Big banks take issue with coal plants
Feb 5, 2008 - The Associated Press
Three of the nation's largest investment
banks said Monday they've developed new environmental
standards to help lenders evaluate risks associated
with investments in coal-fired power plants.
Citigroup Inc., JPMorgan Chase & Co.
and Morgan Stanley say they've produced "The Carbon
Principles" together with several large power companies,
Environmental Defense and the Natural Resources Defense
Council, that will make it more difficult for new
U.S. coal-fired power plants to secure financing.
The focus of the principles will be
to steer power companies away from plants that emit
high levels of carbon dioxide -- a greenhouse gas
-- and to focus on new, cleaner and renewable technologies.
The principles do not, however, strictly prevent any
of the banks from financing the plants.
About half of the electricity in the
United States is generated from coal-fired power plants,
according to the Energy Information Association.
The new lending creeds come at a time
when uncertainties for coal and power companies abound.
Coal-fired power plants have been scrutinized by environmental
groups and regulators over the emissions of harmful
pollutants. Congress is mulling legislation that would
limit greenhouse gas emissions. Plans for coal-fired
power plants have also recently been squashed in several
states, although more are being planned to account
for a predicted surge in electricity demand.
Energy consumption in the U.S. is expected
to double in the next 22 years, according to the North
American Electric Reliability Council.
But the principles also come at a time
when the country's biggest financial institutions
have grown skittish after taking billions of dollars
in write-downs from mortgage-related debt. Investment
in coal-fired power plants could prove to be risky
investments that many banks aren't willing to take.
"With these principles, we are making
a very serious commitment to examine the risk around
coal-fired power plants," said Eric Fornell, vice
chairman of JPMorgan's natural resources investment
The plants have economic consequences
that "need to be carefully examined," he added. "Investors
need to know what they are getting into."
Fornell said JPMorgan is talking to
competitors about the possibility of adopting similar
"Leading utilities and financial institutions
understand that the rules of the road have changed
for coal," said Mark Brownstein, managing director
of business partnerships for Environmental Defense.
"These principles are a first step in facilitating
an honest assessment of electric generation options
in light of the obvious and pressing need to substantially
reduce national greenhouse gas pollution."
But Rebecca Tarbotton, director of the
Rainforest Action Network's Global Finance Campaign,
said the new regulations don't go far enough. The
Rainforest Action Network has long fought the big
banks to impose environmental standards in their lending
"Calling them the Carbon Principles
is an overstatement," Tarbotton said. "A serious climate
change policy would commit the banks to emissions
reductions in their financing and extend beyond coal
into other carbon-intensive sectors such as coal mining
and the oil and transportation industries."
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