stuff:

-CFL and LED lighting
-Ground source heat pumps
-On site CHP (combined heat and power)

If the likes of AEP, Exelon, and Southern Co decided that they really wanted to reduce their emissions, they'd modify legislation that would allow for mass acceptance of CHP (which it appears they are doing). They would still own and operate the CHP plants and would still make their profits by burning fuel. No paradigm change. They live to fight another day.

[windmill power in the home]

Exactly, which is where the underlying problems only just begin. Corporate America will always win.

[viv energy drink]

In San Francisco, I have been told that all new constuction must have solar power. That will make a big difference whar there is no choice and will be financed in the mortgage.

[vanessa alves]

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[mujeres]

That will make a big difference whar there is no choice and will be financed in the mortgage.

[Furniture Stores in Los Angeles]

Glad to see the power being used for good rather than evil. Lol

[Filipino Car Lease Broker Los Angeles]

I love that they did this! I think we need more big companies to help out with endorsing alternative energy research! They can afford to really make a change in the world.

[towel warmer]

This is an interesting move, now let's see if this will bring any good results.

[Dentist Los Angeles]

Good principles, I hope they make a difference.

[Air Purifiers]

Great stuff we need to focus on getting not only other energy but purer air.

[Therapist San Francisco]

I love the first one, we should definitely work on not even producing CO2 emissions.

[Reversing sensors]

These are all great principles, now we just need to make sure people are working on making them a reality.

[SEO Services]

Energy efficiency is so important!

[acting classes los angeles]

It would be great if we could implement these processes across the entire industry like you said, this is incredibly crucialto what we are working on in terms of alternative energy.

[Microsoft Office]

The new President will have to embrace this exact plan if the United States is to avoid economic catastrophe.

[las vegas wedding chapels]

That will make a big difference whar there is no choice and will be financed in the mortgage.