Power companies quiet on climate change as emissions outweigh profits

Less than half the electric utility companies asked for information on their greenhouse gas emissions have chosen to respond to the request from financial institutions with shared investment assets of US$40 trillion.

The Carbon Disclosure Project (CDP) is a global coalition of institutional investors which have banded together to ask the world’s leading corporations to come clean on their emissions.

The idea is that the interest shown by the investment houses in environmental performance might inspire companies to up their game and begin to put a price on carbon rather than relegating it to a solely reputational issue.

In 2006 the CDP asked the world’s largest 265 electricity companies to report their emissions and according to figures published this week only 112 responded.

Paul Dickinson, co-ordinator of CDP, said: “This report shows that the industry making the greatest contribution to climate change is mostly failing to respond to investors requests for information. This makes it extremely difficult for those investors wanting to avoid funding carbon intensive industry to make a well-informed decision.”

In addition, the report found that most of the companies, if forced to pay for their emissions at US$22 per tonne of CO2 – the average price during the first year of the EU ETS – would find the cost of emissions outweighing their profits.

Under existing attempts to commodify carbon, like the ETS, power companies are given carbon allowances and only need to pay if they exceed them.

The report suggests that if companies had to pay the going rate for every tonne they produced, the cost would be more than existing profits and would have to be recovered by dramatically raising energy prices.

“This report shows that when governments regulate greenhouse gas emissions in accordance with their scientific advisors’ long term emissions targets, thereby internalising the cost of emissions, it is without doubt that some Electric Utilities share prices will be negatively impacted,” said Mr Dickinson.

The Global Electric Utilities Report was commissioned by WWF and written by environmental research and analysis firm Trucost.

It used the same system as the Stern Review to measure “True Economic Value Added” to reach its conclusions.

The CDP survey asked electric utility companies about the commercial risks and opportunities posed by climate change, and related management responsibilities.

In addition, companies were asked about energy costs and emissions in terms of total annual generation, emissions from products and services, emission reduction programs and targets and emission trading arrangements.

Mr Dickinson said: “The conclusions we can draw from those that have responded to our request for information is that there is huge variation in the level of readiness for the challenges that climate change and climate change regulation pose to utilities’ bottom line.

“Some forward thinking ones are well positioned to benefit their shareholders, but most are not.”

In general, European companies tended to be less carbon intensive than their Northern American or Asian counterparts.

Asian figures were made difficult to analyse, however, as no Chinese power company responded to the request for information which meant the information available painted a patchy picture at best, with China responsible for nearly a fifth of global carbon emissions and the largest single user of coal in the world.

Sam Bond

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