Green Wombat

A report prepared for institutional investors puts some cold hard figures on the cost of global warming to electric utility companies worldwide. No surprise that coal-dependent U.S. utilities will see a significant hit on their bottom line if they do not begin to cut their spew and a nationwide cap on greenhouse gas emissions is imposed, as proposed in legislation now before Congress. Utilities like PG&E (PCG) that resell power from cleaner-burning natural gas and renewable energy sources stand to profit while coal-using Southern Company (SO) and American Electric Power (AEP) could lose billions. The report was prepared for the Carbon Disclosure Project, an alliance of 225 institutional investors – managing $31 trillion in assets – that annually asks corporations to reveal their greenhouse gas emissions. This year the report focused on electric utilities, one of the largest sources of planet-warming gases. "No longer can fiduciaries claim to be unaware of what is at stake," the report’s authors warned. "Taking climate risks into account is now becoming part of smart financial management. Failure to do so may well be tantamount to an abdication of fiduciary responsibility and indicative of poor management."

About 42 percent of the world’s 265 biggest public utilities disclosed emissions data to the project. That information was used to calculate the cost of the utilities’ carbon emissions based on the $22 average trading price for a ton of carbon dioxide on the European carbon market, known as the European Trading Scheme. "Remarkably, by this measure few electric utility companies were adding value to the economy," the authors concluded. "The damages they imposed exceeded the surpluses they generated, often by a large margin." The report found that American Electric Power and Southern imposed net annual costs of $3.6 billion and $2.7 billion, respectively. American Electric plants, for instance, emit 146 million tons of greenhouse gases. "These companies must be regarded as quite exposed to future restrictions on greenhouse gas emissions," the report stated. PG&E, on the other hand, emitted 536,000 tons of greenhouse gases and reaped a net benefit of $404 million by the report’s methodology. Similarly, nuclear power producer Exelon (EXC) produced a net benefit of $225 million.

The report also calculated the cost to the utilities if a California-style global warming law – requiring a 25 percent reduction in greenhouse gas emissions – was adopted nationwide. At current emissions levels, such a cap would cost American Electric nearly 7 percent of its annual revenue. Texas utility TXU (TXU), under fire from environmentalists for its coal-power plant building binge, would lose 3 percent of its revenue. Such a cap would cost PG&E just .03 percent of its sales.