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    Banks to Weigh CO2 Emissions in Power Lending
    By Lisa Lee
    Reuters

    Monday 04 February 2008

    New York - Three Wall Street banks said on Monday they will set environmental standards that factor in 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 advisors 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 principles are intended to be an industry-wide framework with more financial institutions jumping 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.

    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 U.S. power demand to grow steadily in coming decades.

    "The days of conventional coal are over," Mark Brownstein of Environmental Defense, one of the groups involved with helping 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 coal-heavy Southeast.

    "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,"

    When assessing new coal-plant financing, the principles will also look at energy efficiency, advanced cleaner-coal technology that emit less carbon, and renewable sources of power.

    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.

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    Additional reporting by Timothy Gardner; editing by Derek Caney and Tim Dobbyn.

 

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    A "Bold" Step to Capture an Elusive Gas Falters
    By Andrew C. Revkin
    The New York Times

    Sunday 03 February 2008

    Capturing heat-trapping emissions from coal-fired power plants is on nearly every climate expert's menu for a planet whose inhabitants all want a plugged-in lifestyle.

    So there was much enthusiasm five years ago when the Bush administration said it would pursue "one of the boldest steps our nation has taken toward a pollution-free energy future" by building a commercial-scale coal-fire plant that would emit no carbon dioxide - the greenhouse gas that makes those plants major contributors to global warming.

    That bold step forward stumbled last week. With the budget of the so-called FutureGen project having nearly doubled, to $1.8 billion, and the government responsible for more than 70 percent of the eventual bill, the administration completely revamped the project.

    The Energy Department said it would pay for the gas-capturing technology, but industry would have to build and pay for the commercial plants that use the technology. Plans for the experimental plant were scratched.

    Top Energy Department officials said the change would save taxpayers money, generate more electricity and capture more than twice as much carbon dioxide.

    But independent energy experts largely criticized the move, saying it would require two to four more years for new designs, plans and approvals, let alone budget tussles and eventual construction.

    The idea is to capture carbon dioxide emitted by coal-fire power plants and then pump it deep into the earth to avoid further buildup of the gas in the atmosphere. But several experts said the plan still lacked the scope to test various gas-separation technologies, coal varieties, and - most important - whether varied geological conditions can permanently hold carbon dioxide.

    Coal companies are desperate for this option to work, given how much coal remains to be mined. Many climate scientists and environmental campaigners see it as vital. Steady growth in coal use by developing and industrialized countries is expected to extend well beyond 2030.

    David G. Hawkins, an energy analyst at the Natural Resources Defense Council, said the new approach would have been a good move four years ago. "But to tout FutureGen for five years and then in the president's last year pull the plug is just bait and switch," he said.

    Many experts say that neither the original plan nor the revamped effort, nor the few projects underway in other countries, are sufficient to set the stage for pumping tens of billions of tons of compressed carbon dioxide into the earth or sea bed starting 10 or 20 years from now.

    Vaclav Smil, an energy expert at the University of Manitoba, has estimated that capturing and burying just 10 percent of the carbon dioxide emitted over a year from coal-fire plants at current rates would require moving volumes of compressed carbon dioxide greater than the total annual flow of oil worldwide - a massive undertaking requiring decades and trillions of dollars. "Beware of the scale," he stressed.

    Ernest J. Moniz, under secretary of energy in the Clinton administration and an author of a report by M.I.T. on the future of coal, said that the new approach, while sensible in terms of financing, could still be far too little, too late.

    "If we want sequestration of carbon dioxide at large scale to be a material player in climate in this half-century, it means starting now with these plants," he said.

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