Spurred by looming federal policy on CO2 emissions, many banks are exploring how to mitigate their financial risk as much as possible. This week, Citigroup, Morgan Stanley, and JP Morgan announced guidelines to help them determine whether to lend money to projects that emit a lot of carbon dioxide (CO2) – like coal-fired power plants.
The Principles are:
- Energy efficiency: Encourage clients to invest in efficiency measures, taking into consideration the value of avoided CO2 emissions; encourage regulatory and legislative changes that increase efficiency in electricity consumption including the removal of barriers to investment in cost-effective demand reduction.
- Renewable and low carbon distributed energy technologies: 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.
- Conventional and advanced generation: Investing in CO2-emitting fossil fuel generation entails uncertain financial, regulatory and certain environmental liability risks. Encourage regulatory and legislative changes that facilitate carbon capture and storage (CCS) to further reduce emissions.
An attorney for the Natural Resources Defense Council lauded this move in the bank industry’s news release:
Expectations are rising fast for this industry. Global warming is changing the competitive landscape. Clean power is the name of the game today. Conventional coal facilities are already facing intensive scrutiny. We think the serious money is increasingly going to be on clean, efficient solutions.
But as Matt over at Watthead pointed out, these are just guidelines – the banks are certainly not saying they won’t ever finance another old-fashioned coal plant.