Banks to weigh CO2 emissions in power lending

By Lisa Lee

NEW YORK (Reuters) - 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 on board.

"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.