Who's Funding Global Warming?
By Tara Lohan, AlterNet
Posted on February 5, 2007, Printed on February 5, 2007
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
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.
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.
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
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
"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
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
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.
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.
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.
they said the 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."
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
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.
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."
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 immediatley 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
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
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 that 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:
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.
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.
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.
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
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
"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 or
Tara Lohan is a managing editor at AlterNet.
© 2007 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/47615/