Friday, February 22, 2008

Investment Banks Begin Counting Carbon in New Power Plant Costs

Leading investment banks have begun to incorporate estimates for the cost of reducing carbon dioxide emissions into the cost of building new power plant projects, a move that would increase the competitiveness of new nuclear plants.

According to this approach, banks would impose additional costs on plants that produce carbon dioxide, such as those powered by fossil fuels. The federal government does not impose a tax or other measure to account for the cost of emitting carbon dioxide, but the banks clearly believe measures to regulate greenhouse gases are imminent.

"We have decided, as have other banks, to start assessing the cost of carbon in our risk and underwriting processes as we evaluate the business models of utility sector companies. In the absence of federal legislation, we estimate the cost will fall between $20 to $40 per ton of carbon dioxide," Ken Lewis, Bank of America's chairman and CEO, told attendees at a Feb. 12 energy conference in North Carolina.

The imposition of these costs would increase the cost of coal-fired power plants, but Lewis said that he believed that coal plants would remain in use for years to come. Nuclear power plants would not be affected by such a charge because they do not produce carbon dioxide while generating electricity.

Earlier this month, investment banks Citigroup, JPMorgan Chase and Morgan Stanley announced they will begin factoring the cost of greenhouse gas emissions into new power plant proposals.

The announcement was part of a partnership with energy companies, including DTE Energy, NRG Energy, PSEG and Southern Co., to create an approach for evaluating and addressing carbon risk in financing power projects.

This partnership, which also included Environmental Defense and Natural Resources Defense Council, released guidelines for dealing with the uncertainties surrounding regional and national climate change policy.

1 comment:

Matthew66 said...

Actually this doesn't surprise me at all. Nuclear power plants have been paying a tax to the federal government for years to manage their used fuel. That the government, hamstrung by Congress, has failed to do that is a great pity. The greatest obstacle I see to effective used fuel management is the fact that Congress has mandated that the Department of Energy take responsibility, but failed to pass on the resources provided by the utilities for that purpose. Congress has seen the fuel management fund as a giant trough, and they've had their snouts and trotters in that trough for so long they don't want to get them out.

Maybe its time to learn from the experience of other countries and set up a specialized fuel management company, either owned by the federal government or jointly by the nuclear utilities, which is mandated to manage used fuel. This of course would require Congress releasing its death grip on the purse strings.

Public accountability is a good thing, and any company established to manage used nuclear fuel should be regulated by the NRC and be subject to public scrutiny. I don't think we are vigorous enough in holding Congress accountable for its inaction in this regard.