Carbon Emissions are Now Legal Liabilities

Greg Kats of the venture capital firm Good Energies has argued for a while now that a company's carbon emissions can have a material impact on its financial performance, and by failing to disclose that risk the company may be liable to shareholder action. That argument was used to explain part of the appeal to corporations of green (low-carbon-emitting) real estate in our article on valuing green buildings. Now, according to a report in today's New York Times, New York attorney general Andrew Cuomo has taken that argument a step further. Cuomo reached an agreement with Xcel Energy of Minneapolis that requires Xcel to disclose a detailed assessment of the long-term financial risks from its ongoing investment in coal-burning power plants. He got that agreement using a legal mechanism that could have led to criminal as well as civil charges if they failed to disclose those risks, and he's still pressuring four other companies to go along. How can a NY AG control a Minnesota company? Because they issue securities on New-York-based stock exchanges. The Times suggests that the other companies may not be as cooperative, because Xcel is already quite proactive in its reporting. I have anecdotal evidence corroborating that — after a little prodding, an Xcel engineer gave me an estimate of the carbon emissions behind the high-pressure steam they distribute in downtown Denver. (I needed that figure for a case study of EPA's Region 8 headquarters.) It's 185 pounds of CO2 per thousand pounds of steam.