According to the WWF report, "Power Switch: Impacts of Climate Policy on the Power Sector";, the world's largest power companies could face costs equivalent to over 10 per cent of 2002 earnings if they fail to address global warming and switch to clean energy.

Earlier this year, Ballymoney Power faced overwhelming opposition to its lignite mine and power station proposal from the public, politicians and environmental organisations, including WWF Northern Ireland. Following this opposition, AuIron - Ballymoney Power's parent company - suspended investment in the project.

"This report sends a strong wake-up call to the power sector and those who invest in it," said Malachy Campbell, WWF Northern Ireland Policy Officer. "Investing in low carbon energy sources, especially renewables, could bring long term economic benefits. When burned, lignite produces even larger quantities of carbon dioxide than oil, gas and other types of coal. This, coupled with other potential environmental impacts associated with lignite, means the Ballymoney project could appear even less attractive to potential investors."

Since the Kyoto Protocol was signed in 1997, industrialized countries have been developing policies to curb emissions of carbon dioxide (CO2), the main global warming gas. While policies vary from region to region, the general effect is, for the first time, to make CO2 emissions costly to polluters. With the power sector responsible for 37 per cent of global CO2 emissions, electricity-producing companies are likely to be among the most affected firms. The report shows how legislation already in place or under discussion can significantly raise the costs of power production.

Power profits

However, the WWF report also shows that power companies could earn considerable profits by switching from coal to cleaner energy sources, such as natural gas and renewables. Scottish Power aims to have nearly 3000MW of wind energy operational in the US and the UK by 2010 - showing that a change in strategy is feasible. Firms with proactive and well thought-out carbon management strategies, therefore, will be the most likely winners in the new operating environment.

The WWF report concludes that large quantities of emissions can be reduced cheaply - but that this depends to a great extent on the willingness of firms to switch to low carbon strategies. Investors and analysts therefore need to engage with utilities at the earliest opportunity to ensure that low-carbon investment strategies are in place.