In Tuesday’s post about Staples terminating a relationship with an environmentally suspect paper supplier, Jeffrey noted that “the potential cost (to business) of failing to be responsible or transparent… can be high indeed.”
Apparently some of the biggest financial firms agree. A couple of days ago, Citi, JPMorgan Chase and Morgan Stanley announced that they’ve developed a new set of standards by which investors can assess the regulatory and financial risks of coal-related projects. The firms hope that these so-called Carbon Principles will become a framework that the entire investment community can use to encourage “responsible” coal development, which is probably one of the larger oxymorons you’ll encounter today. As GreenBiz notes, the new standards don’t forbid investment in coal-burning schemes, but they do place them under additional scrutiny. They’re also voluntary, which means any bank is quite free to ignore them as Bank of America, perhaps the largest financer of coal plants, seems so to be doing judging by its conspicuous absence from the proceedings so far.
So while this is not exactly another nail in coal’s coffin, it’s certainly another hammer blow or two on those nails already there. It sends the clearest message yet to the investment community that there’s a growing risk in projects that generate carbon dioxide and that, as Jeffrey says, the potential costs of failing to be responsible can be high. Clearly the landscape is changing and clearly climate crisis concerns are (finally) penetrating the halls of financial power.
The importance of this development cannot be overstated. Because the new carbon principles are not so important for what they say as what they reveal, which is that the people who hold the global purse strings are getting worried. Maybe not for purely altruistic reasons and maybe not as worried as they should be but worried nonetheless. The financial community is no longer willing to throw money indiscriminately at any venture with a reasonable chance of generating a decent return regardless of its environmental costs and no longer feeling safe from regulators who have historically kept their hands largely off big energy deals. There are some concerns creeping onto their radar as well, and one of the biggest is where do such investments stand in relation to a world whose citizens and governments are becoming ever more activist where carbon emissions are concerned. The answer to that question, increasingly, is sustainable and renewable or not at all. And banks appear to be getting the message.
This is huge because without capital, projects like new coal burning plants are going nowhere. Coal proponents can dream all they want but if investors aren’t willing to pony up the cash, they’re not going to be able to buy so much as boiler rivet. So when giant banks that control trillions of dollars power up a big yellow caution light like this, it’s a good day.
Just not for coal, whose days seem extremely numbered. Carbon Principles aside, the Earth Policy Institute reports that new coal fired plants are going the way of the dinosaurs (how appropriate) as citizens and governments block proposed new plants at almost every turn and the public at large realizes what a mistake any new coal burning would be. According to EPI president Lester Brown:
In a report compiled in early 2007, the U.S. Department of Energy listed 151 coal-fired power plants in the planning stages and talked about a resurgence in coal-fired electricity. But during 2007, 59 proposed U.S. coal-fired power plants were either refused licenses by state governments or quietly abandoned. In addition to the 59 plants that were dropped, close to 50 more coal plants are being contested in the courts, and the remaining plants will likely be challenged as they reach the permitting stage.
That’s good news for us all. Let’s hope the trend continues and that the thankful glimmers of national sanity now being seen blossom into the sun-drenched dawn of a full-blown sustainably-powered day in the year ahead.