Key Findings

• Power firms are exposed to future carbon costs Together the 107 publicly listed power generators and electricity distributors analysed directly emit over 3.4 billion tonnes of GHGs, measured as their carbon dioxide equivalent (CO2e) emissions. Trucost used the average carbon price under the EU ETS to model potential exposure to carbon costs worldwide. This equated to an average of 12% of company revenues in 2008 for the businesses analysed.
• SO2 and NOX: Combined environmental external costs from these emissions, which contribute to smog and acid rain, equate to almost 4% of revenues on average.
• Process water: On average, over 3% of combined revenues could be at risk from environmental costs linked to water use.
• Nuclear waste: External environmental costs from nuclear waste represent 1% of revenues on average.
• Some firms are more exposed to environmental costs than others Carbon costs represent almost 55% of revenue for the company that would be most exposed to carbon costs under cap-and-trade programmes. Electricity companies that are more exposed to environmental costs than sector peers could find it more difficult to pass these on to customers in higher prices.
• Carbon intensity varies dramatically as the highest-carbon conventional electricity firm is over 1,000 times more carbon intensive than the lowest-carbon power generator, reflecting varied exposure to carbon costs.
• Carbon performance will affect competitiveness Power firms that are less carbon-intensive than sector peers could gain a competitive advantage. If a company’s carbon intensity is much lower than its peers, the rise in costs will be lower, and might be easier to pass on to customers.
• Many of the most carbon-intensive power firms operate in China China’s Government aims to cut carbon dioxide emissions per unit of GDP by40%–45% from 2005 levels by 2020, using measures including economic policies to drive mitigation. As companies in OECD countries locate plants in China or outsource manufacturing to suppliers in the region, the high-emitting electricity providers could present a major carbon “hotspot” in their supply chains.

Why did Trucost carry out the research?

Electricity firms are paying rising costs for pollution. This will have a knock-on effect for their investors and clients. Investors need to control risks to fund returns from power generators with poor environmental performance. Companies need to measure and manage risks from environmental costs passed on by electricity providers and other suppliers. In this report Trucost has examined these companies’ emissions, analysed their exposure to environmental costs, and ranked power generators on carbon intensity.

Report image: Power firms are exposed to carbon costs

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