Publication / 30 Apr 2010

Sector Briefing: Utilities

Trucost measured the environmental performance of over 107 electricity firms worldwide and examined their emissions of greenhouse gases, sulfur dioxide (SO2) and nitrogen oxides (NOX), nuclear waste, and process water. Trucost analysed exposure to environmental costs and ranked power generators on carbon intensity.

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. The main findings are that 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.

For SO2 and NOX, combined environmental external costs from these emissions equate to almost 4% of revenues on average. Over 3% of combined revenues could be at risk from environmental costs linked to water use. 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 programs. 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.

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