Green Leaf Report

My entire week has been brightened by this announcement from Morgan Stanley, Citi and JPMorgan- Leading Wall Street Banks Establish The Carbon Principles:

“Three of the world’s leading financial institutions 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.”

I can’t stress enough how important it feels to have the banks pick up where private business has lagged.  Certainly the cheap cost of coal is always mentioned as a main driver for its use as the world’s primary source of electricity, but what happens when the major US banking institutions foresee greater future risk and degradation to this form of energy’s profit margins?  Hopefully it means investments will flow elsewhere.  The comparative returns of alternative forms of energy become much more attractive.

The New York Times also write up an analysis of this banking press release that is less favorable than my view: The big concern in this article is whether other forms of energy such as natural gas will become much more expensive again, due to the possible delay or even inability to build more coal plants.  Good, I say, and it’s about time.  Cheap energy is not really cheap- the side effects and community costs must be recognized for coal, and if it means more conservation and reduced usage will happen on the household level due to increased prices, well, we’ll recover, and we’ll be better off in the long run.  Change is good, let’s embrace it.