| NEW YORK
NEW YORK Three Wall Street banks said on Monday
they will set standards for factoring in environmental risks
posed by carbon emissions when lending to power companies that
seek to build coal-fired power plants.
Citigroup Inc, JP Morgan Chase & Co and Morgan Stanley will
form "The Carbon Principles," climate change guidelines for
advisers and lenders to power companies in the United States.
The standards do not preclude bank financing for building
traditional coal-burning power plants, said Jeffrey Holzschuh,
vice chairman at Morgan Stanley. Instead, they set up a more
rigorous evaluation process, such as looking at the costs of
storing carbon emissions and other risk factors.
"The Carbon Principles" establishes a process to include
the impact of future global warming legislation on the loan
risk of building new coal-fired power plants.
The principles are intended to be an industry-wide
framework, and more financial institutions are expected to jump
"I think there will be several other banks that will join
in over the next few weeks," Holzschuh told Reuters.
Coal generates about half of U.S. electricity, but is the
dirtiest emitter of the main greenhouse gas, carbon dioxide.
Traditional coal-fired plants have come under pressure from
states and environmentalists, while Congress considers several
bills that would cap greenhouse gas emissions. Presidential
candidates also say they favor regulating the gases.
Plans for new coal-fired plants have been scuttled recently
in Texas, Florida and Kansas as environmental groups work with
banks to highlight their emissions risks.
But dozens more of the plants are in various stages of
planning as the government predicts power demand to grow
steadily in coming decades.
"The days of conventional coal are over," Mark Brownstein
of Environmental Defense, one of the groups helping to form the
framework, told Reuters.
The three banks developed the principles in consultation
with environmental organizations and power companies, including
American Electric Power Co, the nation's largest consumer of
coal, and Southern Co, the largest utility company in the
When assessing new coal-plant financing, the principles
will also look at energy efficiency, advanced cleaner-coal
technology for emitting less carbon, and renewable sources of
"Having just come from the subprime mess, financial
institutions are taking a second look at their risk management
practices," Brownstein told Reuters.
"Taking into account future CO2 liabilities is the way to
make sure that the investments you make today don't come back
to bite you tomorrow," he said.
Wall Street banks have been hit hard by the subprime
mortgage debacle, taking tens of billions of dollars of
write-downs on the loans to people with poor credit histories.
"They've bitten off a little piece," said Rebecca Tarbotton
of Rainforest Action Network, an environmental group that did
not participate in the standard setting talks.
"What we really need is an actual carbon principle that
would include a commitment to reduce the financed-emissions
across all sectors," Tarbotton said.
(Additional reporting by Timothy Gardner; Editing by Brian
Moss and Tim Dobbyn)