Tuesday, February 5, 2008

Bills Coming Due for Old King Coal

The free ride for coal is over. With guidance from Environmental Defense and the Natural Resources Defense Council, big banks have banded together with large energy companies to form what's being called the Carbon Principles. You may think I'm exaggerating here, but this is BIG, BIG, BIG, BIG, BIG, BIG news. The increasing alignment of environmental and economic drivers means the sustainability team has just grown by a factor of 100, and some of the new teammates have very deep pockets indeed.

Short and mid term, coal plants are not going to disappear; they are going to change, however. And new ones likely will not be built in the numbers some in the industry had imagined. Put yourself in the place of investors considering placing their funds in a new plant. In Rumsfeld-speak, there are known knowns: carbon emissions are going to cost money; unknown knowns: don't know how much money yet; and unknown unknowns: how fast current electricity generating alternatives will be replaced by breakthrough clean energy alternatives we don't even know of yet.

You want to invest in a new coal plant? We definitely need the energy. But you've got a lot to think about these days before you lay your money down.