As some of you may be aware, several leading financial firms announced “The Carbon Principles” to address the risks of carbon pricing when making loans for electric power plants. This development further highlights the need for technologies such as carbon capture and sequestration in order to provide cost certainty and emissions reductions to power producers in the face of pending regulation.
Wall Street establishes “The Carbon Principles” and “Enhanced Diligence” as guidelines for electricity investments – http://www.citigroup.com/citigroup/press/2008/080204a.htm
Three of the world's leading financial institutions (Citi, JPMorgan Chase and Morgan Stanley) today announced the formation of The Carbon Principles, climate change guidelines for advisors and lenders to power companies in the United States. These Principles are the result of a nine-month intensive effort to create an approach to evaluating and addressing carbon risks in the financing of electric power projects. The need for these Principles is driven by the risks faced by the power industry as utilities, independent producers, regulators, lenders and investors deal with the uncertainties around regional and national climate change policy.
This effort is the first time a group of banks has come together and consulted with power companies and environmental groups to develop a process for understanding carbon risk around power sector investments needed to meet future economic growth and the needs of consumers for reliable and affordable energy. The consortium has developed an Enhanced Diligence framework to help lenders better understand and evaluate the potential carbon risks associated with coal plant investments.
It is the purpose of the Enhanced Diligence process to assess and reflect these risks in the financing considerations for certain fossil fuel generation. We will encourage regulatory and legislative changes that facilitate carbon capture and storage (CCS) to further reduce CO2 emissions from the electric sector.
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