Who's Funding Global Warming?

Who's Funding Global Warming?

By Tara Lohan

AlterNet, Posted on February 5, 2007

http://www.alternet.org/story/47615/

(10 links at the URL above)

Wearing hats shaped like smokestacks and carrying signs that said, "Coal
Investments Cook the Climate," a group known as Billionaires for Coal raised
awareness last week about the plans by TXU, a Dallas-based utility company,
to build 11-new pulverized coal-fired power plants in Texas.

The activists delivered suitcases of coal, but the recipient of their gift
was not TXU and they were a long way from Texas. Instead, their action took
place in New York's financial district where they visited the headquarters
of Merrill Lynch -a company that is putting coal and profits above human
health and climate change.

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.

It is widely known among scientists and regulators that coal-fired power
plants are the most polluting form of electricity and right now, the world
needs every opportunity it can to move away from the production of more
greenhouse gas (GHG) emissions.

Some say the impetus is on the government to regulate GHG emissions; others
put the responsibility on utility companies. But organizations like
Rainforest Action Network ( RAN) believe that banks that fund polluting
projects like TXU also need to be held accountable.

The recent action by Billionaires for Coal in New York begs the question:
What is the role of the global finance industry when it comes to climate
change? It also highlights the ripple effect of global warming -more coal
plants in Texas will be everyone's problem -including Wall Street's.

Banking on Dirty Money

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.

"This is the U.S. and its insanity at its very greatest. We are facing a
climate crisis," said Brianna Cayo Cotter of RAN. "We are standing at the
edge of a cliff and this is the sort of project that just pushes us over."

TXU seems to be striving to become known as the largest corporate greenhouse
gas emitter in the U.S. With mounting political pressure in the U.S. and
growing international action, what kinds of institutions want to be
associated with them?

So far, the only three officially committed to the project are Citigroup,
Merrill Lynch, and Morgan Stanley, and they are known as "lead arrangers,"
in charge of helping TXU get the $11 billion in financing.

RAN has sent letters to 56 global banks -across the U.S., Canada, Europe,
and even in Japan and Brazil -urging banks to reject requests to finance the
project.

In the Netherlands four banks were being approached for financing despite
the fact that TXU's project will produce six times the pledged CO2
reductions of their country -negating the efforts (six times over) of the
Dutch people to limit their contributions to climate change.

According to Cotter, at least 18 banks have already responded that they have
no interest in financing the plan, and not one has affirmed that they will.
So far there are also three major banks on public record saying they are not
on board -Goldman Sachs, JP Morgan Chase, and Bank of Montreal. Wachovia and
Scotiabank are among those still on the fence.

Many banks make it their policy not to comment on clients and so have not
responded. However, a little reading between the lines sometimes can provide
a sense of their position.

The London-based HSBC became the world's first bank in 2005 to commit to
becoming carbon neutral.

While they said they could not comment on TXU, they did say, "We regard
climate change as the single largest environmental challenge facing the
world this century and have undertaken a number of initiatives to ensure we
play our role in combating it," wrote Michael Goeghegan, Group Chief
Executive of HSBC.

HSBC reports that they are committed to complying with the Kyoto Protocol
and the EU Emissions Trading Scheme. They also have a Carbon Finance
Strategy to assist in "a transition to financing low carbon and energy
efficient projects," Goeghegan wrote. "We believe financial institutions
will play an important role in the shift to cleaner energy and aspire to be
among the leading financial institutions of a lower carbon economy."

Bank of America has taken things a step further by cutting emissions from
the projects they fund. According to Dana Clark who heads RAN's global
finance campaign, "At this point Bank of America has made the strongest
commitment to combating climate change." The bank states that they have
pledged to "realize a seven percent reduction in indirect emissions ...
within our energy and utility portfolio."

Merrill Lynch is on the opposite end of the spectrum, with no environmental
policy, and Citigroup has gone from being a leader in the industry to having
to play catch up, said Clark.

In 2004, Clark said, Citigroup had a pioneering environmental policy that
covered forests, biodiversity, and climate issues, but these days, she said,
their commitments are rather minimal.

"They are committed to reducing their own footprint," said Clark. "That
means the direct emissions from their buildings -turning off lights,
recycling -all well and good but they are not committed to looking at the
climate impacts of their investments, loans, and advisory services."

Citigroup doesn't see helping to fund TXU's project to be in contradiction
to the bank's environmental policy as long as the utility company gets all
their necessary permits from the state.

"Their approach is thinking within the box," said Clark. "They've made
commitments to reduce GHG emissions from their operations and yet they are
turning around and funding a project that will emit 78 million tons of CO2
every year for the next 50 years -that wipes out all the good things they
are trying to do."

In the last few years, many banks in the global finance industry have begun
to develop better environmental and social policies. "In the beginning,
environmental policies were a lot about precluding banks from financing
dirty oil pipelines or not being able to invest in illegal logging in
Indonesia, which continue to be good things," said Cotter. "But the evolving
notion of what a strong environmental policy is has changed."

That change has been the result of a surge in public awareness about the
dangers of climate changed coupled with reports from leading experts, such
as Jim Hansen of NASA and Sir Nicholas Stern of the United Kingdom, who have
both concluded that decisive action needs to take place immediately to
change our carbon consumption within the next decade.

"This is a time when there is an imperative on the global finance sector to
make a decision -are they going to fund the future or are they going to
support and profit from climate destructive activities?" asked Clark. "It is
time they put in place policies to reduce the carbon intensity of their
investments and put their resources toward more sustainable energy sources."

Texas' Problem is the World's Problem

According to the Department of Energy, there are 154 new coal plants in the
works to be on-line by 2030 in the U.S. Not surprisingly, Texas is leading
the way, with 19 currently proposed.

If TXU is able to successfully build their 11 plants in Texas, they are
hoping to export their model and build an additional 13 coal-fired plants in
other states, taking their emissions up to 92 million tons of C02 a year,
and making them the largest corporate GHG emitter in the U.S. -no small feat
for a country that leads the world in emissions.

"This is a serious issue -the polar bears are losing their homes, Inuit
women can't breast feed, all over the world the effects of climate change
are being felt in very serious ways and for banks to consider a project that
would give us 78 million tons of GHG emissions every year is crazy," said
Cotter.

The construction of new coal-fired power plants right now would lock
residents into another 50 years of dirty energy at a time when the world is
in agreement that we need to move toward cleaner, more sustainable energy
choices.

"If we stop these plants from being built it will be even harder to get the
other plants built under Bush/Cheney's 'clean coal' energy plan," said
Cotter. "If we can stop a high profile project early on in the game then it
will have an influence on whether this country goes down a path of no return
on climate change by building more plants or whether we start acting
sensibly and increase our efficiency and reduce our emissions."

The true cost of the plants will not just be the burden of global banks.
There is an estimated $6 billion a year in externality costs associated with
the TXU project. The GHG emissions will affect more than just Texas, as
climate change is a problem shared globally, with the poorest people the
most at risk first. Externality costs also take into consideration the
health impacts of burning coal, including increased rates of asthma and
premature deaths.

The Stern Review on the Economics of Climate Change, released this fall came
to decisive conclusions about what global warming may cost financially. The
U.K.'s Guardian summarized his findings:

Unabated climate change could cost the world at least 5 percent of GDP each
year; if more dramatic predictions come to pass, the cost could be more than
20 percent of GDP.

The cost of reducing emissions could be limited to around 1 percent of
global GDP; people could be charged more for carbon-intensive goods.

Each tonne of CO2 we emit causes damages worth at least $85, but emissions
can be cut at a cost of less than $25 a ton.

Shifting the world onto a low-carbon path could eventually benefit the
economy by $2.5 trillion a year.

By 2050, markets for low-carbon technologies could be worth at least $500bn.

What we do now can have only a limited effect on the climate over the next
40 or 50 years, but what we do in the next 10-20 years can have a profound
effect on the climate in the second half of this century.

The Guaridan concluded that "The benefits of strong, early action
considerably outweigh the costs." From an economic perspective, the only way
to avoid disaster is to act immediately -something it seems world financial
institutions would be keen to do.

But so far, most banks have been extremely shortsighted.

"The problem that I have with people saying that we have abundant coal and
it's cheap so we should burn it -is that it is not cheap," said Clark.
"There are massive costs that are being externalized to the rest of society
and the global environment that aren't getting factored into the analysis."

Texans seem well aware of the repercussions of the 11 new plants, so much so
that virtually everyone besides TXU and the governor are opposing it.

The mayors of Dallas, Fort Worth, and Houston are against the project, along
with over 30 municipalities representing nearly 7 million people. Even the
business community is concerned. Over 20 prominent business leaders in the
Dallas area have formed Texas Business for Clean Air.

The permitting process for TXU's project was fast-tracked by executive order
of Gov. Perry who received sizable contributions from the coal industry,
including TXU in his recent re-election bid. "The permitting process was cut
down from 1.5 years to six months and drastically limits the public's
ability to have a voice in the process," Clark said.

"There is no carbon regulation in Texas or at the federal level," she added.
"So it is deemed OK that these plants will emit 78 million tons of CO2 a
year. Everyone knows the handwriting is on the wall and once there is a new
administration things will change. So seeing that, this fast-tracking is a
push to bring these plants on line before there is meaningful legislation to
curb GHG emissions."

TXU may have the political clout to get the permits they need from the
state, but without support from global banks they can't fund their polluting
project. So groups like Billionaires for Coal, Environmental Defense, RAN,
and dozens of community and regional organizations will continue to demand
that financial institutions be responsible for the destruction they fund.
And the rest of us should start getting vocal as well. After all, we'll be
paying for it, too.

"Our global climate affects every single one of us. Whether it does today,
it definitely will tomorrow. There is a growing movement around the world to
stop global warming and the U.S. has been at the back of the gang and has
been holding things up," said Cotter.

"We have been stalemating and making global regulations next to impossible
and this is a chance for U.S. citizens to stand up and say we don't agree
with the direction our country is heading in terms of dirty energy and we
are going to take action to stop climate change and the United States'
contributions to it."

To learn more about TXU or to take action, visit RAN at:

http://dirtymoney.org/

or Environmental Defense at:

http://www.environmentaldefense.org/page.cfm?tagID=596&campaign=583

Tara Lohan is a managing editor at AlterNet.