Back on Thursday, I mentioned
that Citigroup had put coal-heavy utility company TXU on its list of companies
which stood to benefit from global climate change. It’s maybe worth quoting
the report at some length:
We discussed various types of corporate behavior above that are positive for
the climate. Then, too, there are other strategies in response to
climate issues that are not at all “climate friendly.”
A July 21, 2006 Wall Street Journal article, “Burning Debate: As Emission
Restrictions Loom, Texas Utility Bets Big on Coal,” discussed how TXU
Corp. is “racing to build 11 big power plants [over the next four years]
in Texas that will burn pulverized coal.” A possible reason, according
to the Journal, is:
The federal government may slap limits on carbon-dioxide emissions. If
it does, plants completed sooner may have a distinct advantage. That’s
because the government may dole out “allowances” to release
carbon dioxide, and plants up and running when regulations go into effect
may qualify for more of them than those built at a later date.
It seems that TXU’s grandfathering strategy could be a smart
move — in a best-case scenario, its coal-fired power plants
might be either “grandfathered” or “cleaned” by new
sequestering technology, while, in a worst-case scenario, its “dirty”
plants might face the same carbon emissions regulations that apply to all
electric utilities across the U.S.
Does reading this kind of research make you feel a little bit, I dunno, dirty?
The idea of playing the regulatory-arbitrage game, and buying coal-fired plants
in a non-Kyoto country like the US, is a little distasteful. And now Tara
Lohan, of AlterNet, is calling out banks who are facilitating this kind
of strategy – and she’s concentrating on TXU, and Citigroup, in particular.
Merrill Lynch is one of three major financial institutions, along with Morgan
Stanley and Citigroup, that have agreed to arrange the needed $11 billion
to finance TXU’s plants…
What is the role of the global finance industry when it comes to climate change?
If TXU secures the necessary money and permits, their 11 plants will produce
78 million tons of CO2 emissions each year for the expected 50-year lifespan
of the plants.
Let’s put that number in perspective. According to Environmental Defense,
TXU’s projected output of 78 million tons of CO2 a year is more than entire
countries, such as Sweden, Denmark, and Portugal. It is also the equivalent
of putting 10 million Cadillac Escalades on the road or cutting and burning
all the trees in a section of the Amazon the size of over 9 million football
fields — larger than the state of California.
Lohan is quite right to call out Citi, Morgan Stanley, and Merrill Lynch for
their role in financing TXU – and also to praise the likes of Goldman
Sachs, JPMorgan Chase, and Bank of Montreal, who have said that they’re not
going to participate.
She also praises Bank of America, which has pledged to "realize a 7 percent
reduction in indirect emissions … within our energy and utility portfolio."
Banks, within their own operations, are naturally pretty green: their carbon
footprint per dollar of profits must be tiny. But if that tiny carbon footprint
comes by helping to destroy the planet indirectly, it does no one any
good at all. It’s worth remembering: if a bank puts out long research notes
on the subject of climate change, that doesn’t mean it’s actually going to do
something about climate change.